SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
IDM ENVIRONMENTAL CORP.
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(Name of Registrant As Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] 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:
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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):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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<PAGE>
IDM ENVIRONMENTAL CORP.
396 Whitehead Avenue
South River, New Jersey 08882
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, JUNE 10, 1999
To the Shareholders of IDM Environmental Corp.:
An Annual Meeting of Shareholders of IDM Environmental Corp. (the
"Company") will be held at the Hyatt Regency, 2 Albany Street, New Brunswick,
New Jersey 08901 at 1:30 p.m., on Thursday, June 10, 1999 for the following
purposes:
1. To elect two Class III directors to hold office until the 2002
annual meeting of shareholders, respectively, or until their successors are
duly elected and qualified.
2. To consider a proposal to authorize the issuance of common shares
in excess of 360,000 on the conversion of outstanding Series RR Preferred
Stock.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on April 22, 1999 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you are
planning to attend the meeting, you are urged to complete, date and sign the
enclosed proxy card and return it promptly.
YOUR VOTE IS IMPORTANT! PLEASE PROMPTLY MARK, DATE, SIGN, AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE. IF YOU ARE ABLE TO ATTEND THE MEETING AND WISH
TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS
VOTED.
By Order of the Board of Directors
Frank A. Falco
Secretary
South River, New Jersey
April 30, 1999
<PAGE>
IDM ENVIRONMENTAL CORP.
396 Whitehead Avenue
South River, New Jersey 08882
--------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 10, 1999
----------------
This Proxy Statement is being furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of IDM Environmental Corp. (the
"Company") for use at the 1999 Annual Meeting of Shareholders of the Company and
at any adjournment thereof (the "Annual Meeting"). The Annual Meeting is
scheduled to be held at the Hyatt Regency, 2 Albany Street, New Brunswick, New
Jersey 08901, on Thursday, June 10, 1999 at 1:30 p.m. local time. The Proxy
Statement and the enclosed form of proxy will first be sent to shareholders on
or about April 30, 1999.
Proxies
The shares represented by any proxy in the enclosed form, if such proxy is
properly executed and is received by the Company prior to or at the Annual
Meeting prior to the closing of the polls, will be voted in accordance with the
specifications made thereon. Proxies on which no specification has been made by
the shareholder will be voted FOR the election to the Board of Directors of the
nominees of the Board of Directors named herein, FOR a proposal to authorize the
issuance of common shares in excess of 360,000 on the conversion of outstanding
Series RR Preferred Stock and as the proxy holders deem advisable on other
matters that may come before the meeting. Proxies are revocable by written
notice received by the Secretary of the Company at any time prior to their
exercise or by executing a later dated proxy. Proxies will be deemed revoked by
voting in person at the Annual Meeting.
Voting Securities
Shareholders of record at the close of business on April 22, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. On
the Record Date, the total number of shares of common stock of the Company, $.01
par value per share (the "Common Stock"), outstanding and entitled to vote was
30,552,971. The holders of all outstanding shares of Common Stock are entitled
to one vote for each share of Common Stock registered in their names on the
books of the Company at the close of business on the Record Date.
All shares of Common Stock shown as outstanding or otherwise referred to in
this Proxy Statement reflect the effects of a 1-for-10 reverse stock split which
was effective April 16, 1999.
Quorum and Other Matters
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum. The Board of Directors is
not aware of any matters that are expected to come before the Annual Meeting
other than those referred to in this Proxy Statement. If any other matter should
come before the Annual Meeting, the persons named in the accompanying proxy
intend to vote such proxies in accordance with their best judgment.
Shares of Common Stock represented by a properly dated, signed and returned
proxy will be counted as present at the Annual Meeting for purposes of
determining a quorum, without regard to whether the proxy is marked as casting a
vote or abstaining. Directors will be elected by a plurality of the votes cast
at the Annual Meeting. Each of the other matters scheduled to come before the
Annual Meeting requires the approval of a majority of the votes cast at the
Annual Meeting. Therefore, abstentions and broker non-votes will have no effect
on the election of directors or any other matter.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company presently consists of seven
directors. The Board is divided into classes (Class I, Class II and Class III)
serving staggered three-year terms. The terms of the current Class I, II and III
directors expire, respectively, at the 2000 annual meeting, at the 2001 annual
meeting and at the upcoming annual meeting. Each director will serve until the
expiration of his term and until his successor is duly elected and qualified or
until such director's earlier resignation or removal. Frank Patti, Michael
Killeen and Mark Franceschini are the Class I director; Richard Keller and
Robert McGuinness are the Class II directors; and Joel Freedman and Frank Falco
are the Class III directors.
The terms of Joel Freedman and Frank Falco expire as of the upcoming annual
meeting. The Board of Directors has nominated Mr. Freedman and Mr. Falco to
remain as Class III directors until the 2002 annual meeting of shareholders and
until their successors are duly elected and qualified or until such directors'
earlier resignation or removal. Directors shall be elected to fill the Class III
positions by shareholders holding a plurality of the shares of Common Stock
present at the Annual Meeting. It is the intention of the persons named in the
form of proxy, unless authority is withheld, to vote the proxies given them for
the election of the above named nominees (the "Nominees"). In the event,
however, that any of the Nominees is unable or declines to serve as a director,
the appointees named in the form of proxy reserve the right to substitute
another person of their choice as Nominee, in his place and stead, or to vote
for such lesser number of directors as may be presented by the Board of
Directors in accordance with the Company's Bylaws. The Board of Directors has no
reason to believe that any Nominee will be unable to serve or decline to serve
as a director. Any vacancy occurring between shareholders' meetings, including
vacancies resulting from an increase in the number of directors, may be filled
by the Board of Directors. A director elected to fill a vacancy shall hold
office until the next annual shareholders' meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ELECTION OF THE NOMINEES NAMED ABOVE TO THE BOARD OF DIRECTORS.
Information Regarding Nominees and Directors
Directors Standing for Election -- Class III
Joel A. Freedman. Mr. Freedman, 63, has served as a director of the Company
since 1978. Mr. Freedman has served as President and Chief Executive Officer of
the Company since co-founding the Company in 1978 and served as Chairman of the
Board from 1978 until June of 1993.
Frank A. Falco. Mr. Falco, 65, has served as a director of the Company
since 1978. Mr. Falco has served as Executive Vice President and Secretary of
the Company since co-founding the Company in 1978 and has served as Chairman of
the Board and Chief Operating Officer of the Company since June of 1993.
Directors Continuing in Office -- Class I
Frank Patti. Mr. Patti, 70, has served as a director of the Company since
1994. Mr. Patti has been a Project Engineer at the Brookhaven National
Laboratory since October of 1994. From March of 1994 through September of 1994,
Mr. Patti was a self-employed nuclear engineering consultant. For more than five
years prior to March of 1994, Mr. Patti was Chief Nuclear Engineer for Burns &
Roe, a major engineering firm. Mr. Patti serves on the Company's Compensation
Committee.
Michael B. Killeen. Mr. Killeen, 53, has served as Treasurer and Chief
Financial Officer of the Company since September of 1991, and as a director
since June of 1998. Mr. Killeen previously served as a Director of the Company
from September of 1991 until May of 1996. Prior to joining the Company, Mr.
Killeen served as controller of Burnham Corporation, a multiple plant
manufacturer of heating equipment, from 1978 to 1991.
2
<PAGE>
Mark Franceschini. Mr. Franceschini, 61, has served as a director of the
Company since June of 1998. Mr. Franceschini retired in 1993 after serving ten
years as the Superintendent of Schools for the Wall Township Public Schools in
Wall, New Jersey. From 1967 to 1983, Mr. Franceschini served as a teacher and
administrator. Prior to entering the education field, Mr. Franceschini was a
vice president and co-founder of IRT Electronics, a manufacturer of pressure
transducers. Mr. Franceschini serves on the Company's Audit Committee and
Compensation Committee.
Director Continuing in Office -- Class II
Richard Keller. Mr. Keller, 49, has served as a director of the Company
since August 1997. Mr. Keller retired in 1997 from his position as Senior Vice
President/Manager of Garvin GuyButler Corporation, a money brokerage firm, where
he managed the trading desk. Mr. Keller serves as Chairman of the Company's
Compensation Committee and as a member of the Audit Committee.
Robert McGuinness. Mr. McGuinness, 47, has served as a director of the
Company since 1994. Since January of 1995, Mr. McGuinness has served as a
partner in the certified public accounting firm of McGuinness, Corley &
Hodavance. For more than five years prior to January of 1995, Mr. McGuinness was
Vice President of Essroc Corp., a cement manufacturer. Mr. McGuinness serves as
Chairman of the Company's Audit Committee.
Information Regarding Executive Officers Who Are Not Directors
The following table sets forth the names, ages and offices of the present
executive officers of the Company other than those who serve as directors and
who are described above. The periods during which such persons have served in
such capacities are indicated in the description of business experience of such
persons below.
Frank Pasalano (46)........ Vice President of Operations
James R. Harrigan (49)..... Vice President of Environmental Services
John M. Tuohy (53)......... Vice President of Nuclear Services
John Klosek (51)........... Vice President of Engineering
Joe Dias (45).............. Vice President of Sales and Purchasing
Stuart M. Brown (36)....... Vice President and General Counsel
Jose Capote (42)........... Vice President of Business Development
Birger Munck (54).......... President - IDM Energy
Kenneth L. Moskowitz (38).. Vice President and Deputy General Counsel
Other than officers who are subject to employment agreements, each officer
serves at the discretion of the Board of Directors. See "Employment Contracts,
Termination of Employment and Change in Control Arrangements."
Mr. Falco is the uncle of Mr. Pasalano. Otherwise, there are no family
relationships among any of the directors or officers of the Company.
Frank Pasalano has served as Vice President of Operations of the Company
since 1985. Previously, Mr. Pasalano served as a project manager for the Company
from 1978 to 1985.
James R. Harrigan has served as Vice President of Environmental Services
since 1989. Previously, Mr. Harrigan served as General Manager of Combustion
Engineering, a national engineering firm, from 1986 to 1989.
John M. Tuohy has served as Vice President of Nuclear Services of the
Company since 1990. Previously, Mr. Tuohy served as Director of Burns & Roe, a
national engineering firm, from 1970 to 1990.
John Klosek has served as Vice President of Engineering of the Company
since 1989. Previously, Mr. Klosek served as Associate Director of Colgate
Palmolive, a conglomerate engaged in the worldwide production and marketing of
consumer goods, from 1969 to 1989.
Joe Dias has served as Vice President of Sales and Purchasing of the
Company since 1979. Stuart M. Brown has served as General Counsel of the Company
since February of 1995 and as a Vice President of the Company since May of 1995.
Previously, Mr. Brown was a partner in the law firm of Becker and Brown from
September of 1994 to February of 1995. For the prior five years, Mr. Brown was
an associate with the law firm of Sills, Cummis, Radin, Tishman, Epstein &
Gross.
3
<PAGE>
Jose Capote has served as Vice President of Business Development of the
Company since May of 1995 and previously as Director of Business Development
since March of 1994. For the previous five years Mr. Capote served as Director
of Business Development for Burns & Roe.
Birger Munck has served as President of IDM Energy since August of 1996.
Previously, Mr. Munck served as President of Continental Waste Conversion, Inc.,
a waste-to-energy project company from 1994 to 1996. Previously, Mr. Munck
served as a management consultant from 1990 to 1993 and as President of Nordex
Petroleum from 1987 to 1990.
Kenneth L. Moskowitz has served as Deputy General Counsel of the Company
since May of 1997 and as a Vice President of the Company since June of 1998.
Prior to joining the Company, Mr. Moskowitz was an associate with the law firm
of Sills, Cummis, Radin, Tishman, Epstein & Gross for eight years.
Compliance With Section 16(a) of Exchange Act
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose in this Proxy Statement
any failure to file by these dates during 1998. All of the filing requirements
were satisfied on a timely basis in 1998. In making these disclosures, the
Company has relied solely on written statements of its directors, executive
officers and shareholders and copies of the reports that they filed with the
Commission.
Committees and Attendance of the Board of Directors
In order to facilitate the various functions of the Board of Directors, the
Board has created a standing Audit Committee and a standing Compensation
Committee.
The functions of the Company's Audit Committee are to review the Company's
financial statements with the Company's independent auditors; to determine the
effectiveness of the audit effort through regular periodic meetings with the
Company's independent auditors; to determine through discussion with the
Company's independent auditors that no unreasonable restrictions were placed on
the scope or implementation of their examinations; to inquire into the
effectiveness of the Company's financial and accounting functions and internal
controls through discussions with the Company's independent auditors and
officers of the Company; to recommend to the full Board of Directors the
engagement or discharge of the Company's independent auditors; and to review
with the independent auditors the plans and results of the auditing engagement.
The members of the Audit Committee are Mr. McGuinness, Chairman, Mr.
Franceschini and Mr. Keller.
The functions of the Company's Compensation Committee include reviewing the
existing compensation arrangements with officers and employees, periodically
reviewing the overall compensation program of the Company and recommending to
the Board modifications of such program which, in the view of the development of
the Company and its business, the Committee believes are appropriate,
recommending to the full Board of Directors the compensation arrangements for
senior management and directors, and recommending to the full Board of Directors
the adoption of compensation plans in which officers and directors are eligible
to participate and granting options or other benefits under such plans. The
members of the Compensation Committee are Mr. Keller, Chairman, Mr. Franceschini
and Mr. Patti.
The Board of Directors does not have a standing nominating committee or a
committee performing similar functions.
4
<PAGE>
During the year ended December 31, 1998, the Board of Directors held 10
formal meetings, including telephonic meetings, and acted through unanimous
written consent on other occasions, the Audit Committee held 3 meetings and the
Compensation Committee held 4 meetings. Each director (during the period in
which each such director served) attended at least 75% of the aggregate of (i)
the total number of meetings of the Board of Directors, plus (ii) the total
number of meetings held by all committees of the Board of Directors on which the
director served.
Compensation of Directors
Each non-employee director of the Company is paid a fee of $1,000 for each
Board of Directors meeting or committee meeting attended. The Company also
reimburses each director for all expenses of attending such meetings.
Pursuant to the IDM Environmental Corp. 1998 Comprehensive Stock Option and
Award Plan, commencing in 1998 and upon each subsequent reelection of each
non-employee director, options will be granted to each non-employee director to
purchase 5,000 shares of Common Stock multiplied by the number of years
remaining in each non-employee director's term. All such options will be
exercisable at the fair market value of the Company's Common Stock on the date
of grant. Such options will vest and become exercisable at the rate of 5,000
shares upon election as a non-employee director and 5,000 shares per year on
each subsequent anniversary of election provided that the non-employee director
continues to serve in such capacity.
No additional compensation of any nature is paid to employee directors.
Executive Compensation and Other Matters
The following table sets forth information concerning cash and non-cash
compensation paid or accrued for services in all capacities to the Company
during the year ended December 31, 1998 of each of the five most highly
compensated executive officers of the Company (the "Named Officers").
<TABLE>
Long Term
Annual Compensation Compensation
--------------------------------------------------------- -----------------
Other Annual Stock
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Options (#)(2)
- --------------------------- ------ ------------ ----------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
Joel A. Freedman................... 1998 480,000 -0- (1) 225,000
President and 1997 480,000 -0- (1) 10,000
Chief Executive Officer 1996 250,000 230,000 (1) 7,500
Frank A. Falco..................... 1998 480,000 -0- (1) 225,000
Executive Vice President and 1997 480,000 -0- (1) 10,000
Chief Operating Officer 1996 250,000 230,000 (1) 7,500
Birger Munck....................... 1998 175,000 -0- (1) -0-
President - IDM Energy 1997 175,000 -0- (1) -0-
1996 80,000 -0- (1) -0-
Michael B. Killeen................. 1998 128,500 -0- (1) 2,500
Treasurer and Chief 1997 123,084 -0- (1) 500
Financial Officer 1996 122,081 -0- (1) 2,000
Jose Capote........................ 1998 128,500 -0- (1) 1,750
Vice President of 1997 119,913 -0- (1) -0-
Business Development 1996 111,702 -0- (1) 500
</TABLE>
(1) Although the officers receive certain perquisites such as auto allowances
and Company provided life insurance, the value of such perquisites did not
exceed the lesser of $50,000 or 10% of the officer's salary and bonus.
(2) Reflects, retroactively, the effects of a 1-for-10 reverse stock split
effective April 16, 1999.
5
<PAGE>
Stock Option Grants
The following table sets forth information concerning the grant of stock
options made during 1998 to each of the Named Officers:
<TABLE>
Percent of Potential Realizable Value
Total Options at Assumed Annual Rates
Granted to of Stock Price Appreciation
Options Employees in Price Expiration For Option Term
---------------------------
Name Granted (1)(2) Fiscal Year Per Share (2) Date 5% 10%
- --------------------- ---------------- ------------- ------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joel A. Freedman.......... 225,000 48.1 37.19 02/18/03 0 0
Frank A. Falco............ 225,000 48.1 37.19 02/18/03 0 0
Michael B. Killeen........ 1,000 0.2 37.19 01/08/08 0 0
1,500 0.3 35.00 06/02/98 0 0
Jose Capote............... 1,000 0.2 37.19 01/08/08 0 0
750 0.2 35.00 06/02/98 0 0
</TABLE>
- -------------
(1) All referenced options were granted under the Company's Stock Option Plans
except for the options granted to Mr. Freedman and Mr. Falco which were
granted in connection with a renegotiation of their respective employment
agreements to eliminate certain stock bonus arrangements. All such options
were fully vested and became exercisable on the date of grant.
(2) Reflects, retroactively, the effects of a 1-for-10 reverse stock split
effective April 16, 1999.
Stock Option Exercises
The following table sets forth information concerning the exercise of stock
options during 1998 by each of the Named Officers and the number and value of
unexercised options held by the Named Officers at the end of 1998:
<TABLE>
Number of Unexercised Value of Unexercised
Shares Options at In-the Money Options
Acquired on Value at FY-End (#)(1) at FY-End ($)(2)
--------------------------- -----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------- --------------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Joel A. Freedman............ -0- -0- 242,500 -0- -0- -0-
Frank A. Falco.............. -0- -0- 242,500 -0- -0- -0-
Michael B. Killeen.......... -0- -0- 6,003 1,000 -0- -0-
Jose Capote................. -0- -0- 4,250 500 -0- -0-
</TABLE>
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(1) Reflects, retroactively, the effects of a 1-for-10 reverse stock split
effective April 16, 1999.
(2) Based on the fair market value per share of the Common Stock at year end,
minus the exercise price of "in-the-money" options. The closing price for
the Company's Common Stock on December 31, 1998 on the Nasdaq National
Market System was $0.469.
6
<PAGE>
Stock Option Repricing
The following table sets forth all repricings of stock options held by the
Named Officers since the Company's initial public offering in April 1994. See
"Compensation Committee Report -- Stock Option Repricing."
<TABLE>
Length of
Number of original
securities Market price Exercise option term
underlying of stock at price at time remaining at
options/ time of of repricing date of
SARs repricing or or New repricing or
repriced or amendment amendment exercise amendment
Name Date amended (#)(1) ($)(1) ($)(1) price ($)(1) (years/days)
---------- ------ ---------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joel A. Freedman.... 12/11/98 225,000 5.625 37.19 6.75 4/069
12/11/98 10,000 5.625 28.1875 6.75 3/224
12/11/98 7,500 5.625 20.00 6.75 1/325
05/22/97 7,500 15.625 40.90 20.00 3/183
Frank A. Falco...... 12/11/98 225,000 5.625 37.19 6.75 4/069
12/11/98 10,000 5.625 28.1875 6.75 3/224
12/11/98 7,500 5.625 20.00 6.75 1/325
05/22/97 7,500 15.625 40.90 20.00 3/183
Michael B. Killeen.. 12/11/98 1,000 5.625 37.19 6.75 8/028
12/11/98 1,500 5.625 35.00 6.75 8/143
12/11/98 500 5.625 25.625 6.75 7/204
12/11/98 1,000 5.625 20.00 6.75 6/151
12/11/98 1,000 5.625 20.00 6.75 7/028
12/11/98 2,003 5.625 20.00 6.75 5/122
05/22/97 2,503 15.625 40.00 20.00 6/325
05/22/97 1,000 15.625 29.375 20.00 8/231
05/22/97 1,000 15.625 82.50 20.00 8/364
Jose Capote......... 12/11/98 1,000 5.625 20.00 6.75 5/122
12/11/98 250 5.625 20.00 6.75 5/122
12/11/98 750 5.625 20.00 6.75 7/028
12/11/98 500 5.625 20.00 6.75 7/028
12/11/98 500 5.625 25.625 6.75 7/204
12/11/98 1,000 5.625 37.19 6.75 8/028
12/11/98 750 5.625 35.00 6.75 8/143
05/22/97 250 15.625 40.00 20.00 6/325
05/22/97 1,000 15.625 40.00 20.00 6/325
05/22/97 500 15.625 29.375 20.00 8/231
05/22/97 750 15.625 29.375 20.00 8/231
</TABLE>
- ----------------
(1) Reflects, retroactively, the effects of a 1-for-10 reverse stock split
effective April 16, 1999.
Employment Contracts, Termination of Employment and Change in Control
Arrangements
Messrs. Freedman and Falco. Effective January 1, 1996, Joel A. Freedman and
Frank A. Falco each entered into employment agreements, superseding their prior
employment agreements, with the Company on substantially identical terms.
Subsequently, on September 1, 1997 and February 18, 1998, the employment
agreements of Messrs. Freedman and Falco were amended.
7
<PAGE>
Pursuant to such agreements, effective September 1, 1997, Mr. Freedman and
Mr. Falco each receive (i) a base salary of $480,000 per year plus 2% of
operating profits; (ii) bonuses as determined by the Board of Directors; (iii)
participation in any employee benefit plans and fringe benefit arrangements
generally available to the Company's employees; and (iv) an entertainment
expense allowance of $45,000 per year. For purposes of computing the salary of
Messrs. Freedman and Falco, operating profits are defined as net income from
operations before deduction of interest expense, income taxes, depreciation and
amortization and other non-cash charges to income. Pursuant to the February 18,
1998 amendment to their employment agreements, Messrs. Freedman and Falco were
each granted 225,000 stock options exercisable at $37.19 per share and expiring
February 17, 2003 (reflects the effects of a 1-for-10 reverse stock split
effective April 16, 1999).
Pursuant to the September 1997 and February 1998 amendments to the
employment agreements of Messrs. Freedman and Falco, the previously existing
draw schedule and stock bonus provisions were eliminated from the employment
agreements of Messrs. Freedman and Falco.
The employment agreements prohibit Mr. Freedman and Mr. Falco from
competing, directly or indirectly, with the Company or disclosing confidential
matters with respect to the Company for two years after termination of
employment. Each of such agreements expires on December 31, 2005 and are
thereafter automatically extended for one-year periods unless there is a notice
of termination from either the Company or the employee.
In the event of their disability, Messrs. Freedman and Falco are entitled
to continue to receive their full salary at the date of disability for a period
of one year after which time the Company may terminate the employment of such
disabled employee without further compensation. In the event of death during the
term of employment, the estate of Mr. Freedman or Mr. Falco, as appropriate,
shall be entitled to three months salary. In the event of the termination of Mr.
Freedman or Mr. Falco's employment within one year of the occurrence of various
change in control events, or in the event of termination of their employment by
the Company for any reason other than death or disability, the Company must pay
or provide to Mr. Freedman and/or Mr. Falco, as appropriate, (i) a lump sum
payment equal to 2.99 times his average annual gross income from the Company for
the five tax-year period ending before the date of such termination; (ii) a lump
sum payment equal to three times the value of all "in-the-money" stock options
held by such persons at the date of termination; and (iii) continued
participation in all employee benefit plans or programs for a period of three
years, provided that the employee may, at his election, receive a lump sum cash
payment equal to the value of such benefits in lieu of continued participation
in such benefit plans. As used in the employment agreements of Messrs. Freedman
and Falco, a "change in control" is defined to be (i) the acquisition of 15% of
the Company's common stock; (ii) a change in the majority composition of the
board of directors within any two year period; or (iii) a failure to elect
either of such employees to the board when such employee is standing for
election; provided, however, that such events shall not constitute a change in
control if a majority of the directors immediately prior to such "change in
control" approve the transaction or event otherwise constituting a "change of
control."
Other Executives. The Company has no other employment agreements with any
other officers or employees. The Company has, however, entered into agreements
with certain of its employees pursuant to which such employees have agreed to
maintain the confidentiality of certain information and have agreed to not
compete with the Company within 250 miles of the Company's principal places of
business for a period of three years following the termination of such persons'
employment with the Company. Additionally, the Company has entered into
agreements with certain of its executive officers, including the Named Officers,
other than Messrs. Freedman, Falco and Mr. Munck, which provide that such
officers shall be entitled to (i) a lump sum payment equal to 2.99 times his
average annual gross income from the Company for the three tax-year period
ending before the date of such termination; (ii) a lump sum payment equal to
three times the value of all "in-the-money" stock options held by such persons
at the date of termination; and (iii) continued participation in all employee
benefit plans or programs for a period of three years, provided that the
employee may, at his election, receive a lump sum cash payment equal to the
value of such benefits in lieu of continued participation in such benefit plans.
For purposes of such agreements, a change in control is defined in the same
manner as in the employment agreements of Messrs. Freedman and Falco, except
that failure of either Mr. Freedman or Falco to be elected when standing for
election as a director shall not constitute a "change in control" for purposes
thereof.
8
<PAGE>
All Officers. In addition to the foregoing employment and change of control
arrangements, the Company's 1993 Plan, 1995 Plan and 1998 Plan provide that all
outstanding options shall become fully vested and exercisable in the event of a
change in control.
Retirement Savings Plan
In July of 1992, the Company amended an existing profit sharing plan to
convert such plan to a retirement savings plan (the "401(k) Plan") under Section
401(k) of the Internal Revenue Code. The 401(k) Plan generally covers all
employees of the Company who have completed two years of service with Company.
Employees may elect to defer, in the form of contributions to the 401(k) Plan,
up to 15% of their annual compensation, subject to the federal maximum limit.
The Company may, at its own discretion, contribute to the plan. The Company made
no contribution to the 401(k) Plan during the fiscal year ended December 31,
1998.
Compensation Committee Report
General. The Compensation Committee of the Board of Directors establishes
the general compensation policies of the Company and the compensation plans and
specific compensation levels for executive officers.
The Compensation Committee consists of non-employee Directors who are not
eligible to participate in any of the compensation plans or programs that it
administers, other than the receipt of formula grants under the Company's Stock
Option Plans. The Committee believes that the Company is best served by a
program that is designed to motivate, reward and retain the management team to
achieve the objectives of the Company. To this end, the Committee has adopted a
program designed to focus on the Company's long-term goals. Accordingly, a
significant portion of the senior executive compensation is dependent upon
achieving these long-term goals.
The philosophical basis of the Committee is to compensate executives based
on performance and on the level of responsibility of the executive. Salary
ranges are established based on such criteria. Salaries of key executives are
set by measuring performances against the benchmark and by determining the value
of the executive's contribution towards the Company's long-term goals. In
addition, consideration is given to the individual's experience and past
performance because the Committee also believes that any program must recognize
performance and encourage initiative.
The Committee also reviews management's response to the changing business
environment in which the Company operates. A timely and effective response by
management to changing business conditions while continuing to focus on the
long-term objectives is considered essential by the Committee. Management is
also evaluated on its ability to evaluate and adjust the long-term goals in
response to the evolving business climate.
Base Salary. For fiscal 1998, the base salary of executive officers, other
than the Chief Executive Officer and Chairman whose base salaries are determined
by employment agreements, were set based upon the results of the executive's
performance review. Each executive is reviewed annually by the Chief Executive
Officer and Chairman and given specific objectives, with the objectives varying
based upon the executive's position and responsibilities and the specific
objectives for that position. At the next annual review, the performance of each
executive is reviewed versus the objectives established for each executive and
the Company's overall performance. The results of the review are then reported
to the Committee along with senior management's compensation recommendation. The
Committee then determines whether the base salary should be adjusted for the
coming year.
Long-Term Incentive Compensation. Each executive officer of the Company was
granted options at the time of the initial adoption of the Company's stock
option plans or at the time the officer joined the Company. The Committee makes
option grants to executive officers on a case- by-case basis relative to the
annual performance reviews and the recommendations of senior management. Grants
of options are designed to align the interests of executive officers with those
of stockholders. The size of these grants is generally set at a level which the
Committee feels is in proportion with the role and responsibility of the
executive, as well as his or her opportunity to effect the Company's
performance, while also being sufficient to attract and retain qualified
executives.
9
<PAGE>
Chief Executive Officer and Chairman Compensation. With respect to the
compensation of the Chief Executive Officer and the Chairman of the Board, the
Committee believes that the Company continues to respond well to the changing
business environment in which it operates. The "Vision 2000" initiative
developed by the Chairman and CEO has proven to be a catalyst for expansion into
new and potentially lucrative markets. Both the Chairman and CEO have been
instrumental in creating new opportunities for the Company, which the Committee
believes will lead to strong growth in revenues, a return to profitability and
increased shareholder value. The Committee believes that the foresight of senior
management in setting the goals and direction of "Vision 2000", and the
opportunities uncovered by senior management during 1998 have allowed the
Company to weather difficult industry conditions and to position the Company
favorably while moving forward. Based on the foregoing considerations, the
Committee has agreed, to maintain the Chief Executive Officer and Chairman's
base salaries at $480,000 each plus an annual expense allowance of $45,000. At
the present time, the Committee believes that any movement away from the current
compensation plan or the above mentioned philosophies, would be detrimental to
the Company's ability to attract and retain key management personnel and,
ultimately, the Company's capabilities for future success.
The Committee believes these executive compensation policies and programs
serve the interests of stockholders and the Company effectively. The various pay
vehicles offered are appropriately balanced to provide increased motivation for
senior executives to contribute to the Company's overall future success, thereby
enhancing the value of the Company for the stockholder's benefit.
Stock Option Repricing. In December, 1998, the Board of Directors offered
to amend the outstanding stock options of all employees to reduce the exercise
price of those options to $0.675 per share (the fair market value of the
Company's Common Stock at the time of the repricing was $0.5625). The terms of
the repriced options were identical in all respect to the options prior to the
repricing with the exception of the reduction in the exercise price. The option
repricing was an acknowledgment of the importance to the Company of having
equity incentives in the hands of key employees. Stock options which are
significantly "out of the money" provide no particular compensatory incentive if
an employee is considering alternative opportunities.
The Compensation Committee
RICHARD KELLER, Chairman
MARK FRANCESCHINI
FRANK PATTI
Beneficial Ownership of Common Stock
The following table is furnished as of April 16, 1999, to indicate
beneficial ownership of shares of the Company's Common Stock by (1) each
shareholder of the Company who is known by the Company to be a beneficial owner
of more than 5% of the Company's Common Stock, (2) each director, nominee for
director and Named Officer of the Company, individually, and (3) all officers
and directors of the Company as a group. The information in the following table
was provided by such persons and reflects the effect of a 1-for-10 reverse stock
split effective April 16, 1999.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership (1)(2) of Class (2)
--------------------- ----------------------------- ------------
Joel A. Freedman (3)................... 290,028 (4) 8.8%
Frank A. Falco (3)..................... 289,605 (5) 8.8%
Michael B. Killeen..................... 7,003 (6) *
Birger Munck........................... 0 *
Jose Capote............................ 5,300 (7) *
Frank Patti............................ 2,750 (8) *
Robert McGuinness...................... 3,000 (9) *
Richard Keller......................... 2,000 (10) *
Mark Franceschini...................... 1,150 (11) *
All executive officers and directors
as a group (16 persons)............... 625,508 (12) 17.4%
10
<PAGE>
* Less than 1%.
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws, where applicable, and the information
contained in the footnotes to the table.
(2) Includes shares of Common Stock not outstanding, but which are subject to
options exercisable within 60 days of the date of the information set forth
in this table, which are deemed to be outstanding for the purpose of
computing the shares held and percentage of outstanding Common Stock with
respect to the holder of such options. Such shares are not, however, deemed
to be outstanding for the purpose of computing the percentage of any other
person.
(3) Address is 396 Whitehead Avenue, South River, New Jersey 08882.
(4) Includes 242,500 shares issuable upon exercise of incentive stock options
and non-qualified stock options held by Mr. Freedman. Excludes shares held
by the adult children of Joel Freedman. Mr. Freedman disclaims any
beneficial ownership interest in such shares.
(5) Includes 242,500 shares issuable upon exercise of incentive stock options
and non-qualified stock options held by Mr. Falco. Excludes shares held by
Margaret Mullin, the adult daughter of Frank Falco, and the children of
Mrs. Mullin. Mr. Falco disclaims any beneficial ownership interest in such
shares.
(6) Includes 7,003 shares issuable upon exercise of incentive stock options
held by Mr. Killeen.
(7) Includes 4,750 shares issuable upon exercise of incentive stock options
held by Mr. Capote.
(8) Includes 2,750 shares issuable upon exercise of non-qualified stock options
held by Mr. Patti.
(9) Includes 3,000 shares issuable upon exercise of non-qualified stock options
held by Mr. McGuinness. Also includes 5 shares held by a minor child of Mr.
McGuinness, as to which Mr. McGuinness disclaims any beneficial interest.
10) Includes 2,000 shares issuable upon exercise of non-qualified stock options
held by Mr. Keller.
(11) Includes 1,000 shares issuable upon exercise of non-qualified stock options
held by Mr. Franceschini.
(12) Includes 530,719 shares of Common Stock subject to stock options held by
the officers and directors and exercisable within 60 days.
Certain Relationships and Transactions
Since July of 1988, the Company has leased its executive offices and yard
storage facilities from L&G Associates, a partnership controlled by Joel
Freedman and Frank Falco, the Company's founders and senior officers and
directors. On March 1, 1993, the Company entered into a new five year lease on
such property, including two additional parcels with storage buildings
previously leased to a third party. Pursuant to such lease, the Company pays
base rent of $270,000 annually subject to annual adjustments based on the
Consumer Price Index, plus all costs of maintenance, insurance and taxes.
In 1994, the Company and L&G entered into an agreement regarding the
construction and/or renovation of expanded facilities on the premises leased by
the Company from L&G and the renovation and leasing of an adjoining property.
The expanded facilities were needed to support current operations and
anticipated future growth. The Board of Directors formed a Building Committee to
review the terms and fairness of such proposed expansion. In November of 1994,
the parties agreed in principal with respect to the terms of the proposed
expansion and the Building Committee determined that such expansion met the
Company's needs and was on terms which were fair to the Company. Based on such
agreement and determination, the Company in November of 1994 commenced
renovation and construction on such sites of which one facility, office space
(7,600 square feet), was completed during the third quarter of 1995, and the
second facility, warehouse space (5,700 square feet), was completed during the
third quarter of 1996. Renovation of such office space by the Company at an
approximate cost of $303,000 constitutes payment in full of rent for the initial
term of the lease of such office space. The Company, however, is responsible for
all taxes, utilities, insurance and other costs of occupying the office space
during the initial term. Construction of such warehouse space by the Company at
an estimated cost of $145,000 constitutes payment in full of rent for the
initial term of the lease of such warehouse space. The Company, however, is
responsible for all taxes, utilities, insurance and other costs of occupying the
warehouse space during the initial term. The total cost of the renovations was
to be amortized over the initial terms of the lease. On May 16, 1996 the leases
were amended and extended fifteen years to May 31, 2011. The amortization
associated with the cost of the renovation was extended through the terms of the
modified lease. Amortization expense related to these costs for the years ended
December 31, 1998 and 1997 was $93,320 and $93,320, respectively. For the years
ended December 31, 1998 and 1997, the rent paid totaled $308,948 and $302,412,
respectively.
11
<PAGE>
The Company believes that its existing lease with L&G Associates, as
modified, is on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties.
Prior to the September 1997 amendment, the employment agreements of Messrs.
Freedman and Falco provided that Messrs. Freedman and Falco would receive a draw
of salary and bonus based on projected earnings. Because actual earnings were
below projected earnings, Messrs. Freedman and Falco were indebted to the
Company for excess draws at December 31, 1996 and at prior years end. In
addition to amounts owed to the Company relating to excess draws, the Company
has periodically paid certain personal expenses of Messrs. Freedman and Falco.
At December 31, 1998, the Company's receivables from Mr. Freedman and Mr. Falco
had been repaid in full. At December 31, 1997, the Company's receivable from Mr.
Freedman totaled $7,965 and the Company's receivable from Mr. Falco totaled
$361,576. All amounts owed to the Company by Messrs. Freedman and Falco were
repayable on demand with interest accruing at 7%.
During 1998, the Company purchased 8,250 shares of common stock of Life
International Products, Inc. from Joel Freedman for $178,125, Mr. Freedman's
cost basis in those shares.
Other than elections to office, no director, nominee for director,
executive officer or associate of any of the foregoing persons has any
substantial interest, direct or indirect, by security holdings or otherwise, in
any matter to be acted upon at the Annual Meeting.
Company Performance
The following graph compares the cumulative total investor return on the
Company's Common Stock from April 21, 1994, the date the Company's Common Stock
began trading publicly, through December 31, 1998 with an index consisting of
returns from a peer group of companies, consisting of the Nasdaq Non-Financial
Index (the "Nasdaq Non-Financial Index"), and The Nasdaq Stock Market Composite
Index (the "Nasdaq Composite Index").
The graph displayed below is presented in accordance with Securities and
Exchange Commission requirements. Shareholders are cautioned against drawing any
conclusions from the data contained herein, as past results are not necessarily
indicative of future performance. This graph in no way reflects the Company's
forecast of future financial performance.
(graph appears at this location depicting the following stock performance)
<TABLE>
Base Period December December December December December
April 21 '94 31 1994 31 1995 31 1996 31 1997 31 1998
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
IDM Environmental Corp. 100 109.38 92.18 73.43 175.01 11.73
Nasdaq Composite Index 100 102.04 144.30 177.51 217.92 305.80
Nasdaq Non-Financial Index 100 101.00 140.75 171.02 200.86 294.08
</TABLE>
12
<PAGE>
PROPOSAL 2
AUTHORIZATION OF THE ISSUANCE OF SHARES OF COMMON STOCK
IN EXCESS OF 360,000 ON THE CONVERSION OF OUTSTANDING
SHARES OF SERIES RR PREFERRED STOCK
In August of 1998, the Company completed an offering of $1,500,000 of
Series RR 6% Convertible Preferred Stock (the "Series RR Preferred Shares") to
the Isosceles Fund Limited. The Series RR Preferred Shares are convertible into
Common Stock at the lesser of (i) $22.50 per share (after giving effect to a
1-for-10 reverse split (the "Reverse Split") effective April 16, 1999) or (ii)
75% of the average closing bid price of the Common Stock over the five
trading-day period preceding conversion. Conversion of the Series RR Preferred
Shares is subject to the issuance of a maximum of 360,000 shares of Common Stock
(after giving effect to the Reverse Split) on conversion unless the shareholders
of the Company have approved issuances beyond that level upon conversion. In the
absence of shareholder approval of issuances above 360,000 shares, the holders
of Series RR Preferred Shares remaining outstanding if and when 360,000 shares
have been issued will have the right to demand redemption of the Series RR
Preferred Shares at 120% of the principal balance outstanding. The Series RR
Preferred Shares pay dividends at 6% payable semi-annually or on conversion or
redemption in cash or Common Stock, at the Company's option. The offering of the
Series RR Preferred Shares was made after evaluating various financing options
available to the Company in order to provide adequate working capital to support
the Company's backlog of projects under contract and general working capital
needs.
As of April 5, 1999, $1,285,000 of the Series RR Preferred Shares had been
converted, resulting in the issuance of 359,981 shares of Common Stock (after
giving effect to the Reverse Split), and $215,000 of the Series RR Preferred
Shares remained issued and outstanding.
Pursuant to Nasdaq corporate governance rules applicable to the Company,
the Company may not permit issuance of shares in excess of 20% of the shares
outstanding prior to the issuance unless shareholder approval of such issuance
is first obtained. In order to assure compliance with such rules, the shares
issuable upon conversion of the Series RR Preferred Shares has been limited to
360,000 subject to shareholder approval of conversions beyond such level.
The shareholders are being asked to approve the issuance of shares above
the 360,000 limit imposed on the conversion of Series RR Preferred Shares.
Approval of such conversions and issuance will result in the holders of the
balance of the outstanding Series RR Preferred Shares being able to convert, at
their election, all of the remaining Series RR Preferred Shares outstanding.
Based on the closing bid price for the Company's Common Stock of $2.50 at April
5, 1998 (after giving effect to the Reverse Split), conversion of the remaining
Series RR Preferred Shares would result in the issuance of 114,667 shares of
Common Stock. Because of uncertainty as to the time of conversion of the
remaining Series RR Preferred Shares, if ever, and the price of the Common Stock
at the time of such conversion, there can be no assurance as to the actual
number of shares which will be issued on the conversion of the remaining Series
RR Preferred Shares.
If the shareholders do not approve the issuance of shares in excess of the
cap, given the number of shares issued to date on conversion, the Series RR
Preferred Shares remaining outstanding will be subject to redemption by the
Company at the holders' option. The Company does not presently have sufficient
capital resources or alternative financing sources to redeem the remaining
Series RR Preferred Shares and support the Company's current level of operations
should the shareholders reject this proposal. Based on the Company's financing
requirements and the absence of other acceptable financing sources, management
believes that the approval of this proposal which would permit the issuance of
shares beyond the cap on the terms described is in the best interest of the
Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AUTHORIZATION OF THE ISSUANCE OF COMMON SHARES IN EXCESS OF 360,000 ON THE
CONVERSION OF OUTSTANDING SERIES RR PREFERRED SHARES.
13
<PAGE>
INDEPENDENT AUDITORS
The Audit Committee and Board of Directors selected Samuel Klein & Company
as independent auditors for the year ended December 31, 1998. Samuel Klein &
Company were also the Company's independent auditors in 1996 and 1997. The
Company has not chosen an independent auditor for the year ending December 31,
1999, as the Company, historically, does not choose its auditors until near the
end of the fiscal year.
Representatives of Samuel Klein & Company are expected to be present at the
Annual Meeting, will be afforded an opportunity to make a statement, and are
expected to be available to respond to appropriate inquiries from shareholders.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
In order for shareholder proposals to be included in the Company's Proxy
Statement and proxy relating to the Company's 2000 Annual Meeting of
Shareholders, such proposals must be received by the Company at its principal
executive offices not later than January 1, 2000.
EXPENSES OF SOLICITATION
All of the expenses of soliciting proxies from shareholders, including the
reimbursement of brokerage firms and others for their expenses in forwarding
proxies and proxy statements to the beneficial owners of the Company's Common
Stock, will be borne by the Company.
OTHER MATTERS
The Board of Directors does not intend to bring any other matters before
the Annual Meeting and has not been informed that any other matters are to be
presented by others. In the event any other matters properly come before the
Annual Meeting, the persons named in the enclosed form of proxy will vote all
such proxies in accordance with their best judgment on such matters.
Whether or not you are planning to attend the Annual Meeting, you are urged
to complete, date and sign the enclosed proxy and return it in the enclosed
stamped envelope at your earliest convenience.
By Order of the Board of Directors
Frank A. Falco
Secretary
South River, New Jersey
April 30, 1999
14
<PAGE>
IDM ENVIRONMENTAL CORP.
396 Whitehead Avenue
South River, New Jersey 08882
Proxy for Annual Meeting of Shareholders
to be held on June 10, 1999
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Joel A. Freedman and Frank A. Falco, and
each of them, as Proxies, with full power of substitution in each of them, in
the name, place and stead of the undersigned, to vote at an Annual Meeting of
Shareholders (the "Meeting") of IDM Environmental Corp., a New Jersey
corporation (the "Company"), on June 10, 1999, at 1:30 p.m., or at any
adjournment or adjournments thereof, in the manner designated below, all of the
shares of the Company's common stock that the undersigned would be entitled to
vote if personally present.
1. GRANTING __ WITHHOLDING __ authority to vote for the election as a
director of the Company the following nominees: Frank A. Falco (Class III) and
Joel A. Freedman (Class III).
(Instructions: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name.)
2. Proposal to authorize the issuance of common shares in excess of 360,000
on the conversion of outstanding Series RR Preferred Shares.
FOR AGAINST ABSTAIN
--- --- ---
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournments thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL 2 AND FOR THE
ELECTION OF ALL NOMINEES AS DIRECTORS.
Please sign exactly as your name appears hereon.
When shares are held by joint tenants, both should
sign. When signing as an attorney, executor,
administrator, trustee, guardian, or corporate
officer, please indicate the capacity in which
signing.
DATED: , 199
------------------------- ----
------------------------------------------
Signature
------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE
