United States
Securities and Exchange Commission

Washington, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

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PDG ENVIRONMENTAL, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, If Other Than The Registrant)

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PDG ENVIRONMENTAL, INC.

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 6, 2007

 

TO THE STOCKHOLDERS OF PDG ENVIRONMENTAL, INC.:

 

NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of PDG Environmental, Inc., a Delaware corporation (the “Corporation”), will be held at the Corporation’s offices at the Westinghouse Science & Technology Center, 1386 Beulah Road, Building 801, Pittsburgh, Pennsylvania 15235, on Tuesday, November 6, 2007 at 9:00 o’clock a.m., Eastern Daylight Savings Time, for the following purposes:

 

 

 

 

 

The forgoing matters are described in more detail in the enclosed proxy statement. The Board of Directors has fixed September 24, 2007, at the close of business, as the record date for the purpose of determining the stockholders who are entitled to receive notice of and to vote at the Annual Meeting or at any adjournment or postponement thereof.

 

All stockholders are cordially invited to attend the Annual Meeting in person. Whether or not you plan to attend the Annual Meeting, we urge you to complete, date, sign and return the enclosed proxy as promptly as possible in the envelop enclosed to ensure your representation and the presence of a quorum at the Annual Meeting. Should you receive more than one proxy because your shares are registered in different names and addresses, each proxy should be signed and returned to assure that all your shares will be voted. You may revoke your proxy at any time before the Annual Meeting. If you attend the Annual Meeting and vote by ballot, your proxy will be revoked automatically and only your vote at the Annual Meeting will be counted. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain from the record holder a proxy issued in your name.

 

By Order of the Board of Directors

 

James D. Chiafullo
Secretary

 

Pittsburgh, Pennsylvania

September 21, 2007

 

PROXY STATEMENT

 

PDG ENVIRONMENTAL, INC.

1386 BEULAH ROAD, BUILDING 801

PITTSBURGH, PENNSYLVANIA 15235

(412) 243-3200

 

ANNUAL MEETING OF STOCKHOLDERS TO BE HELD

NOVEMBER 6, 2007

 

This Proxy Statement is being furnished to all stockholders of PDG Environmental, Inc., a Delaware corporation (the “Corporation”), in connection with the solicitation of proxies by the Board of Directors of the Corporation for use at the Annual Meeting of the Stockholders of the Corporation to be held on November 6, 2007 at 9:00 a.m., Eastern Daylight Savings Time, at the Corporation’s offices at the Westinghouse Science & Technology Center, 1386 Beulah Road, Building 801, Pittsburgh, Pennsylvania 15235 and any adjournment or postponement of the Annual Meeting for the purposes set forth in this Proxy Statement and the accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement and accompanying Notice of Annual Meeting of Stockholders are being sent to the stockholders of the Corporation on or about September 24, 2007.

 

GENERAL INFORMATION REGARDING VOTING

 

Record Date

 

The Board of Directors of the Corporation has fixed the close of business on September 24, 2007 as the record date for the determination of stockholders of the Corporation entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof (the “Record Date”). All holders of record of shares of the common stock, par value $0.02, of the Corporation (“Common Stock”) as of the Record Date will be entitled to vote at the Annual Meeting on all matters voted upon. At the close of business on September 14, 2007, there were 20,765,276 shares of Common Stock outstanding and entitled to vote. On September 14, 2007 the Common Stock was held by 1,705 stockholders of record. There may be subsequent issuances of the Corporation’s Common Stock from September 14, 2007 until the record date of September 24, 2007 from the exercise of stock options and warrants and from conversion of the Corporation’s Series C Preferred Stock into Common Stock.

 

Quorum and Votes Per Share

 

The presence, in person or by properly executed proxy, of the holders of shares representing a majority of the voting power outstanding on the Record Date is necessary to constitute a quorum at the Annual Meeting. Shares present at the Annual Meeting in person or represented by proxy and entitled to vote (including shares which abstain or do not vote) will be counted for purposes of determining whether a quorum exists at the Annual Meeting.

 

On all matters to be voted upon at the Annual Meeting, the holders of Common Stock are entitled to cast one (1) vote per share. Stockholders shall not be entitled to cumulative votes on any matter brought before them at the Annual Meeting.

 

Abstentions; Broker Non-Votes

 

All votes will be tabulated by the inspector of election appointed for the meeting, who will separately tabulate affirmative and negative votes, abstentions and broker “non-votes.” Abstentions and broker “non-votes” are included in the determination of the number of shares present at the Annual Meeting for purposes of determining whether a quorum is present. An abstention will have the same effect as a negative vote except with respect to the election of directors in which case an abstention will have no effect since directors are elected by a plurality vote. Broker “non-votes” are not counted in the tabulation of votes cast on proposals presented to stockholders because shares held by a broker are not considered to be entitled to vote on matters as to which broker authority is withheld. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner has not received instructions from the beneficial owner and does not have discretionary voting power with respect to that item.

 

Shares Held by Directors and Officers

 

As of September 14, 2007, the directors and officers of the Corporation as a group beneficially owned approximately 16% of the Common Stock. See “Security Ownership of Certain Beneficial Owners and Management.” Each director and officer of the Corporation has indicated that he intends to vote in favor of each of the matters to be acted upon at the Annual Meeting.

 

Proxies

 

All shares of Common Stock which are represented at the Annual Meeting by properly executed proxies received by the Board of Directors prior to or at the Annual Meeting and not revoked will be voted at the Annual Meeting and will be voted in accordance with the instructions indicated on such proxies including any instruction directing abstention from voting. If no instructions are indicated with respect to any shares for which properly executed proxies are received, such proxies will be voted:

 

 

In addition, if any other matters come before the Annual Meeting, the person named in the accompanying form of proxy will have the discretion to vote the shares represented by the proxies, or otherwise act with respect to such matters, in accordance with their best judgment.

 

Revocation of Proxies

 

Any proxy given pursuant to this solicitation may be revoked by the person giving it any time before it is voted. Proxies may be revoked by filing a written notice of such revocation with the Secretary, PDG Environmental, Inc., 1386 Beulah Road, Building 801, Pittsburgh, Pennsylvania 15235. In addition, a proxy will be deemed to be revoked if the stockholder either (a) attends and votes at the Annual Meeting, or (b) executes and delivers to the Secretary a proxy bearing a later date.

 

Expenses of Solicitation

 

Proxies are being solicited by and on behalf of the Board of Directors of the Corporation. All expenses of this solicitation, including the cost of preparing and mailing this Proxy Statement, will be borne by the Corporation. In addition to solicitation by use of the mails, proxies may be solicited by directors, officers and employees of the Corporation in person or by telephone, telegram or other means of communication. Such directors, officers and employees will not be additionally compensated, but may be reimbursed for any out-of-pocket expenses incurred by them in connection with such solicitation. Proxies will be tabulated by the Corporation’s transfer agent, Continental Stock Transfer & Trust Company, as they are received and updated at the Annual Meeting.

 

PROPOSAL ONE:
ELECTION OF DIRECTORS

 

The Board of Directors has nominated five (5) directors for election at the Annual Meeting. Each director to be elected will hold office until the next Annual Meeting of Stockholders and until such director’s successor is elected and has qualified, or until such director’s earlier death, resignation or removal.

 

The Board of Directors has nominated Messrs. Regan, Bendis, Chiafullo, Berkey and Kilpela for election at the 2007 Annual Meeting of Stockholders.

 

The following table sets forth information regarding the nominees for election. All of the nominees are currently serving as directors and were elected at the 2006 Annual Meeting to serve until the next annual meeting of the Corporation’s stockholders. There are no family relationships among the directors or executive officers of the Corporation. Each of the nominees has consented to serve as a director if elected and management has no reason to believe that any nominee will be unable to serve.

 

 

Board Composition and Committees

 

The Board of Directors currently has five directors, four of whom (Messrs. Bendis, Berkey, Chiafullo and Kilpela) the Board has determined are “independent” as defined in Section 121(A) of the listing standards of the American Stock Exchange (which is the standard used by the Board in determining whether a majority of the Board is independent).

During the fiscal year ended January 31, 2007, there were five regular meetings of the Board of Directors, and each of the incumbent directors attended or participated in at least 80% of the total number of meetings of the Board of Directors. Each of the incumbent directors attended at least 80% of the meetings of the committees of the Board of Directors on which they served during such fiscal year.

 

The Board of Directors currently has three committees: The Audit Committee, the Compensation Committee and the Nominating Committee.

 

Audit Committee

 

The Audit Committee is primarily concerned with the accuracy and effectiveness of the audits of our financial statements by our internal accounting staff and our independent auditors. The Audit Committee’s function is to review our quarterly and annual financial statements with our independent accountants and management; review the scope and results of the examination of our financial statements by the independent accountants; approve all professional services performed by the independent accountants and related fees; recommend the retention or replacement of the independent accountants and periodically review our accounting policies and internal accounting and financial controls. The Audit Committee is also responsible for establishing and overseeing our internal reporting system relating to accounting, internal accounting controls and auditing matters. The Audit Committee is governed by a written charter adopted in 2000 and subsequently amended by our Board of Directors.

 

The Audit Committee presently consists of Messrs. Bendis, Berkey and Kilpela. The Board of Directors has determined that each of Messrs. Bendis, Berkey, and Kilpela is an “independent director” as that term is defined by Rule 10-A-3 under the Securities Exchange Act of 1934, as amended. Mr. Bendis serves as Chairman of the Audit Committee. The Board has determined that Mr. Bendis is an “audit committee financial expert”, as that term is defined in Item 401(h)(2) of Regulation S-K.

 

The Audit Committee met four times during the fiscal year ended January 31, 2007.

 

Compensation Committee

 

The Compensation Committee is responsible for administering the Corporation’s Employee Incentive Stock Option Plan, designating the employees eligible to participate in such plan, the number of options to be granted and the terms and conditions of each option. The Compensation Committee also reviews the performance of the Corporation’s Chief Executive Officer and makes recommendations with respect to the compensation of the Corporation’s Chief Executive Officer. The Chairman of the Compensation Committee is Mr. Kilpela, and the other members of the Compensation Committee are Mr. Berkey and Mr. Chiafullo. In addition to being “independent” under the AMEX listing standards, each member of the Compensation Committee is an “independent director” as defined by AMEX listing standards, an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Compensation Committee did not meet during the fiscal year ended January 31, 2007.

 

Nominating Committee

 

The Nominating Committee makes recommendations to the Board of Directors regarding the size and composition of the Board of Directors.

 

The Nominating Committee presently consists of Messrs. Kilpela, Bendis and Berkey with Mr. Berkey serving as Chairman. The Nominating Committee did not meet during the fiscal year ended January 31, 2007 but did consider candidates for the Board of Directors.

 

Identification and Evaluation of Nominees for Directors

 

The Nominating Committee regularly assesses the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominating Committee considers various potential candidates for director. Candidates may come to the attention of the Nominating Committee through current members of the Board, professional search firms, employees, stockholders or other persons.

These candidates are evaluated at regular or special meetings of the Nominating Committee, and may be considered at any point during the year.

 

The Nominating Committee considers properly submitted stockholder recommendations for candidates for the Board. In evaluating such recommendations, the Nominating Committee uses the same qualification standards as are used for all other candidates. To recommend a prospective nominee for the Nominating Committee’s consideration, a stockholder must have held no less than 10,000 shares of our stock for a continuous 12-month period. Stockholder recommendations must be submitted in writing to the Corporation’s Corporate Secretary at PDG Environmental, Inc., 1386 Beulah Road, Building 801, Pittsburgh, PA 15235 and must include (a) the proposed candidate’s personal and business information, (b) the class and number of Corporation’s securities he/she owns, (c) a description of all arrangements or understandings between the stockholder and the nominee and any other person or persons (naming such persons or persons) pursuant to which the nomination is to be made by the stockholder and (d) all other information regarding the stockholder’s proposed nominee that is required to be disclosed in solicitations of proxies for elections of directors in an election contest, or is otherwise required, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and Rule 14a-11 thereunder (including such person’s written consent to be named in the proxy statement as a nominee and to serving as a director if elected). Recommendations must also be accompanied by personal references including a supporting statement from the recommending stockholder regarding a proposed candidate’s character and judgment.

 

In addition, the bylaws of the Corporation permit stockholders to nominate directors for election at an annual stockholder meeting. To nominate a director, the stockholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares to elect such nominee and comply with all other requirements set forth in our bylaws and Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended. In addition, the stockholder must give timely notice to the Corporate Secretary of the Corporation in accordance with the bylaws of the Corporation which, in general, require that the notice be received by the Corporation Secretary of the Company within the time period described below under “Stockholder Proposals for 2008 Annual Meeting.”

 

The Nominating Committee utilizes a variety of methods for identifying and evaluating candidates for director. In evaluating the qualifications of the candidates, the Nominating Committee considers many factors, including, issues of character, judgment, integrity, independence, age, expertise, diversity of experience, length of service, other commitments and other characteristics which the Nominating Committee deems important in their directors. A candidate should have sufficient financial or accounting knowledge to add value to the financial oversight role of the Board of Directors. The Nominating Committee evaluates such factors, among others, and does not assign any particular weighting or priority to any of these factors. The Nominating Committee also considers each individual candidate in the context of the current perceived needs of the Board as a whole. While the Nominating Committee has not established specific minimum qualifications for director candidates, the Nominating Committee believes that candidates and nominees must reflect a Board that is comprised of directors who have competency in the following areas: (i) industry knowledge; (ii) accounting and finance (including expertise of at least one director who would qualify as a “financial expert” as that term is defined the SEC rules; (iii) business judgment; (iv) management; (v) leadership; (vi) business strategy; (vii) crisis management; (viii) corporate governance; (ix) risk management and (x) such other requirements as may be required by applicable rules, such as financial literacy or financial expertise with respect to audit committee members.

 

Code of Ethics

 

We have adopted a Code of Business Ethics for directors and executive officers (including our principal executive officer and principal financial officer) (the “Code of Ethics”). A copy of the Code of Ethics is available upon request, free of charge, by contacting our Corporate Secretary at PDG Environmental, Inc., 1386 Beulah Road, Building 801, Pittsburgh, PA 15235.

 

Stockholder Communications with the Board

 

Stockholders may communicate with the Board by writing to them by mail or express mail c/o PDG Environmental, Inc., 1386 Beulah Road, Building, 801, Pittsburgh, PA 15235. Any stockholder communications directed to the Board or a member of the Board will first be delivered to the Corporation’s Corporate Secretary who will forward all communications to the Board for review.

Director Attendance at Annual Stockholder Meeting

 

Members of the Board of Directors are encouraged to attend the 2007 Annual Meeting of Stockholders. However, the Company does not have a policy requiring director attendance.

 

Compensation Committee Interlocks and Insider Participation

 

The Compensation Committee consists of Messrs. Berkey, Chiafullo and Kilpela. None of these individuals served as one of the Corporation’s compensated officers or employees at any time during the fiscal year ended January 31, 2007. Mr. Chiafullo has served as corporate secretary, a non-compensated position. None of the Corporation’s current executive officers has ever served as a member of the board of directors or compensation committee of any other entity that has or has had one or more executive officers serving as a member of our board of directors or compensation committee.

 

Certain Relationships And Related Transactions

 

At January 31, 2007, we maintained outstanding personal loans to Mr. Regan in the principal amount of $95,000 and related accrued interest of $55,000. This personal loan is evidenced by a demand note. This loan was made to provide Mr. Regan with funds to satisfy personal obligations. The loan to Mr. Regan was made in a series of installments from April 1990 to August 1990. The amount specified represents the highest outstanding balances of the loans during our fiscal year.

 

Mr. Chiafullo is a Director of Cohen & Grigsby, P.C. which is our legal counsel. During the year ended January 31, 2007, Cohen & Grigsby billed us $406,840 for legal services.

 

Other than the transactions disclosed herein, we have not entered into any material transactions with any director, executive officer, beneficial owner of five percent (5%) or more of our Common Stock, or family members of such person, in which the amount involved exceeds $120,000.

 

Although no written formal policy or ratification of related party transactions exists, in practice the Board of Directors must approve all such transactions in advance of any company commitment.

 

Vote Required

 

Directors are elected by a plurality of the votes of the shares present at the 2007 Annual Meeting in person or represented by proxy and entitled to vote. Unless otherwise instructed, the proxies will vote “FOR” the election of the nominees listed above. If events not now known or anticipated make any of the nominees unable to serve, the proxies will be voted at the discretion of the holders thereof for other nominees not named herein in lieu of those unable to serve, or the size of the Board of Directors may have to be reduced.

 

Recommendation of the Board of Directors

 

The Board of Directors recommends that the stockholders vote “FOR” the election of the nominees listed above.

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Compensation program objectives and philosophy

 

Because we are still a founder-managed company and not a heavily executive laden company and because John Regan, the founder, is subject to an employment agreement with the Company that provides for annual automatic renewal, the extent of the work by the Compensation Committee has been limited. In particular, the annual work of the Compensation Committee is to meet and decide the annual compensation for the Principal Executive Officer (“PEO”) and any bonuses for the then just completed year. This year the members of the Compensation Committee concluded, without a meeting, that no additional base salary was to be paid and that no bonus or equity award needed to be made.

 

In doing so, the Compensation Committee has considered the commitment, effort, effectiveness of the PEO and most importantly the performance of the Company and shareholder value created by his leadership.

 

The future of the Company requires that a plan and compensation philosophy be in place to hire and maintain talented executives in the future. For this reason, the Committee plans to adopt a charter soon. In developing our guidelines and ultimately our charter, the following principles are likely to figure greatly in them:

 

 

To attain these goals, we have created an executive compensation program which consists of base pay, a short term cash bonus program and a stock option program and employee benefits.

 

Our executive compensation program rewards executives for company and individual performance. Company and individual performance are strongly considered when we grant base pay increasers and equity awards. The pool of funds to be used for our short term bonus program is decided by the Board of Directors. For all management and supervising employees of the Company, other than the PEO, the PEO decides such bonuses. The Board, with the recommendation of the Compensation Committee, decides the PEO’s bonus, if any. For the fiscal year ended January 31, 2007, no bonus was paid to the PEO because of the loss incurred in the operation of the business.

 

The role of the Compensation Committee

 

Our Compensation Committee has not adopted a formal charter. The Compensation Committee performs the following functions regarding compensation for the named executive officers (“ NEOs”):

 

 

The components of our executive compensation program

 

Our executive compensation program consists of three elements: base pay; short term cash bonus and grants of fair market value options in our stock. We use this mix of programs for a variety of reasons:

 

 

 

We believe that the package of executive compensation programs that we offer fits our needs well. Our program is competitive; we are able to attract and retain the executive talent that we need to successfully run our business. We do not maintain any type of non-qualified deferred compensation program (either a defined benefit or a defined contribution program) for executives We currently believe that the long term incentive component of our executive compensation program, which uses fair market value stock options, provides executives with an incentive as well as putting a portion of their compensation at risk if our share price declines; we do not currently feel the need to provide additional long term incentives to our executives. In regard to our PEO, we believe that his holdings of Company Stock are a strong incentive to him to manage the Company in a manner that maximizes stockholder value.

 

Taken as a whole, we believe that our executive compensation program is a cost-effective method of providing competitive pay to our NEOs.

 

Our process for setting executive pay

 

The Compensation Committee’s focus is to determine the compensation of the Principal Executive Officer and to review the proposals of the Principal Executive Officer regarding the compensation for his direct reports, which include the NEOs.

 

Our process for determining the value of each component of executive pay functioned in the following manner for 2007:

 

Base pay:  Base compensation for all of our NEOs is either provided for in their respective employment agreements or based on market rates. The Principal Executive Officer makes a recommendation for executive base pay increases to the Compensation Committee. The Compensation Committee reviews the information provided by the Principal Executive Officer and its supporting data, and makes a determination of annual base pay increases. There were no base pay increases to the NEOs in 2007.

 

Annual bonus:  Our annual bonus program for executives is based on the discretion of the Compensation Committee. No annual bonuses were awarded to NEOs in 2007.

 

As the bonus awards are not determined based on any particular Company metric or metrics related to financial performance, the Company does not have a policy that would require that recipients return the bonus to the Company in the event that a restatement of the Company’s financial statements results in a detriment to the Company.

 

Equity grants:  In connection with the award of equity grants, the Principal Executive Officer provides the Compensation Committee with a proposal for equity grants as part of the employment contract process. The amount of the grant is based on various factors, including the equity grant ranges for the position which the Company maintains. The Compensation Committee reviews the Principal Executive Officer’s proposal and the underlying information, and makes its determination as to the grant. There were no equity grants to the NEOs in 2007. Mr. Battaglia was granted 500,000 options in fiscal 2008.

 

We establish the exercise price for our options in the following manner:

 

For a new hire, the Board approves the grant and establishes the price based on the Company’s closing price on the day of Compensation committee approval; however, if the executive has not yet started employment as of the date of Compensation Committee approval, the price is set as the Company’s closing price on the executive’s first day of work.

 

For a new contract for a current executive, the Board approves the grant and establishes the price based on the Company’s closing price on the day of Board approval.

 

Amounts realized in a prior year from annual bonuses or equity awards are not a factor in determining current year equity grants.

We believe that the grant of fair market value stock options, even though there is now a financial statement impact before the options are exercised, continues to provide substantial benefits to the Company and the executive. We benefit because:

 

 

The executives benefit because:

 

 

We do not maintain any equity ownership guidelines for our NEOs. We have adopted a corporate policy which expressly prohibits any NEO from trading in derivative securities of our Company, short selling our securities, or purchasing our securities on margin at any time. We do not time the granting of our options with any favorable or unfavorable news relating to our Company. Proximity of any awards to an earnings announcement, market event or other event related to us is purely coincidental.

 

Because we feel that each of our NEOs provides unique services to us, we do not use a fixed relationship between base pay, short term bonus and equity awards. When the Compensation Committee or the full Board makes the final decisions about a NEOs total compensation package for a year, the three elements (base pay, short term bonus and equity award) are considered both individually and as a complete package. We do not take into account amounts that a NEO may have realized in a year as a result of short term bonus awards or stock option exercises when we establish pay levels and goals for the current year. Overall, we believe that our total compensation program for executives is reasonable while being competitive with market peers.

 

Summary Compensation Table

 

The following table sets forth for the fiscal year ended January 31, 2007, compensation awarded to, paid to, or earned by, our Chief Executive Officer and our Chief Financial Officer who served in such capacity during such fiscal year (the “Named Executive Officers”):

 

Summary Compensation Table

 

 

 

 

Grants of Plan-Based Awards for 2007

 

There were no grants of Plan-Based Awards to NEOs for the fiscal year ended January 31, 2007.

 

Option Exercises and Stock Vested Table

 

 

Outstanding Equity Awards at Year End

 

The following table shows the number of shares covered by exercisable and unexercisable options held by the Named Executive Officers on January 31, 2007. There were no other outstanding equity awards as of January 31, 2007.

 

 

 

 

Post- employment compensation

 

Mr. Regan has an employment agreement, effective March 15, 2004 for a three-year term. Upon the expiration of the basic three-year term of the agreement, the agreement is automatically renewed for a one-year period until such time as we elect to terminate Mr. Regan’s employment agreement. The agreement provided for a $250,000 annual base salary. The base salary and life and disability insurance benefit shall continue for a three-year period following the date of termination, the death of Mr. Regan, the disability of Mr. Regan or Mr. Regan’s resignation due to a substantial change in ownership of our company or membership of the Board of Directors. In addition, all of Mr. Regan’s rights under the Company’s stock option and incentive plan and all other incentive bonus plans shall fully and completely vest upon the date of such termination and any early termination provisions provided for in such plans shall not apply to rights or options granted to Mr. Regan.

 

A termination for ‘cause’ occurs if Mr. Regan has:

 

 

If Mr. Regan is terminated for cause, he shall receive only six months of base salary and life and disability insurance benefit.

 

A “substantial change in ownership” means:

 

 

For purposes of the table information regarding post employment payments, we assume the following:

 

 

Post-Employment Payments Table

 

Compensation of Directors

 

The following table sets forth the compensation paid to our non-employee directors in 2007.

 

 

Each non-employee director of the Corporation receives an annual retainer of $10,000, upon such director’s initial election or re-election to the Board of Directors and a $1,500 per meeting fee plus reimbursement for their actual expenses incurred in attending such meetings (excluding telephonic meetings). In addition, the Corporation has established the 1990 Non-Employee Director Stock Option Plan (the “Non-Employee Plan”) which provides for the grants of options to non-employee directors to purchase an aggregate of up to 600,000 shares of Common Stock. Under the Non-Employee Plan, the exercise price of options granted shall be 100% of the fair market value of such shares on the date such options are granted subject to adjustment as provided in the plan. The options expire ten years from the date of grant. Options granted under the Non-Employee Plan do not qualify as incentive stock options under the Internal Revenue Code.

 

During the last fiscal year, the Corporation granted and vested options covering 10,000 shares of common stock to each non-employee director of the Corporation at an exercise price per share of $1.47, which was the fair market value of such shares on the date the options were granted. The options expire ten years from the date of grant.

 

Employee directors are not compensated in their role as directors with the exception of grants under the 1990 Employee Director Stock Option Plan (the “Employee Director Plan”) pursuant to which options to purchase an aggregate of up to 500,000 shares of Common Stock, subject to the amendment to the Employee Director Plan proposed for this meeting and subject to adjustment in the event of any change in the Common Stock, may be granted to employee directors. Under the Employee Director Plan, the exercise price of options granted shall be 100% of the fair market value of such shares on the date such options are granted. The Corporation did not grant any options under the Employee Director Plan in the fiscal year ended January 31, 2005. On February 15, 2005, the Corporation’s Chairman and Chief Executive Officer was awarded stock options for 250,000 shares of the Corporation’s common stock under the terms of the Employee Director Stock Option Plan in conjunction with his execution of a new employment agreement.

 

Compensation Committee Report

 

The Compensation Committee has reviewed the Compensation Discussion and Analysis included above, and has reviewed this document with members of our management team. Based upon the review and discussions that the Compensation Committee had with management regarding the Compensation Discussion and Analysis, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our proxy statement relating to the annual meeting of stockholders in 2007.

 

Members of the Compensation Committee:

 

James D. Chiafullo
Edgar Berkey
Edwin J. Kipela, Chairman

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

 

Security Ownership

 

The following table sets forth information with respect to the beneficial ownership of the Corporation’s Common Stock as of September 14, 2007 by:

 

 

Beneficial ownership is determined in accordance with SEC rules, and the information is not necessarily indicative of beneficial ownership for any other purpose. In computing the number of shares beneficially owned by a person, we have included shares for which the named person has sole or shared power over voting or investment decisions and also any shares of Common Stock which the named person has the right to acquire, through conversion or option exercise, or otherwise, within 60 days after September 14, 2007. Beneficial ownership calculations for 5% stockholders are based solely on publicly-filed Schedule 13Ds or 13Gs, which 5% stockholders are required to file with the SEC.

 

Except as otherwise indicated, and subject to applicable community property laws, to the Corporation’s knowledge, the persons named below have sole voting and investment power with respect to all shares of Common Stock held by them. As of September 14, 2007, there were 20,734,191 shares of Common Stock outstanding.

 

Unless otherwise indicated, the address of each beneficial owner listed below is c/o Corporate Secretary, PDG Environmental, Inc., Westinghouse Science & Technology Center, 1386 Beulah Road, Building 801, Pittsburgh, Pennsylvania 15235.

 

 

 

 

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of a registered class of our equity securities to file initial reports of beneficial ownership (Form 3) and reports of changes in beneficial ownership (Forms 4 and 5) of common stock and other equity securities of ours with the Securities and Exchange Commission (“SEC”). Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Our information regarding compliance with Section 16(a) is based solely on a review of the copies of such reports furnished to us by our executive officers, directors and greater than 10% beneficial owners. During the fiscal year ended January 31, 2007, we believe that all of our executive officers, directors and greater than 10% beneficial owners complied with all applicable Section 16(a) filing requirements.

 

Equity Compensation Plan Information

 

The following table is as of the end of the most recent fiscal year (January 31, 2007) and reflects all compensation plans under which equity securities of the Corporation are authorized for issuance.

 

 

 

 

AUDIT COMMITTEE MATTERS

 

The following Report of the Audit Committee does not constitute “solicitation material” and shall not be deemed to be filed or incorporated by reference into any other company filing with the Securities and Exchange Commission, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate the report by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.

 

REPORT OF THE AUDIT COMMITTEE

 

The Audit Committee is composed of three members each of whom is “independent” as defined by Rule 10A-3 under the Exchange Act and AMEX listing standards. The Audit Committee operates under a written Audit Committee Charter (the “Charter”) first adopted by the Board of Directors in 2000 and subsequently amended

 

Management has the primary responsibility for the financial statements and the reporting process including the systems of internal control. The independent registered public accounting firm is responsible for performing an independent audit of the Corporation’s financial statements in accordance with generally accepted auditing standards and for issuing a report thereon. The Audit Committee is charged with the duty to monitor and oversee these processes.

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited financial statements in the Annual Report on Form 10-K with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and clarity of disclosures in the financial statements.

 

The Audit Committee met with both management and the Corporation’s independent registered public accounting firm to review and discuss the Corporation’s 2007 year end financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Audit Committee that all financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee review included discussions with the independent registered public accounting firm regarding matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communications with Audit Committees).

 

The Audit Committee also received written disclosure from the independent registered public accounting firm as required by the Independence Standards Board Statement No. 1 (Independence Discussions with Audit Committees) and discussed with the independent registered public accounting firm matters relating to the independent registered public accounting firm’s independence from management. The independent registered public accounting firm informed the Audit Committee that it was independent with respect to the Corporation within the regulations promulgated by the Securities and Exchange Commission and the requirements of the Independence Standards Board. The Audit Committee also considered the compatibility of non-audit services with the registered public accounting firm’s independence and concluded that the provisions of such services had not and has not impaired the independent registered public accounting firm’s independence.

 

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the year ended January 31, 2007 for filing with the Securities and Exchange Commission.

 

Members of the Audit Committee:

 

Richard A. Bendis, Chairman
Edgar Berkey
Edwin J. Kilpela

 

PROPOSAL TWO:
PROPOSAL TO AMEND THE PDG ENVIRONMENTAL, INC.
INCENTIVE STOCK OPTION PLAN

 

On August 21, 2007, the Board of Directors voted to amend the PDG Environmental, Inc. Incentive Stock Option Plan (the “Employee Stock Plan”), subject to approval by the stockholders, to increase the total number of shares of Common Stock which may be granted thereunder from 5,000,000 shares to 5,500,000 shares.

 

Background

 

The Board of Directors adopted the Employee Stock Plan for the benefit of the Corporation’s employees based upon the belief that it promotes the best interests of the Corporation and its stockholders by encouraging stock ownership in the Corporation by employees, thus stimulating their efforts on behalf of the Corporation, strengthening their desire to remain with the Corporation, and to provide a compensation increase to employees while at the same time conserving the Corporation’s cash. The Employee Stock Plan, as currently in effect, was adopted by the Corporation in December, 1990 and amended in 2000 to extend the life of the Employee Stock Plan until December 14, 2010.

 

The Plan

 

The following is a summary of the principal features of the Employee Stock Plan.

 

Term:  The Employee Stock Plan shall remain in effect until December 14, 2010 unless sooner terminated by the Board of Directors of the Corporation.

 

Shares Subject to the Employee Stock Plan:  The total number of shares of Common Stock of the Corporation which may be granted under the Employee Stock Plan is 5,500,000 shares (which includes the 500,000-share increase for which authorization from stockholders is sought), subject to adjustments provided for in the Employee Stock Plan in order to prevent dilution or enlargement of rights under the Employee Stock Plan. If an option expires or is terminated for any reason, the unpurchased or forfeited shares shall be eligible for future awards.

 

Eligibility:  Every employee of the Corporation is eligible to participate in the Employee Stock Plan.

 

Option Price:  The option price shall be fixed by the Board of Directors but shall in no event be less than 100% of the fair market value of the Corporation’s Common Stock on the date of grant. On September 11, 2007, the closing price for the Corporation’s Common Stock was $1.10.

 

Terms and Conditions of Options:  No option granted under the Employee Stock Plan will be transferable other than by will or by the laws of descent and distribution and each option will be exercisable during the lifetime of the optionee only by the optionee. Options granted will expire no later than ten years from the date of grant. In the event of death or permanent disability, an outstanding option can be exercised for one year thereafter. The optionee shall forfeit all rights under the option (except as to any shares already purchased) if the optionee terminates employment with the Company.

 

Tax Consequences:

 

An optionee to whom an incentive stock option is granted will not recognize any taxable income upon the grant of the option. Neither will the optionee recognize any taxable income upon the exercise of such option, but the amount by which the fair market value of the shares on the date of exercise exceeds the option price paid will be a tax preference item for the purposes of the alternative minimum tax. The shares received pursuant to the exercise of the option will have a tax basis equal to the option price paid. The Corporation will not be entitled to a deduction in respect to the granting or exercise of such option.

 

The prescribed holding period for stock received pursuant to such an option is the greater of two years from the date the option is granted and one year from the date the shares are transferred to the optionee. If the optionee does not dispose of the stock before the expiration of this holding period, they shall realize a long-term capital gain or loss upon a later disposition of the stock. The amount of this gain or loss shall be equal to the difference between the amount he or she realizes on the disposition and the option price paid.

When shares purchased under the incentive stock option plan are disposed of prior to the expiration of the prescribed holding period, a disqualifying disposition will occur. In such a case, the optionee will recognize the ordinary income at the time of the disposition in an amount equal to the excess of the fair market value of the stock on the date of the exercise over the option price paid for those shares. This ordinary income will be limited to the amount by which (a) the amount realized or (b) the fair market value at the date of the exercise, whichever is less, exceeds the option price paid for the shares. If the difference between the amount realized on the disposition and the option price paid exceeds the difference between the fair market value of the stock on the date of exercise and the option price paid, the excess amount will be taxed as a long-term capital gain. If the amount realized on the disqualifying disposition is less than the option price paid, the difference will be either a long-term or short-term capital loss. The Corporation will be entitled to a deduction, in the same year and in the same amount, as the ordinary income the optionee resulting from the disqualifying disposition.

 

Vote Required

 

The amendment to the PDG Environmental, Inc. Employee Stock Plan requires the affirmative vote of the holders of shares representing a majority of the votes present at the Annual Meeting in person or by proxy and entitled to vote. Unless otherwise instructed, the proxies will vote “FOR” this proposal two.

 

Recommendation of the Corporation’s Board of Directors

 

The Board of Directors recommends that the stockholders vote “FOR” the amendment of the PDG Environmental, Inc. Incentive Stock Option Plan

 

PROPOSAL THREE:
PROPOSAL TO RATIFY THE SELECTION OF MALIN, BERGQUIST & COMPANY, LLP
AS THE CORPORATION’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee of the Board of Directors of the Corporation has selected Malin, Bergquist & Company, LLP to serve as the Corporation’s independent registered public accounting firm for the fiscal year ending January 31, 2008. Malin, Bergquist & Company, LLP served as the Corporation’s independent registered public accounting firm for the fiscal year ended January 31, 2007. A representative from Malin, Bergquist & Company, LLP will be present at the Annual Meeting, will be given the opportunity to make a statement, if he or she so desires, and will be available to respond to appropriate questions.

 

The stockholders are asked to ratify the appointment of Malin, Bergquist & Company, LLP as the independent public accounting firm for the Corporation for the year ending January 31, 2008. If the stockholders fail to ratify the appointment, the Audit Committee and the Board of Directors of the Corporation will reconsider whether or not to retain Malin, Bergquist & Company, LLP. Even if the appointment is ratified, the Corporation’s Board of Directors in its discretion may direct the appointment of a different independent auditing firm at any time during the year if the Board of Directors believes that such a change would be in the best interests of the Corporation and the stockholders.

 

Fees Billed by Malin, Bergquist and Company, LLP during Fiscal Year 2007 and 2006

 

During the fiscal years ended January 31, 2007 and 2006, Malin, Bergquist and Company, LLP acted as our independent auditors and aggregate fees billed various audit, audit-related and non-audit services were as follows:

 

 

 

Our Audit Committee pre-approves the provision of all audit and non-audit services (including tax services) by the independent auditors and also approves all audit and non-audit engagement fees and terms with the independent auditors. All audit and non-audit services provided by Malin Bergquist in 2006 and 2007 were approved in advance by the Audit Committee, and no fees were paid in 2006 or 2007 under a de minimus exception that waives pre-approval for certain non-audit services.

 

Vote Required

 

The affirmative vote of a majority of the votes cast by holders of common stock entitled to vote at the Annual Meeting, at which a quorum is present either in person or by proxy, is required for approval of this proposal. Unless otherwise instructed, the persons named in the accompanying proxy will vote “FOR” the ratification of the appointment of Malin, Bergquist & Company, LLP as our independent registered public accounting firm for the year ending January 31, 2008.

 

Recommendation of the Corporation’s Board of Directors

 

The Corporation’s Board of Directors has approved this proposal and recommends that the stockholders vote “FOR” the ratification of the selection of Malin, Bergquist & Company, LLP as the Corporation’s independent registered public accounting firm for the fiscal year ending January 31, 2008.

 

OTHER MATTERS

 

The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed form of proxy to vote the shares they represent as the board of directors may recommend. Discretionary authority with respect to other matters is granted by the execution of the enclosed proxy, unless you specifically withhold that power.

 

STOCKHOLDER PROPOSALS FOR 2008 ANNUAL MEETING

 

Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), stockholders may present proper proposals for inclusion in the Corporation’s proxy statement for consideration at the next Annual Meeting of Stockholders by submitting such proposals to the Corporation in a timely manner. In order to be so included in our proxy statement for the 2008 Annual Meeting, stockholder proposals must be received by the Corporation no later than May 28, 2008 and must otherwise comply with the requirements of Rule 14a-8. As the SEC rules make clear, simply submitting a proposal does not guarantee that it will be included. A copy of the Corporation’s Annual Report for the fiscal year ended January 31, 2007 is being mailed with this proxy. The Annual Report is not considered proxy solicitation material.

 

STOCKHOLDERS MAY OBTAIN, WITHOUT CHARGE, A COPY OF OUR ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED JANUARY 31, 2007, BY WRITING TO THE CORPORATE SECRETARY, PDG ENVIRONMENTAL, INC., WESTINGHOUSE SCIENCE & TECHNOLOGY CENTER, 1386 BEULAH ROAD, BUILDING 801, PITTSBURGH, PENNSYLVANIA 15235.

 

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE IN ORDER TO ENSURE THE REPRESENTATION OF YOUR SHARES. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY VOTE THEIR SHARES PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.

 

By Order of the Board of Directors,

 

James D. Chiafullo
Corporate Secretary
September 21, 2007