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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
PROXY STATEMENT
PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT |X|
FILED BY A PARTY OTHER THAN THE REGISTRANT |_|
CHECK THE APPROPRIATE BOX:
| | PRELIMINARY PROXY STATEMENT | | CONFIDENTIAL, FOR USE OF COMMISSION
ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
|X| DEFINITIVE PROXY STATEMENT
|_| DEFINITIVE ADDITIONAL MATERIALS
|_| SOLICITING MATERIAL PURSUANT TO RULE 14A-11(C) OR RULE 14A-12
COMMODORE APPLIED TECHNOLOGIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAMES 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:
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(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED PURSUANT
TO EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON WHICH THE FILING FEE IS
CALCULATED AND STATE HOW IT WAS DETERMINED):
--------------------------------------------------
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
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(5) TOTAL FEE PAID:
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|X| FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS:
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|X| 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, OF THE
FORM OR SCHEDULE AND THE DATE OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID:
$3200.00
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(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
PRELIMINARY SCHEDULE 14A
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(3) FILING PARTY:
COMMODORE APPLIED TECHNOLOGIES, INC.
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(4) DATE FILED:
OCTOBER 08, 1999
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<PAGE>
TABLE OF CONTENTS
Stockholder Letter ........................................................ a
Notice of Annual Meeting of Stockholders .................................. c
Proxy Summary ............................................................. 1
Time and Place ......................................................... 1
Matters to be Considered ............................................... 1
Vote Required .......................................................... 1
Election of Directors ............................................... 2
Ratification of Appointment of Auditors ............................. 2
Proxy Statement ........................................................... 3
Cautionary Statement Concerning Forward Looking Statements ............. 4
Outstanding Stock and Voting Rights .................................... 5
Security Ownership of Certain Beneficial Owners and Management ......... 7
Proposal 1 -Election of Directors ......................................... 9
Information Regarding Board Meetings, Committees and Management ........ 13
Committees of the Board ............................................. 14
Compensation of Directors .......................................... 15
Current Management ..................................................... 15
Section 16(a) Beneficial Ownership Reporting Compliance ................ 16
Executive Compensation and Related Matters ................................ 17
Summary Compensation ................................................... 18
Stock Options .......................................................... 21
Employment Agreements .................................................. 23
Compensation Committee Interlocks and Insider Participation ............ 25
Report of the Compensation Committee on Executive Compensation ......... 25
Overview and Philosophy ............................................. 25
Executive Officer Compensation ...................................... 26
Effect of Section 162(M) of the Internal Revenue Code ............... 29
Conclusion .......................................................... 29
Compensation, Stock Option and Benefits Committee ...................... 29
Stockholder Return Performance Presentation ............................... 30
Proposal 2 -Increase in Authorized Common Stock ........................... 32
Reasons for Increasing Authorized Common Stock ......................... 32
Proposal 3 -Ratification of Appointment of Independent Auditors ........... 33
Stockholder Proposals for the Next Annual Meeting ......................... 34
Other Matters That May Come Before the Annual Meeting ..................... 34
Where You Can Find More Information ....................................... 35
Form of Proxy ............................................................. 36
<PAGE>
COMMODORE APPLIED TECHNOLOGIES, INC.
150 EAST 58TH STREET, SUITE 3400
NEW YORK, NEW YORK 10155
November 26, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders (the "ANNUAL MEETING") of Commodore Applied Technologies, Inc. (the
"COMPANY") to be held on Wednesday, December 22, 1999, at 10:00 a.m., local
time, at The American Stock Exchange, 86 Trinity Place, New York, New York
10006. Enclosed is a formal Notice of Annual Meeting and Proxy Statement,
together with a proxy card and return envelope, for use of stockholders who are
unable to be present in person at the Annual Meeting. Also enclosed for your
review is the Company's 1998 Annual Report to Stockholders.
The formal Notice of Annual Meeting and Proxy Statement describe the
specific business to be acted upon at the Annual Meeting, and we urge you to
read these materials carefully. In addition to electing Directors, stockholders
will be entitled to vote upon (i) an amendment to the Company's Certificate of
Incorporation to increase the amount of Common Stock, par value $0.001 per
share, that the Company is authorized to issue to 100,000,000 shares from
75,000,000 shares, and (ii) the ratification of the selection of Tanner + Co. as
the Company's independent auditors. Your Board of Directors believes that (i)
the election of the nominees named in the Proxy Statement as Directors of the
Company, (ii) the increase in the amount of the Company's authorized common
stock and (iii) the ratification of the appointment of Tanner + Co. as the
Company's independent auditors for the year ending December 31, 1999 are in the
best interests of the Company and its stockholders and, accordingly, recommends
a vote "FOR" the foregoing proposals.
<PAGE>
Whether or not you plan to attend the Annual Meeting in person, and
regardless of the size of your holdings, it is very important that your shares
be represented and voted at the Annual Meeting. After reading the enclosed
Notice of Annual Meeting and Proxy Statement, please complete, sign, date and
return the enclosed proxy card in the self-addressed, postage paid envelope
provided for your convenience. Because mail delays occur frequently, it is
important that the enclosed proxy card be returned well in advance of the Annual
Meeting. If the address on the accompanying material is incorrect, please advise
our Transfer Agent, The Bank of New York, in writing, at 101 Barclay Street, New
York, New York 10286. If, after returning your proxy card, you find that you are
able to attend the Annual Meeting in person and wish to personally vote your
shares, you may revoke your proxy at that time and personally vote your shares
at the Annual Meeting.
I hope to see you at the Annual Meeting and to have the opportunity to
introduce you to our management team and the other members of the Board of
Directors. On behalf of your Board of Directors, we greatly appreciate your
continued support.
Sincerely yours,
PAUL E. HANNESSON
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
COMMODORE APPLIED TECHNOLOGIES, INC.
150 East 58th Street, Suite 3400
New York, New York 10155
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 22, 1999, 10:00 A.M.
at
The American Stock Exchange
86 Trinity Place
New York, New York 10006
----------------------------
To the Stockholders of COMMODORE APPLIED TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "ANNUAL
MEETING") of Commodore Applied Technologies, Inc., a Delaware corporation (the
"COMPANY"), will be held at 10:00 a.m., local time, on Wednesday, December 22,
1999, at The American Stock Exchange, 86 Trinity Place, New York, New York
10006, for the following purposes:
1. To elect seven Directors to hold office until the Annual Meeting of
Stockholders to be held in 2000 and until their respective successors are
duly elected and have qualified;
2. To consider an amendment to the Company's Certificate of Incorporation
increasing the amount of the Company's Common Stock, par value $0.001 per
share (the "COMMON STOCK"), that the Company is authorized to issue from
75,000,000 shares to 100,000,000 shares.
3. To ratify the appointment of Tanner + Co. as the Company's Independent
auditors for the year ending December 31, 1999; and
4. To consider and transact such other business as may properly come before
the Annual Meeting and any adjournment or postponement thereof.
<PAGE>
The Board of Directors has fixed the close of business on November 26,
1999, as the record date for determining the stockholders entitled to notice of
and to vote at the Annual Meeting or any adjournment thereof. A list of
stockholders entitled to vote at the Annual Meeting will be open for examination
for ten days preceding the Annual Meeting, during ordinary business hours, at
the location of the principal executive offices of the Company set forth above
and will also be available for inspection at the Annual Meeting.
By Order of the Board of Directors:
GREGG M. ROSEN
Assistant Secretary
New York, New York
November 26, 1999
------------------------------------
YOUR VOTE IS IMPORTANT
It is important that your shares be represented at the Annual Meeting,
regardless of the number of shares you hold. Therefore, whether or not you plan
to attend the Annual Meeting, please complete, sign, date and return the
enclosed proxy card promptly in the enclosed self-addressed, postage-paid
envelope provided for your convenience. Proxies may be revoked at any time
before the shares subject to the proxy are voted, and stockholders who are
present at the Annual Meeting may revoke their proxies at that time and vote in
person if they desire.
------------------------------------
<PAGE>
SUMMARY
This summary highlights certain information contained in this Proxy
Statement. It does not contain all of the information that is important to you.
To understand the transactions fully and for a more complete description of the
terms of the transactions, you should read carefully the entire Proxy Statement.
THE ANNUAL MEETING
TIME AND PLACE
The Company will hold the Annual Meeting at The American Stock Exchange, 86
Trinity Place, New York, New York 10006, on December 22, 1999, convening at
10:00 a.m. (local time).
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the Annual Meeting, the stockholders of the Company will consider and
vote on the following:
o The election of seven Directors of the Company;
o A proposal (the "CHARTER AMENDMENT PROPOSAL") to adopt and approve an
amendment to the Company's Certificate of Incorporation increasing the
authorized number of shares of Common Stock from 75,000,000 to
100,000,000;
o A proposal (the "AUDITOR PROPOSAL") to ratify the selection of Tanner
+ Co. as the Company's auditors for the year that will end on December
31, 1999; and
o Such other business as may properly come before the Annual Meeting or
any adjournments thereof.
VOTE REQUIRED
Only holders of record of the Company's Common Stock at the close of
business on November 26, 1999 will be entitled to notice of and to vote at the
Annual Meeting.
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<PAGE>
At the Annual Meeting:
o each holder of record of Common Stock is entitled to one vote for each
share of Common Stock in such stockholder's name;
o the presence, either in person or by proxy, of the holders entitled to
cast a majority of all votes entitled to be cast at the Annual Meeting
is necessary to constitute a quorum;
o Directors will be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Annual
Meeting.
o approval of the Charter Amendment Proposal requires the affirmative
vote, in person or by proxy, of a majority of the outstanding shares
of the Common Stock.
ELECTION OF DIRECTORS
The Company is soliciting proxies for the election of seven Directors of
the Company. The nominees for election are all of the current members of the
Board of Directors of the Company (the "BOARD OF DIRECTORS"), which include Paul
E. Hannesson, Kenneth L. Adelman, Ph.D., Bentley J. Blum, Herbert A. Cohen,
David L. Mitchell, Edward L. Palmer and William R. Toller.
CHARTER AMENDMENT
The Board of Directors has approved an amendment (the "AMENDMENT") to the
Company's Certificate of Incorporation, increasing the authorized number of
shares of Common Stock from 75,000,000 to 100,000,000. The Board of Directors
has directed management of the Company to have the Company's stockholders
consider the Amendment. The Board believes that the Amendment will provide the
Company with greater flexibility to pursue the Company's strategic objectives.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Tanner + Company as the Company's
auditors for the year that will end on December 31, 1999. The Board of Directors
recommends that the stockholders of the Company ratify such appointment.
2
<PAGE>
COMMODORE APPLIED TECHNOLOGIES, INC.
150 East 58th Street, Suite 3400
New York, New York 10155
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, DECEMBER 22, 1999, 10:00 A.M.
This Proxy Statement is being furnished to the stockholders of Commodore
Applied Technologies, Inc., a Delaware corporation (the "COMPANY"), in
connection with the solicitation of proxies by the Board of Directors of the
Company (the "BOARD OF DIRECTORS" or the "BOARD") from holders of outstanding
shares of common stock, par value $0.001 per share, of the Company (the "COMMON
STOCK"), for use at the Annual Meeting of Stockholders to be held on Wednesday,
December 22, 1999, 10:00 A.M., at The American Stock Exchange, 86 Trinity Place,
New York, New York 10006, and at any adjournment or postponement thereof (the
"ANNUAL MEETING").
The costs of preparing, assembling and mailing the proxy material will be
borne by the Company. Solicitations will be made only by use of the mail except
that, if deemed desirable, officers and other employees of the Company may
solicit proxies by telephone, facsimile and/or other means of communication.
Such persons will receive no compensation therefore in addition to their regular
salaries, but may be reimbursed for reasonable out-of-pocket expenses incurred
in connection with such solicitation. Arrangements will be made with banks,
brokers and other custodians, nominees and fiduciaries to forward copies of the
proxy material to the beneficial owners of the stock held of record by such
persons and to request authority for the execution of proxies. The Company will
reimburse such persons for their reasonable expenses incurred in this regard.
It is anticipated that the mailing to stockholders of this Proxy Statement,
the attached Notice of Annual Meeting and the enclosed proxy card will commence
on or about November 26, 1999. The Company's 1998 Annual Report to Stockholders
accompanies but does not constitute a part of this Proxy Statement.
The purpose of the Annual Meeting, and the matters to be acted upon at the
meeting, are set forth in the attached Notice of Annual Meeting. As of the date
of this Proxy Statement, the Board of Directors knows of no other business that
will be presented for consideration at the Annual Meeting. A stockholder who
executes a proxy
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<PAGE>
may revoke such proxy at any time before the shares subject to the proxy are
voted, by: (i) filing with the Secretary of the Company at the Company's
principal executive offices (a) a written notice of revocation bearing a later
date than the proxy or (b) a duly executed proxy relating to the same shares
bearing a later date than the original proxy; or (ii) attending the Annual
Meeting, withdrawing the proxy and voting in person. Attendance at the Annual
Meeting will not in and of itself constitute revocation of a proxy. No
revocation of a previously delivered proxy shall be effective unless the
Secretary of the Company receives it before the shares subject to the proxy are
voted at the Annual Meeting.
Unless contrary instructions are indicated on the proxy cards, all shares
represented by valid proxies received pursuant to this solicitation (and that
have not been revoked in accordance with the procedures set forth above) will be
voted "FOR" the election of the seven nominees for Director named herein, "FOR"
the amendment (the "AMENDMENT") to the Company's Certificate of Incorporation
authorizing an additional 25,000,000 shares of the Company's Common Stock, par
value $0.001 per share (the "COMMON STOCK"), and "FOR" the ratification of the
appointment of Tanner + Co. as the Company's independent auditors for the year
ending December 31, 1999. If any other business shall properly come before the
Annual Meeting, votes will be cast pursuant to said proxies in respect of any
such other business in accordance with the judgment and in the discretion of the
persons acting thereunder.
The Company's executive offices are located at 150 East 58th Street, Suite
3400, New York, New York 10155, and its telephone number at that address is
(212) 308-5800.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Proxy Statement are "forward-looking
statements" intended to qualify for the safe harbors from liability established
by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
"anticipates," "expects" or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are also
forward-looking statements. Such statements may address future events and
conditions concerning, among other things, the Company's results of operations
and financial condition; the consummation of acquisition and financing
transactions (including the Acquisition) and the effect thereof on the Company's
business; capital expenditures; litigation; regulatory matters; and the
Company's plans and objectives for future operations and expansion. Any such
forward-looking statements would be subject to the risks and uncertainties that
could cause actual results of operations, financial condition, acquisitions,
financing transactions, operations, expenditures, expansion and other events to
differ materially from those expressed or implied in such forward-looking
statements. Any such forward-looking statements would be subject to a number of
assumptions regarding, among other
4
<PAGE>
things, future economic, competitive and market conditions generally. Such
assumptions would be based on facts and conditions as they exist at the time
such statements are made as well as predictions as to future facts and
conditions, the accurate prediction of which may be difficult and involve the
assessment of events beyond the Company's control. Further, the Company's
business is subject to a number of risks that would affect any such
forward-looking statements. These risks and uncertainties include, but are not
limited to, the ability of the Company to commercialize its technology; product
demand and industry pricing; the ability of the Company to obtain patent
protection for its technology; developments in environmental legislation and
regulation; the ability of the Company to obtain future financing on favorable
terms; and other circumstances affecting anticipated revenues and costs. These
risks and uncertainties could cause actual results of the Company to differ
materially from those projected or implied by such forward-looking statements.
OUTSTANDING STOCK AND VOTING RIGHTS
The Board of Directors has set the close of business on November 26, 1999
as the record date (the "RECORD DATE") for determining the stockholders of the
Company entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. As of the Record Date there were 30,960,796 shares of
Common Stock issued and outstanding, all of which are entitled to be voted at
the Annual Meeting. Except as set forth below under the caption "Security
Ownership of Certain Beneficial Owners and Management," the Company at the
Record Date was not aware of any beneficial owner (as defined under the rules of
the Securities and Exchange Commission) of more than 5% of the outstanding
shares of Common Stock. Each share of Common Stock entitles the holder to one
vote on each matter submitted to stockholders for a vote at the Annual Meeting.
o A quorum of stockholders is necessary to take action at the Annual
Meeting.
o A quorum is established if at least a majority of the outstanding
shares of Common Stock as of the Record Date is present in person or
represented by proxy at the Annual Meeting.
o Directors will be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Annual
Meeting.
o Ratification of the appointment of Tanner + Co. as the Company's
independent auditors for the year ending December 31, 1999 will be
approved or ratified, as the case may be, upon the affirmative vote of
a majority of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting.
5
<PAGE>
o The Amendment will be approved if it receives the affirmative vote of
a majority of the shares of Common Stock issued and outstanding as of
the Record Date.
o Votes cast in person or by proxy at the Annual Meeting will be counted
and certified by two Inspectors of Election, of which one is expected
to be an employee of the Company and the other is expected to be an
employee of The Bank of New York, the Company's transfer agent. The
Inspectors of Election will also determine whether or not a quorum is
present at the Annual Meeting.
In accordance with Delaware law, abstentions and "broker non-votes" (which
occur when a broker or other nominee holding shares for a beneficial owner does
not vote on a particular proposal, because such broker or other nominee does not
have discretionary voting power with respect to that matter and has not received
instructions from the beneficial owner) will be treated as present for purposes
of determining the presence of a quorum at the Annual Meeting. Directions to
withhold authority will have no effect on the election of Directors at the
Annual Meeting, because Directors are elected by a plurality of votes cast. For
purposes of determining approval of a matter presented at the Annual Meeting,
abstentions will be deemed present and entitled to vote and will, therefore,
have the same legal effect as a vote "against" a matter presented at the Annual
Meeting. Broker non-votes will be deemed not entitled to vote on the subject
matter as to which the non-vote is indicated and, consequently, will not affect
the outcome of the matter. If less than a majority of the outstanding shares of
Common Stock as of the Record Date are represented at the Annual Meeting, a
majority of the shares so represented may adjourn the Annual Meeting from time
to time without further notice.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of the Record Date by (i) each person
known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock of the Company, (ii) each Director, (iii)
each individual listed in the Summary Compensation Table herein, and (iv) all
executive officers and Directors of the Company as a group, as reported by such
persons. Unless otherwise indicated, the owners have sole voting and investment
power with respect to their respective shares.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES OF
NAME AND ADDRESS OF NUMBER OF SHARES COMMON STOCK
BENEFICIAL OWNER (1) BENEFICIALLY OWNED (2) BENEFICIALLY OWNED
- -------------------- ---------------------- ----------------------
<S> <C> <C>
COMMODORE
ENVIRONMENTAL SERVICES, INC. 15,456,677 (3) 49.9%
BENTLEY J. BLUM 8,104,158 (4) 26.1
PAUL E. HANNESSON 2,121,578 (5) 6.7
JAMES M. DEANGELIS 324,011 (6) 1.0
PETER E. HARROD 102,000 (7) *
WILLIAM E. INGRAM 60,000 (8) *
KENNETH L. ADELMAN, PH.D. 70,000 (9) *
HERBERT A. COHEN 71,000 (10) *
DAVID L. MITCHELL 70,000 (11) *
EDWARD L. PALMER 70,000 (12) *
WILLIAM R. TOLLER 70,000 (13) *
ALL EXECUTIVE OFFICERS AND DIRECTORS AS 6,497,718 21.0%
A GROUP (10 PERSONS)
</TABLE>
- ----------
* Percentage ownership is less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner is 150
East 58th Street, Suite 3400, New York, New York 10155.
7
<PAGE>
(2) As used herein, the term beneficial ownership with respect to a security is
defined by Rule 13d-3 under the Exchange Act as consisting of sole or
shared voting power (including the power to vote or direct the disposition
of) with respect to the security through any contract, arrangement,
understanding, relationship or otherwise, including a right to acquire such
power(s) during the next 60 days. Unless otherwise noted, beneficial
ownership consists of sole ownership, voting and investment rights.
(3) Excludes warrants to purchase an aggregate of 14,410,540 shares of Common
Stock at exercise prices ranging from $1.28 per share to $7.03 per share.
See "Certain Relationships and Related Transactions."
(4) Consists of (i) 70,000 shares of Common Stock underlying currently
exercisable stock options granted to Mr. Blum by the Company's 1998 Stock
Option Plan (the "1998 Plan); and (ii) Mr. Blum's indirect beneficial
ownership of Common Stock based upon his beneficial ownership of 28,479,737
shares of Environmental common stock; and (iii) 4.5 million shares of
Environmental underlying currently exercisable options at $0.10 per share;
and (iv) his spouse's ownership of 2,000,000 shares of common stock of
ENVIRONMENTAL, representing together 52.0% of the outstanding shares of
Environmental common stock at the Record Date. Does not include 450,400
shares of Environmental common stock owned by Simone Blum, the mother of
Mr. Blum, and 385,000 shares of Environmental common stock owned by Samuel
Blum, the father of Mr. Blum. Mr. Blum disclaims any beneficial interest in
the shares of Environmental common stock owned by his spouse, mother and
father.
(5) Consists of: (i) 577,500 shares of Common Stock underlying currently
exercisable stock options granted to Mr. Hannesson by the Company under the
Company's 1998 Plan; and (ii) Mr. Hannesson's indirect beneficial ownership
of Common Stock based upon his ownership of an aggregate of (a) 2,650,000
shares of Environmental common stock owned by Suzanne Hannesson, the spouse
of Mr. Hannesson, (b) 2,650,000 shares of Environmental common stock owned
by the Hannesson Family Trust (Suzanne Hannesson and John D. Hannesson,
trustees) for the benefit of Mr. Hannesson's spouse, (c) 500,000 shares of
Environmental common stock issued to the Hannesson Family Trust, and (d),
and additional stock options to purchase 525,705 shares of Environmental
common stock at $0.10 per share, representing collectively 10% of the
outstanding shares of Environmental common stock at the Record Date. Does
not include 1,000,000 shares of Environmental common stock owned by each of
Jon Paul and Krista Hannesson, the adult children of Mr. Hannesson. Mr.
Hannesson disclaims any beneficial interest in the shares of Environmental
common stock owned by or for the benefit of his spouse and children. It
also does not include 2,400,000 shares of Common Stock underlying stock
options granted to Mr. Hannesson by the Company which are not currently
exercisable.
(6) Consists of (i) 181,250 shares of Common Stock underlying currently
exercisable stock options granted to Mr. DeAngelis by the Company under the
1998 Plan; and (ii) Mr. DeAngelis' indirect beneficial ownership of Common
Stock based upon his ownership of 580,000 shares of Environmental.
(7) Consists of 102,000 shares of Common Stock underlying currently exercisable
stock options granted to Mr. Harrod by the Company under the 1998 Plan.
(8) Consists of 60,000 shares of Common Stock underlying currently exercisable
stock options granted to Mr. Ingram by the Company under the 1998 Plan.
(9) Consists of 70,000 shares of Common Stock underlying currently exercisable
stock options granted to Mr. Adelman by the Company under the 1998 Plan.
(10) Consists of: (i) 1,000 shares of Common Stock; (ii) 70,000 shares of Common
Stock underlying currently exercisable stock options granted to Mr. Cohen
by the Company under the 1998 Plan.
(11) Consists of 70,000 shares of Common Stock underlying currently exercisable
stock options granted to Mr. Mitchell by the Company under the 1998 Plan.
(12) Consists of 70,000 shares of Common Stock underlying currently exercisable
stock options granted to Mr. Palmer by the Company under the 1998 Plan.
(13) Consists of 70,000 shares of Common Stock underlying currently exercisable
stock options granted to Mr. Toller by the Company under the 1998 Plan.
8
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At this year's Annual Meeting, seven Directors will be elected to hold
office for a term expiring at the Annual Meeting of Stockholders to be held in
2000, and until their respective successors are duly elected and have qualified.
The Executive Committee of the Board of Directors has nominated the individuals
listed below as Directors to be elected at the Annual Meeting, each of whom is
presently serving as a Director of the Company. Each Director shall be elected
by a plurality of the votes of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting. The persons named in the enclosed
proxy card intend to vote the shares represented by valid proxies for the
election of the persons listed below as Directors of the Company, unless the
vote for such persons is expressly withheld.
The Board of Directors has no reason to believe that any nominee will
refuse or be unable to accept election; however, in the event that a nominee for
Director is unable to accept election or if any other unforeseen contingencies
should arise, it is intended that proxies will be voted for the remaining
nominees and for such other person or persons as may be designated by the Board
of Directors, unless the proxies instruct otherwise.
The following information, including principal occupation or employment for
the past five or more years, is furnished with respect to the following nominees
for Directors:
PAUL E. HANNESSON -- AGE 59
Director since March 1996
Mr. Hannesson has been a Director of the Company since March 1996 and was
appointed Chairman of the Board in November 1996. Mr. Hannesson also served as
Chief Executive Officer of the Company from March to October 1996 and as
President from March to September 1996, and was re-appointed Chief Executive
Officer in November 1996 and President in May 1997. Mr. Hannesson has been a
director of Commodore Environmental Services, Inc. ("ENVIRONMENTAL") since
February 1993 and was appointed its Chairman of the Board and Chief Executive
Officer in November 1996. Mr. Hannesson also served as President of
Environmental from February 1993 to July 1996 and was re-appointed President in
May 1997 and served in this capacity until July 1998 whereupon Mr. Hannesson
resigned from both Officer and Directorship positions in Environmental. Mr.
Hannesson also currently serves as the Chairman of the Board and Chief Executive
Officer of Commodore Separation Technologies, Inc., ("SEPARATION"), Commodore
Solution Technologies, Inc., a wholly owned subsidiary of the Company
("SOLUTION"), Commodore CFC Technologies, Inc., a wholly owned subsidiary of the
Company ("CFC Technologies"), and certain other wholly owned subsidiaries of the
Company. Mr. Hannesson was a private investor and business consultant from 1990
to 1993, and was also an officer and director of Specialty Retail
9
<PAGE>
Services, Inc. from 1989 to August 1991. He served as Chairman of the Board of
Lanxide Corporation ("LANXIDE"), a research and development company developing
metal and ceramic materials, from 1983 to February 1998. Mr. Hannesson is the
brother-in-law of Bentley J. Blum, a Director of the Company.
KENNETH L. ADELMAN, PH.D. -- AGE 53
Director since July 1996
Dr. Adelman joined the Board of Directors of the Company and Environmental
in July 1996 and was appointed Vice Chairman of the Company in April 1998. Dr.
Adelman also served as Executive Vice President--Marketing and International
Development of the Company from May 1997 to March 1998, and has served as
Executive Vice President--Marketing and International from April 1998 to
December 1998. Dr. Adelman resigned as a Director in Environmental in July 1998.
Dr. Adelman also joined the Board of Directors of Separation in April 1997. Dr.
Adelman served as President and Chief Operating Officer of Solution from
November 1997 to April 1998. Since 1987, Dr. Adelman has been an independent
consultant on international issues to various corporations, including Lockheed
Martin Marietta Corporation and Loral Corporation. Previously, Dr. Adelman held
positions of responsibility in arms control during most of the Reagan
Administration. From 1983 to the end of 1987, he was director of the United
States Arms Control and Disarmament Agency. Dr. Adelman was a Professor at
Georgetown University and writer for Washingtonian Magazine from 1987 to 1991.
From 1985 to 1987, Dr. Adelman accompanied President Ronald Reagan on summits
with Mikhail Gorbachev and negotiated with Soviet diplomats on nuclear and
chemical weapons control issues. He also headed the United States' team on
annual arms control discussions with top-level officials of the People's
Republic of China from 1983 through 1986. From 1981 to 1983, he served as Deputy
United States Representative to the United Nations with the rank of Ambassador
Extraordinary and Plenipotentiary. Dr. Adelman holds M.A. and Ph.D. degrees from
Georgetown University.
BENTLEY J. BLUM -- AGE 58
Director since March 1996
Mr. Blum has served as a Director of the Company since March 1996 and
served as its Chairman of the Board from March to November 1996. Mr. Blum has
served as a director of Environmental since 1984 and served as its Chairman of
the Board from 1984 to November 1996. Mr. Blum also currently serves as a
director of each of Separation, Solution and CFC Technologies. For more than 15
years, Mr. Blum has been actively engaged in real estate acquisitions and
currently is the sole stockholder and director of a number of corporations that
hold real estate interests, oil drilling interests and other corporate
interests. Mr. Blum is a director of each of the following companies: Lanxide;
Federal Resources Corporation, a company formerly engaged in manufacturing,
retail distribution and natural resources development; Specialty Retail
Services, Inc., a former distributor of professional beauty products; and North
Valley Development Corp., an inactive real estate development company. Mr. Blum
is a
10
<PAGE>
principal stockholder of Environmental. Mr. Blum is the brother-in-law of Paul
E. Hannesson, the Chairman of the Board, President and Chief Executive Officer
of the Company.
HERBERT A. COHEN -- AGE 66
Director since July 1996
Mr. Cohen has served as a Director of the Company and Environmental since
July 1996 and joined the Board of Directors of Separation in March 1998. Mr.
Cohen resigned as a Director in Environmental in July 1998. Mr. Cohen has been a
practicing negotiator for the past three decades acting in an advisory capacity
in hostage negotiations and crisis management. He has been an advisor to
Presidents Carter and Reagan in the Iranian hostage crisis, the government's
response to the skyjacking of TWA Flight 847 and the seizure of the Achille
Lauro. Mr. Cohen's clients have included large corporations and government
agencies such as the United States Department of State, the Federal Bureau of
Investigation, the Conference of Mayors, the Bureau of Land Management, Lands
and Natural Resources Division in conjunction with the Environmental Protection
Agency, and the United States Department of Justice. In addition, Mr. Cohen was
an advisor and consultant to the Strategic Arms Reduction Talks negotiating
team. Mr. Cohen holds a law degree from New York University School of Law, and
has lectured at numerous academic institutions.
DAVID L. MITCHELL -- AGE 78
Director since July 1996
Mr. Mitchell has served as a Director of the Company and Environmental
since July 1996 and as a director of Separation since April 1997. Mr. Mitchell
resigned as a Director in Environmental in July 1998. Mr. Mitchell has also
served as a consultant to the Company since July 1997. For the past thirteen
years, Mr. Mitchell has been President and co-founder of Mitchell & Associates,
Inc., a banking firm providing financial advisory services in connection with
corporate mergers, acquisitions and divestitures. Prior to forming Mitchell &
Associates in 1982, Mr. Mitchell was a Managing Director of Shearson/American
Express Inc. from 1979 to 1982, a Managing Director of First Boston Corporation
from 1976 to 1978, and a Managing Director of the investment banking firm of
S.G. Warburg & Company from 1965 to 1976. Mr. Mitchell holds a bachelor's degree
from Yale University.
EDWARD L. PALMER -- AGE 82
Director since August 1998
Mr. Palmer joined the Board of Directors of the Company in August 1998. Mr.
Palmer is the retired Chairman of the Executive Committee and former director of
CitiCorp and Citibank, N.A. Mr. Palmer was Trustee Emeritus of Brown University,
New York Philharmonic and The Metropolitan Museum of Art. Mr. Palmer served as
director of Borg-Warner Corp., CitiCorp, Corning Incorp., Del Monte Corp., First
Boston Corp., Grindlays Banks, plc, Kissinger Associates, Monsanto Co., Mutual
Life Ins., Phelps Dodge Corp., Union Pacific Corp., and Washington National Bank
Corp.
11
<PAGE>
WILLIAM R. TOLLER -- AGE 69
Director since March 1998
Mr. Toller joined the Board of Directors of the Company in March 1998. Mr.
Toller has also served as a member of the Board of Directors of Separation since
April 1997 and has served as a consultant to Environmental since July 1997. Mr.
Toller served as the Vice Chairman of Lanxide from July 1997 to February 1998.
Mr. Toller also currently serves as Chairman and Chief Executive Officer of
Titan Consultants, Inc. Mr. Toller had been the Chairman and Chief Executive
Officer of Witco Corporation since October 1990 until his retirement in July
1996. Mr. Toller joined Witco in 1984 as an executive officer when it acquired
the Continental Carbon Company of Conoco, Inc., where he had been its President
and an officer since 1955. Mr. Toller is a graduate of the University of
Arkansas with a Bachelor's degree in Economics, and the Stanford University
Graduate School Executive Program. Mr. Toller serves on the board of directors
of Chase Industries, Inc., Fuseplus, Inc., where he is also Chairman of the
Organization and Compensation Committee, and the United States Chamber of
Commerce, where he is also a member of the Labor Relations and International
Policy Committees. Mr. Toller is also a member of the Board of Trustees and the
Executive and Finance Committees of the International Center for the Disabled, a
member of the Board of Associates of the Whitehead Institute for Biomedical
Research, a member of the National Advisory Board of First Commercial Bank in
Arkansas, a member of the Dean's Executive Advisory Board and the International
Business Committee at the University of Arkansas, College of Business
Administration, and a member of the Board of Presidents of the Stamford Symphony
Orchestra.
Messrs. Hannesson and Blum are brothers-in-law. No family relationship
exists among any other Directors or executive officers of the Company. No
arrangement or understanding exists between any Director and any other person
pursuant to which any Director was selected as a Director of the Company.
The Board of Directors recommends that stockholders vote "FOR" the election
of the nominees for directors listed above.
12
<PAGE>
INFORMATION REGARDING BOARD MEETINGS, COMMITTEES AND MANAGEMENT
The Board of Directors held 18 meetings and took certain actions by written
consent during the year ended December 31, 1998. Each incumbent Director
attended, either in person or by telephone, at least 75 percent of the aggregate
of (i) the total number of meetings of the Board of Directors (held during the
period for which he has been a Director) and (ii) the total number of meetings
held by all committees of the Board on which he served (during the periods that
he served).
13
<PAGE>
COMMITTEES OF THE BOARD
Audit Committee. The Board of Directors has a standing Audit Committee that
is presently composed of David L. Mitchell (Chairman) and William R. Toller,
neither of which is an employee of the Company. The Audit Committee held 2
meetings during 1998. The responsibilities of the Audit Committee include
recommending to the Board of Directors the firm of independent accountants to be
retained by the Company, reviewing with the Company's independent accountants
the scope and results of their audits, reviewing with the independent
accountants and management the Company's accounting and reporting principles,
policies and practices, as well as the Company's accounting, financial and
operating controls and staff, supervising the Company's policies relating to
business conduct and dealing with conflicts of interest relating to officers and
Directors of the Company.
Compensation, Stock Option and Benefits Committee. The Board of Directors
also has a standing Compensation, Stock Option and Benefits Committee (the
"COMPENSATION COMMITTEE") that is presently composed of Herbert A. Cohen
(Chairman), David L. Mitchell and William R. Toller, none of whom is an employee
of the Company. The Compensation Committee held 4 meetings during 1998. The
responsibilities of the Compensation Committee include establishing and
reviewing employee and consultant/advisor compensation, bonuses and incentive
compensation awards, administering and interpreting the Company's 1998 Stock
Option Plan (the "1998 PLAN"), and determining the recipients, amounts and other
terms (subject to the requirements of the 1998 Plan) of options that may be
granted under the Plan from time to time and providing guidance to management in
connection with establishing additional benefit plans.
Executive and Finance Committee. The Board of Directors has an Executive
and Finance Committee that is presently composed of Paul E. Hannesson
(Chairman), Bentley J. Blum and David L. Mitchell. Mr. Hannesson is the Chairman
of the Board, President and Chief Executive Officer of the Company. Messrs. Blum
and Mitchell are not employees of the Company. The Executive and Finance
Committee held 0 meetings during 1998. The Executive and Finance Committee has
the authority and responsibility of the full Board of Directors to supervise and
oversee the financial practices and policies of the Company, to oversee the
adoption of significant accounting policies, and to manage the Company between
meetings of the Board of Directors, subject to certain limitations. The
Executive and Finance Committee also has the authority and responsibility for
making recommendations to the Board of Directors regarding nominees to serve as
Directors of the Company. The Executive and Finance Committee will consider
nominees for Directors recommended by stockholders.
Nominating Committee. The Board of Directors does not have a standing
nominating committee. The Executive and Finance Committee of the Board of
Directors perform the functions of a nominating committee.
14
<PAGE>
COMPENSATION OF DIRECTORS
Non-management Directors of the Company received Director's fees of $500
per meeting for attendance at Board of Directors meetings from January 1998
through August of 1998, and $375 per meeting from September 1998 through
December 1998 and are reimbursed for actual expenses incurred in respect of such
attendance. The Company does not separately compensate employees for serving as
Directors.
CURRENT MANAGEMENT
The names and ages of the executive officers of the Company and certain
senior executive officers of the Company's operating subsidiaries, and their
positions with the Company and/or the Company's subsidiaries are as follows:
NAME AGE POSITION
---- --- --------
Paul E. Hannesson 59 Chairman of the Board, President and
Chief Executive Officer
James M. DeAngelis 39 Vice President-Finance and Treasurer
William E. Ingram 54 Vice President and Controller
Peter E. Harrod, P.E. 48 President of Advanced Sciences and
President and Chief Operating Officer
of Solution
See "Proposal 1--Election of Directors" above for certain biographical
information concerning Paul E. Hannesson.
Peter E. Harrod, P.E. has served as an executive officer of Commodore
Advanced Sciences, Inc. ("ADVANCED SCIENCES") since 1991 and as its President
since October 1996. Mr. Harrod was appointed President and Chief Operating
Officer of Solution in April 1998, after having served as its Senior Vice
President since November 1997. Prior to such time, Mr. Harrod held numerous
executive positions in environmental engineering, hazardous waste remediation,
design engineering and construction management companies, including ABB
Environmental Services, Inc. from 1983 to 1991, Neil & Gunter, Inc. from 1981 to
1983 and E.C. Jordan Co. from 1975 to 1981. Mr. Harrod is currently a member of
the National Society of Professional Engineers and the American Society of Civil
Engineers, and is the author of several environmental, remediation and design
engineering publications. Mr. Harrod received M.S. and B.S. degrees in Civil
Engineering from the University of Vermont.
15
<PAGE>
Mr. Ingram served as the Company's Vice President and Controller from
October 1996 to March 1997, as its Vice President--Finance from March to May
1997, and was re-appointed Vice President and Controller in June 1997. Mr.
Ingram has also served as Vice President and Controller of Separation, Solution
and CFC Technologies since June 1997 and served as Vice President and Controller
of Environmental from June 1997 to June 1998. Prior to such time, from January
1995 to September 1996, Mr. Ingram was Chief Financial Officer of HydroChem
Industrial Services, Inc., a privately owned company providing high-pressure
water and chemical cleaning services primarily to the petrochemical industry.
Mr. Ingram was Vice President and Region Controller for Chemical Waste
Management, Inc. ("CWM") from September 1983 to December 1994. CWM, a subsidiary
of Waste Management, Inc., provides hazardous waste treatment and disposal
services to a wide range of government and industrial customers. Mr. Ingram also
spent two years with the solid waste operations of Waste Management, Inc. Mr.
Ingram is a Certified Public Accountant and has a M.B.A. from the University of
Florida and a B.S. in Accounting from Florida Southern College.
Mr. DeAngelis was appointed Vice President-Finance and Treasurer of the
Company in July 1998. Mr. DeAngelis has also served as Senior Vice
President--Sales & Marketing of Separation since July 1996, after having served
as its Vice President--Marketing since November 1995. Mr. DeAngelis has also
served as the President of CFC Technologies since September 1994, and served as
Vice President--Marketing of Environmental from September 1992 to September
1995. Mr. DeAngelis holds a Masters in International Management degree from the
American Graduate School of International Management. Mr. DeAngelis holds B.S.
degrees in Biology and Physiology from the University of Connecticut.
The Company's officers are elected by, and serve at the pleasure of, the
Board of Directors, subject to the terms of any employment agreements. Messrs.
Hannesson and Blum are brothers-in-law. No family relationship exists among any
other Directors or executive officers of the Company. No arrangement or
understanding exists between any executive officer and any other person pursuant
to which any executive officer was selected as an executive officer of the
Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers, and persons who own more than 10% of the outstanding shares
of the Company's Common Stock, to file initial reports of beneficial ownership
and reports of changes in beneficial ownership of shares of Common Stock with
the Securities and Exchange Commission (the "COMMISSION") and each securities
exchange on which the Company's Common Stock is traded. Such persons are
required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
16
<PAGE>
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company during the year ended December 31, 1998, and upon a review of Forms
5 and amendments thereto furnished to the Company with respect to the year ended
December 31, 1998, or upon written representations received by the Company from
certain reporting persons that no Forms 5 were required for those persons, the
Company believes that no Director, executive officer or holder of more than 10%
of the outstanding shares of Common Stock failed to file on a timely basis the
reports required by Section 16(a) of the Exchange Act during, or with respect
to, the year ended December 31, 1998, except Edward Romero, formerly a Director
of the Company, who inadvertently failed to file a Form 4 with respect to a
transaction that occurred in March, 1998 (such transaction was reported on Form
4 filed with the Commission on May 7, 1998).
EXECUTIVE COMPENSATION AND RELATED MATTERS
SUMMARY COMPENSATION
The following table sets forth the amount of all compensation paid by the
Company and/or its affiliates and allocated to the Company's operations for
services rendered during each of 1998, 1997, and 1996 to all persons serving as
the Company's Chief Executive Officer during 1998, to each of the Company's four
most highly compensated executive Officers other than the Chief Executive
Officer whose total salary and bonus compensation exceeded $100,000 during any
such year, and to two additional individuals who served as executive Officers of
the Company during 1998, but not at December 31, 1998.
17
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------------- ------------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDER- LTIP ALL OTHER
COMPEN- STOCK LYING PAY- COMPEN-
NAME AND PRINCIPAL SALARY BONUS SATION AWARD(S) OPTIONS OUTS SATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
------------------ ---- ---------- --------- -------- ---------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul E. Hannesson 1998 250,526(1) -0- 7,700(3) -0- 577,500 -0- -0-
Chief Executive Officer 1997 250,256(1) 63,356(2) 15,205(3) -0- -0- -0- -0-
1996 265,836(1) 50,000(2) -0- -0- 400,000 -0- -0-
Kenneth L.. Adelman, Ph.D. 1998 179,854(4) -0- -0- -0- 70,000(6) -0- -0-
Executive Vice President 1997 83,444(4) 54,937(5) -0- -0- 150,000 -0- -0-
1996 -0- -0- -0- -0- 67,500(6) -0- -0-
Michael D. Fullwood 1998 52,067(7) -0- -0- -0- -0- -0- -0-
Former Senior Vice President 1997 68,620(7) 38,463(8) -0- -0- 125,000 -0- -0-
1996 -0- -0- -0- -0- -0- -0- -0-
Rayburn Hanzlik(9) 1998 69,779(10) 13,750(11)- -0- -0- -0- -0- -0-
Former Chief Administrative 1997 79,123(10) 16,481(11) -0- -0- 75,000 -0- -0-
Officer 1996 -0- -0- -0- -0- -0- -0- -0-
Carl O. Magnell (12) 1998 54,124(13) -0- -0- -0- -0- -0- -0-
Former Vice President 1997 94,430(13) 13,750(14) -0- -0- 107,500 -0- -0-
1996 -0- -0- -0- -0- -0- -0- -0-
William E. Ingram (15) 1998 82,500(16) -0- -0- -0- 150,000 -0- -0-
Vice President & Controller 1997 82,500(16) 16,500(17) -0- -0- 150,000 -0- -0-
1996 -0- -0- -0- -0- -0- -0- -0-
Peter E Harrod(18) 1998 170,653(19) -0- -0- -0- 255,000 -0- -0-
Vice President & President 1997 150,807(19) 45,000(20) -0- -0- 125,000 -0- -0-
ASI 1996 33,625(19) 4,125(20) -0- -0- -0- -0- -0-
James M. DeAngelis(21) 1998 72,500(22) -0- -0- -0- 181,250 -0- -0-
Vice President & Treasurer 1997 -0- -0- -0- -0- -0- -0- -0-
1996 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
- ----------
(1) Represents the amount of Mr. Hannesson's base salary allocated to the
Company. Mr. Hannesson's total base salary for 1997 and 1998 was $395,000
and $434,500, (25% of base salary was deferred as of October 5, 1998; base
salary adjusted to $330,000 ), respectively. Certain portions of such base
salary were also allocated to Environmental and Separation. See "Certain
Relationships and Related Transactions--Services Agreement."
(2) Represents the amount of Mr. Hannesson's annual incentive bonus allocated
to the Company. Mr. Hannesson's total annual incentive bonus for 1997 and
1998 was $100,000 and $0 respectively. Certain portions of his 1997 annual
incentive bonus was allocated to Environmental and Separation.
18
<PAGE>
(3) Represents the amount of Mr. Hannesson's automobile allowance allocated to
the Company. Mr. Hannesson's total automobile allowance for 1997 was
$24,000 and for 1998 was $12,000, certain portions of which were also
allocated to Environmental and Separation.
(4) Represents the amount of Dr. Adelman's base salary allocated to the
Company. Dr. Adelman's total base salary for 1997 and 1998 was $151,980
and $400,500 respectively. Certain portions of such base salary were
also allocated to Environmental and Separation. Dr. Adelman resigned
his management positions effective December 31, 1998.
(5) Represents the amount of Dr. Adelman's annual incentive bonuses allocated
to the Company. Dr. Adelman's total annual incentive bonus for 1997 and
1998 was $100,000 and $0 respectively. Certain portions of such annual
incentive bonuses were also allocated to Environmental and Separation. Dr.
Adelman resigned his management positions effective December 31, 1998.
(6) Represents shares of Common Stock underlying stock options granted to Dr.
Adelman by the Company in his capacity as a director of the Company.
(7) Represents the amount of Mr. Fullwood's base salary allocated to the
Company. Mr. Fullwood's total base salary for 1997 and 1998 was $133,805
and $260,000 respectively. Mr. Fullwood resigned his position as Senior
Vice President of the Company in July of 1998. Certain portions of such
base salary were also allocated to Environmental and Separation.
(8) Represents the amount of Mr. Fullwood's annual incentive bonus allocated to
the Company. Mr. Fullwood's total annual incentive bonuses for 1997 and
1998 was $75,000 and $0 respectively. Certain portions of his 1997 annual
incentive bonus were also allocated to Environmental and Separation. Mr.
Fullwood resigned his position as an Officer of the Company in July of
1998.
(9) Mr. Hanzlik served as General Counsel, Chief Administrative Officer and
Secretary of the Company from January to April 1997. Mr. Hanzlick served as
Chief Administrative Officer of the Company from April 1997 to August 1998.
Mr. Hanzlick resigned his position as an Officer of the Company in August
of 1998.
(10) Represents the amount of Mr. Hanzlik's base salary allocated to the
Company. Mr. Hanzlik's total base salary for 1997 and 1998 was $144,025 and
$165,000 respectively. Certain portions of such base salary were also
allocated to Environmental and Separation. Mr. Hanzlick resigned his
position as an Officer of the Company in August of 1998.
(11) Represents the amount of Mr. Hanzlik's annual incentive bonuses allocated
to the Company. Mr. Hanzlik's total annual incentive bonus for 1997 and
1998 was $30,000 and $25,000 respectively. Certain portions of such annual
incentive bonuses were also allocated to Environmental and Separation. Mr.
Hanzlick resigned his position as an Officer of the Company in August of
1998.
(12) Mr. Magnell served as Vice President, Business Development of the Company
from January 1997 to July 1998. Mr. Magnell resigned his position as Vice
President, Business Development, of the Company in July of 1998.
(13) Represents the amount of Mr. Magnell's base salary allocated to the
Company. Mr. Magnell's total base salary for 1997 and 1998 was $165,000 and
$180,000 respectively. Certain portions of such base salary were also
allocated to Environmental and Separation. Mr. Magnell resigned his
position as an Officer of the Company in July of 1998.
(14) Represents the amount of Mr. Magnell's annual incentive bonuses allocated
to the Company. Mr. Magnell's total annual incentive bonus for 1997 and
1998 was $25,000 and $0 respectively. Certain portions of his 1997 annual
incentive bonus was allocated to Environmental and Separation. Mr. Magnell
resigned his position as an Officer of the Company in July of 1998.
(15) Mr. Ingram served as Vice President and Controller from October 1996 to
March 1997, as Vice President- Finance from March to May 1997, and as Vice
President and Controller of the Company from June 1997 to present.
19
<PAGE>
(16) Represents the amount of Mr. Ingram's base salary allocated to the Company.
Mr. Ingram's total base salary for both 1997 and 1998 was $150,000. Certain
portions of such base salary were also allocated to Environmental and
Separation.
(17) Represents the amount of Mr. Ingram's annual incentive bonuses allocated to
the Company. Mr. Ingram's total annual incentive bonus for 1997 and 1998
was $30,000 and $0 respectively. Certain portions of his 1997 annual
incentive bonus was allocated to Environmental and Separation.
(18) Mr. Harrod served as President of Advanced Sciences, a wholly owned
subsidiary of the Company, from November 1996 to present and serves as
President of Commodore Solution Technologies, Inc., a wholly owned
subsidiary of the Company since January 1999.
(19) Represents the amount of Mr. Harrod's base salary allocated to the Company,
through its wholly owned subsidiary, Advanced Sciences. Mr. Harrod's total
base salary for 1996, 1997 and 1998 was $134,500, $150,000, and $170,000
respectively.
(20) Represents the amount of Mr. Harrod's annual incentive bonus allocated to
the Company. Mr. Harrod's total annual incentive bonus, under Advanced
Sciences (a wholly owned subsidiary of the Company) management bonus
program, for 1996, 1997, and 1998 was $16,500, $45,000, and $0
respectively.
(21) Mr. DeAngelis served as Vice President and Treasurer of the Company since
July 1998.
(22) Represents the amount of Mr. DeAngelis' base salary allocated to the
Company. Mr. DeAngelis' total base salary for 1998 was $145,000.
20
<PAGE>
STOCK OPTIONS
The following table sets forth certain information concerning options
granted during the year ended December 31, 1998 to the individuals listed in the
Summary Compensation Table pursuant to the Company's 1998 Stock Option Plan (the
"1998 PLAN"). The Company has no outstanding stock appreciation rights and
granted no stock appreciation rights during the year ended December 31, 1998.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
-----------------------------------------------------------------
Potential Realizable
Value at Assumed
Number of Annual Rates of Stock
Securities Percent of Total price Appreciation for
Underlying Options Granted Exercise of Option Term (7)
Options to Employees in Base Price ----------------------
NAME Granted (#) Fiscal Year (6) ($/SH) Expiration Date 5% ($) 10% ($)
- ---- ----------- --------------- ----------- --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
PAUL E. HANNESSON 577,500(1) 16% 0.4375 11/14/08 75,872 718,093
PETER E. HARROD 255,000(2) 7% 0.4375 11/14/08 33,502 317,800
JAMES M. DEANGELIS 181,250(3) 5% 0.4375 11/14/08 23,813 225,376
KENNETH L. ADELMAN, PH.D 70,000(4) 2% 0.4375 11/14/08 9,197 87,042
WILLIAM E. INGRAM 150,000(5) 4% 0.4375 12/14/08 19,707 186,518
</TABLE>
- ---------------
(1) Options to purchase 577,000 shares of Common Stock were granted to Mr.
Hannesson in December, 1998 pursuant to the 1998 Plan and are fully vested
and exercisable.
(2) Options to purchase 255,000 shares of Common Stock were granted to Mr.
Harrod in December, 1998 pursuant to the 1998 Plan. Forty percent (40%) of
such options (i.e., options for 102,000 shares) are currently exercisable;
the remaining shares will vest and become exercisable over the next three
year period in equal amounts (i.e., 51,000 shares will become exercisable
on each of December 14, 1999, 2000 and 2001). Unless Mr. Harrod exercises
such options, they will expire on December 14, 2008 (subject to prior
termination in accordance with the applicable stock option agreements).
Upon announcement of a Change in Control (pursuant to and as defined in the
1998 Plan) with respect to the Company, such options will become
immediately exercisable. Upon consummation of a Change in Control, all
unexercised options will terminate.
(3) Options to purchase 181,250 shares of Common Stock were granted to Mr.
DeAngelis in December, 1998 pursuant to the 1998 Plan and are fully vested
and exercisable.
(4) Options to purchase 70,000 shares of Common Stock were granted to Dr.
Adelman as a Director in December, 1998 pursuant to the 1998 Plan and are
fully vested and exercisable, as are all stock options granted to the
Directors of the Company (the Company has granted options to purchase
70,000 shares of Common Stock under the 1998 Plan to each of the Company's
Directors).
21
<PAGE>
(5) Options to purchase 150,000 shares of Common Stock were granted to Mr.
Ingram in December, 1998 pursuant to the 1998 Plan. Forty percent (40%) of
such options (i.e., options for 60,000 shares) are currently exercisable;
the remaining shares will vest and become exercisable over the next three
year period in equal amounts (i.e., 30,000 shares will become exercisable
on each of December 14, 1999, 2000 and 2001). Unless Mr. Ingram exercises
such options, they will expire on December 14, 2008 (subject to prior
termination in accordance with the applicable stock option agreements).
Upon announcement of a Change in Control (pursuant to and as defined in the
1998 Plan) with respect to the Company, such options will become
immediately exercisable. Upon consummation of a Change in Control, all
unexercised options will terminate.
(6) Percentages based on 3,576,412 stock options granted under the 1998 Plan
during the year ended December 31, 1998. Such number does not include any
of the options granted under the 1996 Plan, and those awarded in 1997,
which were rescinded with the adoption of the 1998 Plan.
(7) The closing price per share for the Company's Common Stock on December 31,
1998 was $0.31. The closing price is used for all the subsequent stock
appreciation calculations.
The following table sets forth certain information concerning the exercise of
options and the value of unexercised options held under the Plan at December 31,
1998 by the individuals listed in the Summary Compensation Table.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS
OPTIONS AT FISCAL YEAR-
SHARES VALUE AT FISCAL YEAR-END(#) END($)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
---- ------------- -------- --------------------- ----------------
<S> <C> <C> <C> <C>
PAUL E. HANNESSON........... -0- -0- 577,500/0 -0-/-0-
KENNETH L. ADELMAN, PH.D. -0- -0- 70,000/0 -0-/-0-
MICHAEL D. FULLWOOD......... -0- -0- 0/0 -0-/-0-
RAYBURN HANZLIK............. -0- -0- 0/0 -0-/-0-
CARL O. MAGNELL............. -0- -0- 0/0 -0-/-0-
PETER E. HARROD............. -0- -0- 102,000/153,000 -0-/-0-
WILLIAM E. INGRAM........... -0- -0- 60,000/90,000 -0-/-0-
JAMES M. DEANGELIS.......... -0- -0- 181,250/0 -0-/-0-
</TABLE>
- --------------
(1) Represents the difference between the last reported sale price of the
Common Stock on December 31, 1998 ($0.31), and the exercise price of the
option ($0.4375) multiplied by the applicable number of options exercised.
22
<PAGE>
(2) Represents the difference between the exercise price and the closing price
on the date of exercise, multiplied by the number of shares acquired.
EMPLOYMENT AGREEMENTS
Paul E. Hannesson, the Company's Chairman of the Board, President and Chief
Executive Officer, entered into an employment agreement with Environmental on
November 18, 1996 for a term expiring on December 31, 1999. Pursuant to such
employment agreement, Mr. Hannesson agreed to devote his business and
professional time and efforts to the business of Environmental as a senior
executive officer, and to serve in senior executive positions with one or more
of Environmental's subsidiaries at the time, including the Company. The
employment agreement provides that Mr. Hannesson shall receive, among other
things, a base salary at an annual rate of $395,000 through December 31, 1997,
and will receive not less than $434,500 through December 31, 1998 and not less
than $477,950 through December 31, 1999, for services rendered to Environmental
and certain of its affiliates, including the Company. Pursuant to the employment
agreement, Mr. Hannesson received, among other things: (i) a signing bonus of
(a) $150,000 cash and (b) options to purchase 950,000 shares of Common Stock of
Environmental, which options vested on the date of his employment agreement; and
(ii) options to purchase an aggregate of 2,500,000 additional shares of Common
Stock of Environmental, exercisable in installments over a period of five years
commencing on the date of his employment agreement. Mr. Hannesson also received
options to purchase Common Stock of the Company and Separation in the amount of
1.0% of each company's total outstanding shares of Common Stock on the date of
grant, and is eligible to receive incentive compensation of up to $225,000 per
year for achieving certain goals.
In June 1998, Mr. Hannesson's Employment Agreement was assigned from
Environmental to the Company. On September 28, 1998, the Company sold Separation
to Environmental and, effective as of that date, the costs associated with Mr.
Hannesson's employment agreement ceased being allocated to Separation. Effective
June 30, 1998, the Company accepted an assignment from Environmental of the
Employment Agreement between Mr. Hannesson, the Company's Chairman and CEO, and
Environmental. The Company accepted the assignment in view of the fact that Mr.
Hannesson had resigned as an officer and director of Environmental and for some
time had been and has continued to devote his full time as a Director and
officer of the Company. The Company's Board of Directors approved the Company's
acceptance of the assignment of Mr. Hannesson's Employment Agreement. Mr.
Hannesson's Employment Agreement is scheduled to expire on December 31, 1999 and
provides for an annual base salary of $477,950.00 in the third year of that
contract ending December 31, 1999. A portion of Mr. Hannesson's base salary for
1998 (25% of base salary $434,500), was deferred as of October 5, 1998; base
salary adjusted to $330,000). A portion of Mr. Hannesson's base salary for 1999
(31% of $477,950), was deferred as of January 1, 1999.
23
<PAGE>
Kenneth L. Adelman, Ph.D., the Company's Executive Vice
President--Marketing and International Development, entered into an employment
agreement with the Company on May 7, 1997 for a term expiring on April 30, 2000.
Pursuant to such employment agreement, Dr. Adelman agreed to devote his business
and professional time and efforts to the business of the Company as its
Executive Vice President--Marketing and International Development. The
employment agreement provided that Dr. Adelman would receive, among other
things, a fixed base salary at an annual rate of $250,000 for services rendered
to the Company. Dr. Adelman resigned his management positions in the Company as
of December 31, 1998 and received severance pay and benefits, which terminated
June 30, 1999.
James M. DeAngelis, the Company's Vice President of Finance and Treasurer,
entered into an Employment Agreement with Separation in September of 1996.
Effective June 30, 1998, the Company accepted an assignment from Separation of
an Employment Agreement between James M. DeAngelis and Separation. The Company
accepted the Assignment of Mr. DeAngelis' Employment Agreement because Mr.
DeAngelis was appointed as the Vice President Finance of the Company effective
June 30, 1998 and on that date began to work almost exclusively for the Company.
The Company's Board of Directors approved the Company's acceptance of the
assignment of Mr. DeAngelis' Employment Agreement. Mr. DeAngelis' Employment
Agreement is scheduled to expire on December 31, 1999, provides for an annual
base salary of $145,000 and contains the same provisions with respect to
termination without cause, change of control or elimination of his position as
are contained in Mr. Hannesson's agreement.
William E. Ingram, the Company's Vice President and Controller, entered
into an Employment Agreement with the Company in September of 1996. Mr. Ingram's
Employment Agreement, which is scheduled to expire on December 31, 1999,
provides for an annual base salary of $150,000.
The employment agreements also provide for termination by the Company upon
death or disability (defined as three aggregate months of incapacity during any
365-consecutive day period) or upon conviction of a felony crime of moral
turpitude or a material breach of their obligations to the Company. In the event
the Company terminates any of the employment agreements, or the executive's
position with the Company is eliminated, without cause, such executive will be
entitled to compensation for the balance of the term of such agreement.
The employment agreements also contain covenants (a) restricting the
executive from engaging in any activities competitive with the business of the
Company during the terms of such employment agreements and for a period of one
year thereafter, (b) prohibiting the executive from disclosure of confidential
information regarding the Company at any time, and (c) confirming that all
intellectual property developed by the executive and relating to the business of
the Company constitutes the sole and exclusive property of the Company. See
"Certain Relationships and Related Transactions--Services Agreement." All of the
foregoing employment agreements
24
<PAGE>
require the full-time services of the employees, subject to permitted service
with profession-related service organizations and other outside activities that
do not materially interfere with the individual's duties to the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The individuals who served as members of the Compensation, Stock Option and
Benefits Committee (the "COMPENSATION Committee") during the year ended December
31, 1998 were Herbert A. Cohen (Chairman), David L. Mitchell, and William R.
Toller, all of whom were non-employee Directors of the Company. Messrs. Cohen,
Mitchell and Toller also constituted the Compensation, Stock Option and Benefits
Committee of Environmental, and Messrs. Mitchell and Toller also constituted the
Compensation, Stock Option and Benefits Committee of Separation at December 31,
1998. Mr. Mitchell served as a consultant to the Company from July 15, 1997 to
August 14, 1998, and received compensation in the amount of $10,000 per month
for services rendered to the Company in such capacity.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee was established in November 1996 and is
responsible for, among other things, establishing the compensation policies
applicable to executive Officers of the Company. All decisions of the
Compensation Committee relating to the compensation of the Company's executive
Officers are reviewed by, and are subject to the final approval of, the full
Board of Directors of the Company. Set forth below is a report prepared by Mr.
Cohen, Mr. Mitchell and Mr. Toller in their capacities as members of the
Compensation Committee at December 31, 1998, addressing the Company's
compensation policies for 1998 as they affected the Company's executive
Officers.
OVERVIEW AND PHILOSOPHY
The Company's executive compensation program is designed to be linked to
corporate performance and returns to stockholders. Of particular importance to
the Company is its ability to grow and to enhance its competitiveness for the
rest of the decade and beyond. Shorter-term performance, although scrutinized by
the Compensation Committee, stands behind the issue of furthering the Company's
strategic goals. To this end, the Company has developed an overall compensation
strategy and specific compensation plans that tie a significant portion of
executive compensation to the Company's success in meeting specified performance
goals.
25
<PAGE>
The objectives of the Company's executive compensation program are to:
o attract, motivate and retain the highest quality executives;
o motivate them to achieve tactical and strategic objectives in a manner
consistent with the Company's corporate values; and
o link executive and stockholder interest through equity-based plans and
provide a compensation package that recognizes individual
contributions as well as overall business results.
To achieve these objectives, the Company's executive compensation program
is designed to:
o focus participants on high priority goals to increase stockholder
value;
o encourage behavior that exemplifies the Company's values relating to
customers, quality of performance, employees, integrity, teamwork and
good citizenship;
o assess performance based on results and pre-set goals that link the
business activities of each individual to the goals of the Company;
and
o increase stock ownership to promote a proprietary interest in the
success of the Company.
EXECUTIVE OFFICER COMPENSATION
Each year the Compensation Committee conducts a full review of the
Company's executive compensation program. This review includes a comprehensive
evaluation of the competitiveness of the Company's compensation program and a
comparison of the Company's executive compensation to certain other public
companies that, in the view of the Compensation Committee, represent the
Company's most direct competitors for executive talent. It is the Compensation
Committee's policy to establish overall compensation for executive officers of
the Company taking into account the levels of compensation paid for such
positions by such other public companies. A variety of other factors, however,
including position and time in position, experience, and both Company
performance and individual performance, will have an effect on individual
compensation amounts.
The key elements of the Company's executive compensation program in 1998
consisted of base salary, annual incentive compensation and long-term incentive
compensation in the form of stock options. The Compensation Committee's policies
with respect to each of these elements, including the basis for the compensation
awarded to the Company's Chief Executive Officer, are discussed below.
26
<PAGE>
BASE SALARIES. Base salaries for executive Officers are established by an
annual evaluation of the performance of such individuals (which evaluation
involves management's consideration of such factors as responsibilities of the
positions held, contribution toward achievement of the Company's strategic
plans, attainment of specific individual objectives and interpersonal managerial
skills) and by reference to the marketplace for executive talent, including a
comparison to base salaries for comparable positions at other similar public
companies.
In 1998, total compensation paid to executives was based primarily upon the
terms of their employment agreements with the Company, if any, upon individual
performance and the extent to which the business plans for their areas of
responsibility were achieved or exceeded.
Mr. Hannesson, the Chairman of the Board, President and Chief Executive
Officer of the Company and Environmental, and the Chairman of the Board and
Chief Executive Officer of Solution, Separation and CFC Technologies, receives
annual compensation based upon, among other things, the terms of his employment
agreement. Pursuant to the terms of his employment agreement, Mr. Hannesson is
entitled to receive a base salary at an annual rate of not less than $434,500
through December 31, 1998. Mr. Hannesson agreed to a base salary deferment so
that he will receive a base salary at an annual rate of $330,000 from October 5,
1998 for services rendered to the Company.
The members of the Compensation Committee establish the amount actually
received by Mr. Hannesson each year as base salary for services rendered to the
Company and its affiliates. In establishing Mr. Hannesson's base salary for
1998, the Compensation Committee took into account the salaries of chief
executive officers at other similar public companies, future objectives and
challenges, and Mr. Hannesson's individual performance, contributions and
leadership. The Compensation Committee reviewed in detail Mr. Hannesson's
achievement of his 1997 goals and his individual contributions to the Company
and its affiliates. The Compensation Committee concluded that he had achieved
his 1997 goals and had provided a leadership role in achieving the Company's and
its affiliates' strategic priorities for 1997. The Compensation Committee also
considered Mr. Hannesson's decisive management of operational and strategic
issues, his drive to reinforce a culture of innovation and his ability and
dedication to enhance the long-term value of the Company and its affiliates for
their respective stockholders. In making its salary decisions with respect to
Mr. Hannesson, the Compensation Committee exercised its discretion and judgment
based on the above factors, and no specific formula was applied to determine the
weight of each factor.
Mr. Hannesson's base salary increased from $395,000 for 1997 to $434,500
for 1998, representing an increase of approximately 10%. On October 5, 1998, Mr.
Hannesson agreed to defer a portion of his base salary (25%), reducing his base
salary to $330,000. Starting base salary was allocated among the Company,
Environmental and Separation based upon the amount of time and effort devoted by
Mr. Hannesson to
27
<PAGE>
the respective businesses of such companies. Consequently, the Company,
Environmental and Separation paid $260,526, $58,658 and $94,504, respectively,
of such salary. Mr. Hannesson also received an automobile allowance of $12,000
for 1998, and the Company, Environmental and Separation paid $7,700, $1,620 and
$2,610, respectively, of such allowance.
ANNUAL INCENTIVE BONUS. Annual incentive bonuses for executive officers are
intended to reflect the Compensation Committee's belief that a significant
portion of the annual compensation of each executive officer should be
contingent upon the performance of the Company. For 1998, no annual incentive
bonuses were paid to the individuals named in the Summary Compensation Table.
Pursuant to his employment agreement with Environmental, Mr. Hannesson is
eligible to receive incentive compensation of up to $225,000 per year for
achieving certain of the performance goals set forth above. For 1998, Mr.
Hannesson was awarded an incentive bonus of $0.
STOCK OPTIONS. The Compensation Committee has the power to grant stock
options under the 1998 Plan. With respect to executive officers, it has been the
Compensation Committee's practice to grant, on an annual basis, stock options
that vest at the rate of 20% upon grant and 20% in each calendar year thereafter
for four years, and that are exercisable over a ten-year period at exercise
prices per share set at the fair market value per share on the date of grant.
Generally, the executives must be employed by the Company at the time the
options vest in order to exercise the options and, upon announcement of a Change
in Control (pursuant to and as defined in the 1998 Plan), such options become
immediately exercisable. The Compensation Committee believes that stock option
grants provide an incentive that focuses the executives' attention on managing
the Company from the perspective of an owner with an equity stake in the
business. The Company's stock options are tied to the future performance of the
Company's stock and will provide value to the recipient only when the price of
the Company's stock increases above the option grant price.
A total of 3,576,412 stock options were granted pursuant to the 1998 Plan
in 1998, 577,500 of which were granted to Mr. Hannesson and 656,250 of which
were granted (in the aggregate) to 4 other individuals named in the Summary
Compensation Table. Such number does not include 1,295,000 stock options granted
to general employees under the 1996 Plan, which were rescinded on the issuance
of the 1998 Plan. The number of stock options granted in 1998 were determined by
reference to the long-term compensation for comparable positions at other
similar public companies and based upon an assessment of individual performance.
28
<PAGE>
EFFECT OF SECTION 162(M) OF THE INTERNAL REVENUE CODE
The Compensation Committee's policy is to structure compensation awards for
executive officers that will be consistent with the requirements of Section
162(m) of the U.S. Internal Revenue Code of 1986 (the "CODE"). Section 162(m)
limits the Company's tax deduction to $1.0 million per year for certain
compensation paid in a given year to the Chief Executive Officer and the four
highest compensated executives other than the Chief Executive Officer named in
the Summary Compensation Table. According to the Code and corresponding
regulations, compensation that is based on attainment of pre-established,
objective performance goals and complies with certain other requirements will be
excluded from the $1.0 million deduction limitation. The Company's policy is to
structure compensation awards for covered executives that will be fully
deductible where doing so will further the purposes of the Company's executive
compensation program. However, the Compensation Committee also considers it
important to retain flexibility to design compensation programs that recognize a
full range of performance criteria important to the Company's success, even
where compensation payable under such programs may not be fully deductible. The
Company expects that all compensation payments in 1998 to the individuals listed
in the Summary Compensation Table will be fully deductible by the Company.
CONCLUSION
The Compensation Committee believes that the quality of executive
leadership significantly affects the long-term performance of the Company and
that it is in the best interest of the stockholders to compensate fairly
executive leadership for achievement meeting or exceeding the high standards set
by the Compensation Committee, so long as there is a corresponding risk when
performance falls short of such standards. A primary goal of the Compensation
Committee is to relate compensation to corporate performance. Based on the
Company's performance in 1998, the Compensation Committee believes that the
Company's current executive compensation program meets such standards and has
contributed, and will continue to contribute, to the Company's and its
stockholders' long-term success.
COMPENSATION, STOCK OPTION AND BENEFITS COMMITTEE
Herbert A. Cohen (Chairman)
David L. Mitchell
William R. Toller
The Report of the Compensation Committee on Executive Compensation shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act, or
under 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.
29
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The Company's Common Stock and Warrants began trading publicly on June 28,
1996 at initial public offering prices of $6.00 per share and $0.10 per Warrant
and are traded on the American Stock Exchange ("AMEX") under the symbols CXI and
CXIW, respectively. On March 31, 1999, there were 113 holders of record of
Common Stock and 35 holders of record of Warrants.
COMPARISON OF 30 MONTH CUMULATIVE TOTAL RETURN*
AMONG COMMODORE APPLIED TECHNOLOGIES, INC.,
THE AMEX MARKET VALUE INDEX
AND THE DOW JONES POLLUTION CONTROL/WASTE MANAGEMENT
INDEX
[GRAPHICAL REPRESENTATION OF DATA CHART]
*$100 INVESTED ON 7/1/96 IN STOCK OR ON 6/30/96
IN INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31,
o COMMODORE APPLIED TECHNOLOGIES, INC.
o AMEX MARKET VALUE
o DOW JONES POLLUTION CONTROL/WASTE MANAGEMENT
30
<PAGE>
The following table sets forth, for the fiscal periods shown, the high and low
sale prices (rounded to the nearest cent) for the Common Stock and Warrants as
reported on the Amex.
COMMON STOCK WARRANTS
--------------- ---------------
HIGH LOW HIGH LOW
----- ----- ----- -----
FISCAL 1997
FIRST QUARTER ...................... $9.00 $4.00 $3.75 $1.00
SECOND QUARTER ..................... 8.25 5.25 2.88 1.13
THIRD QUARTER ...................... 5.94 4.13 1.63 0.81
FOURTH QUARTER ..................... 5.25 1.50 1.63 0.31
FISCAL 1998
FIRST QUARTER ...................... 6.75 2.56 2.06 0.75
SECOND QUARTER ..................... 5.19 1.75 1.50 0.63
THIRD QUARTER ...................... 2.81 0.19 0.81 0.06
FOURTH QUARTER ..................... 0.75 0.25 0.25 0.03
31
<PAGE>
PROPOSAL 2
INCREASE IN AUTHORIZED COMMON STOCK
The Company's Certificate of Incorporation presently authorizes the Company
to issue 75,000,000 shares of Company Common Stock, of which 30,960,796 shares
were issued and outstanding, and on a fully diluted basis, 60,654,570, as of
November 26, 1999. The Board of Directors proposes that stockholders consider an
amendment (the "AMENDMENT") to the Company's Certificate of Incorporation
authorizing the Company to issue up to 100,000,000 shares of Common Stock.
Reasons for Increasing Authorized Common Stock
The Board of Directors and management of the Company believe that the
Amendment is needed to facilitate raising additional capital. In order for the
Company to realize its business objectives, and thereby best serve the interests
of current stockholders, the Company may require funds for use in making
acquisitions, to fund joint venture obligations and to provide working capital.
The authorization of an additional 25,000,000 shares of Common Stock would make
those shares available for raising needed funds through stock issuances. Such
stock issuances could be for cash, securities or other property, allowing the
Company to respond flexibly to its future financial and capital requirements and
to take advantage of favorable market conditions or business opportunities,
including acquisitions.
The Amendment could also be beneficial for other reasons. Shares of Common
Stock could be issued in order to broaden the public ownership of, and enhance
the market for, Common Stock, should the Board of Directors decide these are
appropriate objectives in light of prevailing market conditions. Shares would
also be available to be issued for other corporate purposes including in
connection with stock splits or under employee benefit programs. Presently, the
Board of Directors does not have any plans for a stock split or for a merger or
other business combination in which shares of Common Stock would be issued.
The additional shares of Common Stock authorized pursuant to the Amendment
would be, subject to the laws of the State of Delaware, issuable at the
discretion of the Board of Directors without, in most cases, the delays and
expenses attendant with obtaining stockholder approval. To the extent required
by Delaware law, stockholder approval would be solicited in the event shares of
Common Stock were to be issued in connection with a merger. No stockholder of
the Company will have any pre-emptive rights to purchase or subscribe for any
shares of Common Stock made available by the Amendment.
The issuance of any of the shares of Common Stock made available through
the Amendment, otherwise than on a pro rata basis to all stockholders of the
Company, would reduce the proportionate interest in the Company that each
current stockholder of
32
<PAGE>
the Company would otherwise have after the Acquisition. At the present time the
Company does not know the terms under which the shares made available by the
Increase in Authorized Common Stock would be issued.
The affirmative vote of a majority of the outstanding shares of Company
Common Stock entitled to vote is required to approve the Increase in Authorized
Common Stock.
The Board of Directors of the Company unanimously recommends that the company's
stockholders vote "FOR" the approval and adoption of the amendment.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On August 17, 1999, the Company terminated its former auditors,
PricewaterhouseCoopers ("PWC"). Additionally, as of August 17, 1999, the Company
retained Tanner + Co. ("TANNER") to serve as its auditors. The decision to
terminate its relationship with PwC and to retain Tanner was approved by the
Board of Directors of the Company.
During the Registrant's past two fiscal years, PwC's report on the
Company's financial statements neither contained any adverse opinions or
disclaimers of opinions nor were qualified or modified as to uncertainty, audit
scope or accounting principles, except that PwC's auditors report on the
Company's consolidated financial statements for the year ended December 31, 1998
contained an explanatory paragraph relating to the Company continuing as a going
concern due to the Company's recurring losses from operations and net cash
outflows from operations.
In connection with its audits for the past two fiscal years and through
August 17, 1999, there were no disagreements with PwC on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
PwC, would have caused it to make reference to the subject matter of the
disagreements in connection with its reports.
No "reportable events" as described under Item 304(a)(1)(v) of Regulation
S-K occurred during the Company's fiscal years ended December 31, 1998 and 1997.
Prior to engaging Tanner, the Company did not consult Tanner regarding any of
the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.
The Board of Directors has selected Tanner, which served as the Company's
independent auditors for the years ended December 31, 1997, to serve as the
Company's independent auditors for the year ending December 31, 1999. The Board
of Directors is submitting its selection of Tanner as the Company's independent
auditors for ratification at the Annual Meeting in order to ascertain the views
of stockholders of
33
<PAGE>
the Company regarding such selection. If the appointment of Tanner is not
ratified, the Board of Directors will reconsider its selection for Tanner to
serve as the Company's independent auditors. The Board of Directors reserves the
right to select new independent auditors at any time, which it may deem
advisable or necessary.
Ratification of this proposal requires the affirmative vote of a majority
of the shares of Common Stock present in person or represented by proxy at the
Annual Meeting. Unless contrary instructions are indicated on the proxy cards,
all shares represented by valid proxies received pursuant to this solicitation
(and which have not been revoked in accordance with the procedures set forth
herein) will be voted "FOR" the ratification of the appointment of Tanner as the
Company's independent auditors for the year ending December 31, 1999.
Representatives of Tanner and PwC are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
The Board of Directors of the Company recommends that stockholders vote
"FOR" ratification of the appointment of Tanner as the company's independent
auditors for the year ended December 31, 1999.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders who wish to present proposals appropriate for consideration at
the Company's Annual Meeting of Stockholders to be held in 2000 must submit the
proposal in proper form to the Secretary of the Company at the Company's address
set forth on the first page of this Proxy Statement not later than August 31,
2000, in order for the proposal to be considered for inclusion in the Company's
proxy statement and form of proxy relating to such annual meeting. It is
suggested that such proposal be sent by Certified Mail, Return Receipt
Requested.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournment thereof, it
is the intention of the persons named in the accompanying proxy card to vote the
same in accordance with their own judgment and their discretion.
34
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0300 for further information on the public reference rooms.
Our SEC filings are also available to the public from commercial document
retrieval services and at the Web site maintained by the SEC at
"http://www.sec.gov."
The following documents are incorporated into this Proxy Statement by
reference:
o The Company's Annual Report on Form 10-K for the year ended December
31, 1998, a copy of which has been delivered with this Proxy
Statement.
o The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999.
o The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1999.
o The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999.
o The Company's Current Report on Form 8-K filed on August 23, 1999.
o The Company's Current Report on Form 8-K/A filed on September 1, 1999.
o The Company's Current Report on Form 8-K filed on November 16, 1999.
o The Company's Current Report on Form S-8 for its 1998 Stock Option
Plan filed on November 10, 1999.
The Company may have sent you some of the documents referenced above, but
you can obtain any of them through the Company or the SEC. You may also obtain
documents incorporated by reference without charge by writing or calling the
Company at 150 East 58th Street; Suite 3400, New York, New York 10155,
(212) 308-5800.
By Order of the Board of Directors
GREGG M. ROSEN
Assistant Secretary
35
<PAGE>
FORM OF PROXY
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, a stockholder of COMMODORE APPLIED TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), hereby appoints Paul E. Hannesson and
James M. DeAngelis, and each of them, as proxies for the undersigned, each with
full power of substitution, and hereby authorizes them to represent and to vote,
as designated below, all of the shares of Common Stock of the Company held of
record by the undersigned at the close of business on November 26, 1999 at the
Annual Meeting of Stockholders of the Company to be held on Wednesday, December
22, 1999, at 10:00 a.m., local time, at The American Stock Exchange, 86 Trinity
Place, New York, New York 10006], and at any adjournment or postponement
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED
FOR ALL NOMINEES FOR DIRECTOR IDENTIFIED BELOW AND FOR PROPOSAL 2 SET FORTH
BELOW.
1. To elect the following nominees as Directors of the Company to hold
office until the Annual Meeting of Stockholders to be held in 2000, and until
their respective successors are duly elected and have qualified: Paul E.
Hannesson, Kenneth L. Adelman, Ph.D., Bentley J. Blum, Herbert A. Cohen, David
L. Mitchell, Edward L. Palmer and William R. Toller.
FOR ALL NOMINEES (except as marked to the contrary) WITHHOLD ALL NOMINEES
( ) ( )
AUTHORITY TO WITHHOLD A VOTE FOR ANY OF THE ABOVE NAMED INDIVIDUALS SHOULD BE
INDICATED BY LINING THROUGH OR OTHERWISE STRIKING OUT THE NAME OF THE NOMINEE.
2. To approve the amendment of the Company's Certificate of Incorporation
to increase the number of shares of common stock to 100,000,000:
( ) FOR ( ) AGAINST ( ) ABSTAIN
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3. To ratify the appointment of Tanner + Co as the Company's independent
auditors for the year ending December 31, 1999:
( ) FOR ( ) AGAINST ( ) ABSTAIN
4. Upon such other matters as may properly come before such Annual Meeting
and any adjournments or postponement thereof. In their discretion, the proxies
are authorized to vote upon such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
The undersigned hereby acknowledges receipt of (1) the Notice of Annual
Meeting for the 1999 Annual Meeting, (2) the Proxy Statement and (3) the
Company's 1998 Annual Report to Stockholders.
Dated: ______________________, 1999 ________________________________
Signature
________________________________
Print Name
________________________________
Signature, if Jointly Held
________________________________
Print Name
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
HEREIN, if signing as attorney, executor, administrator, trustee or
guardian, indicate such capacity. All joint tenants must sign. If a corporation,
please sign in full corporate name by president or other authorized officer. If
a partnership, please sign in partnership name by authorized person. The Board
of Directors requests that you fill in the date and sign the proxy and return it
in the enclosed envelope.
IF THE PROXY IS NOT DATED IN THE ABOVE SPACE, IT IS DEEMED TO BE DATED ON THE
DAY ON WHICH IT WAS MAILED BY THE CORPORATION.
37
