DEF 14A: PureCycle Technologies Sets Date for 2024 Annual Meeting, Outlines Key Proposals

PureCycle Technologies will hold its 2024 annual meeting of shareholders on May 8, 2024, to vote on director elections, auditor ratification, and executive compensation.

Summary

• PureCycle Technologies (PCT) will hold its 2024 annual meeting of shareholders on May 8, 2024.
• Shareholders will vote on electing seven directors, ratifying Grant Thornton LLP as the independent auditor for the fiscal year ending December 31, 2024, and approving executive officer compensation on an advisory basis.
• The board of directors recommends voting FOR all three proposals.
• The record date for determining shareholders eligible to vote is March 21, 2024.
• Proxy materials, including the annual report on Form 10-K for the year ended December 31, 2023, are available online at www.proxydocs.com/PCT.
• The meeting will be held virtually, and shareholders must register in advance by May 7, 2024, to attend and vote online.
• The company's board consists of Steven Bouck, Tanya Burnell, Daniel Coombs, Jeffrey Fieler, Allen Jacoby, Fernando Musa, and Dustin Olson.
• Director compensation includes a base cash retainer of $75,000, with additional compensation for committee chairs and members.
• The annual equity retainer for non-employee directors was increased to $125,000 effective May 8, 2023.
• The company has related party transactions with Sylebra Capital, including a $150 million revolving credit facility, a $40 million term loan facility, and $50 million in convertible notes.
• Milliken & Company, where director Allen Jacoby is employed, has a five-year offtake agreement and a 10-year exclusive supply agreement with PureCycle.

Sentiment

Score: 6

Explanation: The document is neutral to slightly positive. While it outlines important corporate governance matters and executive compensation, it also acknowledges challenges in meeting performance goals and highlights related party transactions, which could be viewed as potential risks.

Positives

• The board of directors is actively engaged in risk oversight and corporate governance.
• The company has stock ownership guidelines for both directors and executive officers to align their interests with shareholders.
• The company has a compensation clawback policy to recover incentive payments in the event of an accounting restatement.
• The company is committed to board diversity, with one director identifying as female and another as a member of an underrepresented community.
• The company has established procedures for shareholders to communicate with the board.

Negatives

• The company has significant related party transactions with Sylebra Capital, which could raise concerns about conflicts of interest.
• The company's executive compensation program includes potential payments upon termination or change in control, which could be seen as excessive.
• The company's financial performance in 2023 resulted in NEO bonus payouts at only 39% of target.

Risks

• The company's success depends on the successful scaling of its novel waste polypropylene recycling technology.
• The company faces risks related to the construction and operation of its Ironton Facility.
• The company's financial performance is subject to uncertainties, including commodity market risk and raw material price risk.
• The company's future performance is subject to the risks detailed in its filings with the SEC, including the Risk Factors section of its Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Future Outlook

The company expects to hold the next say-on-pay vote at the 2025 annual meeting of shareholders.

Management Comments

• Dustin Olson, Chief Executive Officer, expressed appreciation for shareholders' continued support of PureCycle and its mission to address the plastic waste crisis.

Industry Context

PureCycle operates in the niche industry of polypropylene recycling, competing with private companies and subsidiaries of large conglomerates. The company's technology aims to produce UPR resin with similar commercial applications to virgin resin.

Comparison to Industry Standards

• The peer group used for executive compensation benchmarking includes companies such as Advansix Inc., Casella Waste Systems, Inc., and Trex Company, Inc.
• The company generally seeks to approximate the median of its peer group with respect to total direct compensation for its NEOs.
• However, given the company's status as a company with limited revenue, 2023 LTI awards to NEOs were generally designed to exceed this level.

Management Changes

Corporate Governance

Related Party Transactions

• Sylebra Credit Facility: On March 15, 2023, the Company entered into a $150 million revolving credit facility (the Revolving Credit Facility) pursuant to a credit agreement (as amended, the Revolving Credit Agreement) dated as of March 15, 2023, with PureCycle Technologies Holdings Corp. and PureCycle Technologies, LLC (the Guarantors), Sylebra Capital Partners Master Fund, LTD, Sylebra Capital Parc Master Fund, and Sylebra Capital Menlo Master Fund (collectively, the Lenders), and Madison Pacific Trust Limited (the Administrative Agent and Security Agent), which had an original maturity on June 30, 2024, and was subsequently extended.
• Sylebra The Pure Plastic Term Loan Facility: On May 8, 2023, the Company entered into a $40.0 million term loan facility (the Term Loan Facility) pursuant to the term loan credit agreement (as amended, the Term Loan Credit Agreement) dated as of May 8, 2023, among the Guarantors and Pure Plastic LLC (as Lender, Administrative Agent, and Security Agent), which matures on December 31, 2025.
• Sylebra Green Convertible Notes: On August 24, 2023, the Company completed the private offering of $250.0 million total aggregate principal amount of 7.25% Green Convertible Senior Notes due 2030 (the Convertible Notes).
• Sylebra Dan Gibson Independent Consultant Agreement: On September 28, 2023, the Audit Committee approved the engagement of Dan Gibson, a principal at Sylebra Capital, as an independent contractor to assist with the Companys negotiations for a waiver and amendment to the Amended Indenture of Trust, dated as of October 1, 2020 between Southern Ohio Port Authority (the Issuer) and UMB Bank, N.A., as trustee (Trustee) on behalf of the holders of the $249,500,000 bonds used to construct PureCycles flagship commercial scale production facility in Ironton, Ohio (the Ironton Facility).
• Milliken Agreements: In June 2023, PureCycle and Milliken & Company, Mr. Jacobys employer, executed a five-year offtake agreement for annual volume of up to 1,000,000 pounds of the Companys ultra-pure recycled (UPR) resin from the Augusta Facility, including a 1,500-pound sample from the Ironton Facility.

Stakeholder Impact

• Shareholders: The proxy statement provides information necessary for shareholders to make informed decisions regarding voting on key proposals.
• Employees: The document outlines executive compensation and benefits, which can impact employee morale and motivation.
• Customers: The offtake agreement with Milliken & Company ensures a market for PureCycle's UPR resin.
• Creditors: The company's debt facilities with Sylebra Capital impact its financial stability and ability to meet its obligations.

Next Steps

• Shareholders are encouraged to vote on the proposals outlined in the proxy statement.
• The company will announce preliminary voting results at the annual meeting and publish final results in a Current Report on Form 8-K.
• Shareholders may submit proposals for inclusion in the 2025 proxy statement by November 28, 2024.

Key Dates

Keywords

annual meeting, proxy statement, directors, executive compensation, corporate governance, related party transactions, Sylebra Capital, Milliken, Grant Thornton, stock ownership, risk oversight, UPR resin, recycling, PureCycle Technologies