NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 29, 1997
To the Shareholders:
Please take notice that the Annual Meeting of the Shareholders of EMCON, a
California corporation (the "Company"), will be held on May 29, 1997, at 3:00
p.m. local time, in the Syracuse Room of the Holiday Inn Select, 1221 Chess
Drive, Foster City, California, for the following purposes:
1. To elect seven (7) directors for the ensuing year.
2. To consider, approve and ratify the appointment of Ernst & Young LLP
as the Company's independent auditors.
3. To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on March 31, 1997 are
entitled to notice of, and vote at, this meeting and any continuations or
adjournments thereof.
By Order of the Board of Directors
R. MICHAEL MOMBOISSE
Chief Financial Officer,
Vice President - Legal and Secretary
San Mateo, California
April 25, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE RETURN EVELOPE SO THAT YOUR STOCK
MAY BE REPRESENTED AT THE MEETING.
1
<PAGE>
PROXY STATEMENT
1997 ANNUAL MEETING OF SHAREHOLDERS
OF
EMCON
400 South El Camino Real
Suite 1200
San Mateo, California 94402
(415) 375-1522
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of EMCON, a California corporation (the "Company" or
"EMCON"), of Proxies for use at its Annual Meeting of Shareholders to be held on
May 29, 1997, or any adjournment thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting. This Proxy Statement and accompanying
Proxy are first being sent to Shareholders on or about April 26, 1997.
SOLICITATION AND VOTING OF PROXIES
All shares represented by valid Proxies received prior to the meeting will
be voted and, where a shareholder specifies by means of the Proxy a choice with
respect to any matter to be acted upon, the shares will be voted in accordance
with the specifications so made. If no instructions are given on the executed
Proxy, the Proxy will be voted in favor of the proposals described. A
shareholder who signs and returns a Proxy in proper form will have the power to
revoke it at any time before it is voted. A Proxy may be revoked by filing with
the Secretary of the Company a written revocation or duly executed Proxy bearing
a later date, or by appearing at the meeting and electing to vote in person.
The voting securities of the Company entitled to vote at the meeting
consist of shares of Common Stock. Only shareholders of record at the close of
business on March 31, 1997 are entitled to notice of and to vote at the Annual
Meeting. The Company's Bylaws provide that a majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum for the
transaction of business at the meeting. On March 31, 1997, there were 8,543,012
shares of Common Stock issued and outstanding. Each share of Common Stock is
entitled to one vote.
The cost of soliciting Proxies will be borne by the Company. It is
contemplated that Proxies will be solicited principally through the mail, but
directors, officers and employees of the Company may, without additional
compensation, solicit Proxies, personally or by telephone, telegraph or letter.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information as of February 28, 1997, regarding
the ownership of the Common Stock of the Company by (i) all persons who, to the
knowledge of the Company, were the beneficial owners of 5% or more of the
outstanding shares of Common Stock of the Company, (ii) each director and
director nominee of the Company, (iii) the Chief Executive Officer and the four
other most highly compensated executive officers of the Company as of December
31, 1996, whose salary and bonus for the year ended December 31, 1996 exceeded
$100,000, and (iv) all executive officers and directors of the Company as a
group.
<TABLE>
<CAPTION>
Shares Owned(1)
Name Number of Shares Percent
<S> <C> <C>
Grace & White, Inc.(2) 906,000 10.6%
515 Madison Avenue, Suite 1700, New York, NY 10022
Ryback Management Corporation(3) 815,400 9.5%
7711 Carondelet Avenue, Suite 700, St. Louis, MO 63105
T. Rowe Price Associates, Inc.(4) 600,000 7.0%
100 E. Pratt Street, Baltimore, MD 21202
Dimensional Fund Advisors, Inc. (5) 507,400 5.9%
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401
Franklin Advisory Services, Inc. (6) 488,500 5.7%
777 Mariners Island Blvd., San Mateo, CA 94403
Donald R. Andres(7)(15) 226,993 2.7%
Eugene M. Herson(8)(15)(16) 168,488 1.9%
Richard A. Peluso(9) (15) 104,993 1.2%
R. Michael Momboisse(8)(15)(16) 52,473 *
Peter Vardy(10) (15) 21,000 *
Peter W. Clifford (11) (15) 17,615 *
Douglas P. Crane(12)(15) 15,000 *
Jack M. Marzluft(13)(15) 9,800 *
Donald R. Kerstetter(14) (15) 6,000 *
All executive officers and directors as a group (9 persons)(15)(16) 622,362 7.1%
_____________________
* Represents less than 1%.
</TABLE>
(1) Except as indicated, the persons named in the table above 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 to the information contained in the footnotes to this table.
(2) As reported in a Schedule 13G filed by Grace & White, Inc. ("G&W").
Includes 20,000 shares as to which G&W has sole voting and dispositive
power and 886,000 shares as to which G&W has sole voting power only.
3
<PAGE>
(3) As reported in a Schedule 13G filed by Ryback Management Corporation
("Ryback"), a company registered under the Investment Advisors Act of 1940.
Consists of 117,500 shares managed by Ryback and 697,900 shares held of
record by Linner Growth Fund.
(4) As reported in a Schedule 13G filed jointly by T. Rowe Price Associates,
Inc. ("Price Associates") and T. Rowe Price Small Cap Value Fund, Inc.
("Price Small Cap Value"). Consists of shares owned by Price Small Cap
Value for which Price Associates serves as investment adviser with power to
direct the disposition of the shares. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the beneficial owner of
such securities. Price Small Cap Value has sole power to vote all 600,000
of the shares.
(5) As reported in a Schedule 13G filed by Dimensional Fund Advisors Inc.
("DFA"). Includes 72,150 shares and 90,900 shares held by DFA Investment
Dimensions Group Inc. and the DFA Investment Trust Company, each an
affiliate of DFA.
(6) As reported in a Schedule 13G filed jointly by Franklin Resources, Inc.
("FRI"), Charles B. Johnson, Rupert H. Johnson and Franklin Advisory
Services, Inc. Consists of shares held in accounts that are managed by
direct and indirect investment advisory subsidiaries of FRI pursuant to
contracts that give such subsidiaries sole voting and investment power with
respect to such shares. Charles B. Johnson and Rupert H. Johnson are
principal shareholders of FRI.
(7) The business address for Mr. Andres is 1921 Ringwood Avenue, San Jose,
California 95131.
(8) The business address for Messrs. Herson and Momboisse is 400 S. El Camino
Real, Ste. 1200, San Mateo, California 94402.
(9) The business address for Mr. Peluso is One International Plaza, Suite 700,
Mahwah, New Jersey 07495.
(10) The business address for Mr. Vardy is 333 W. Wacker Drive, Ste. 700,
Chicago, Illinois 60606.
(11) The business address for Mr. Clifford is 2035 Financial Way, Glendora,
California 91741.
(12) The business address for Mr. Crane is 1720 Avenida del Mundo, Coronado,
California 92118.
(13) The business address for Mr. Marzluft is 185 Front Street, Danville,
California 94526.
(14) The business address for Mr. Kerstetter is 28495 Granville Rd., Trappe,
Maryland 21673.
(15) Includes the following number of shares of the Company's Common Stock
subject to outstanding options which are exercisable within 60 days of
February 28, 1997: Donald R. Andres, 17,625; Eugene M. Herson, 132,500;
Richard A. Peluso, 22,500; R. Michael Momboisse, 47,000; Peter Vardy,
4,000; Peter Clifford, 17,615; Douglas P. Crane, 6,000; Jack M. Marzluft,
6,000; Donald R. Kerstetter, 4,000; and all executive officers and
directors as a group, 253,012.
(16) Includes shares of the Company's Common Stock beneficially owned and held
in trust.
4
<PAGE>
ELECTION OF DIRECTORS
Seven (7) directors are to be elected at the Annual Shareholders Meeting.
Each nominee will hold office until the next annual meeting of shareholders or
until his successor is elected and qualified, unless he resigns or his office
becomes vacant by death, removal, or other cause in accordance with the Bylaws
of the Company. Management's nominees for election to the office of director and
certain information with respect to their age and background, are set forth
below.
If a quorum is present and voting, the seven (7) nominees receiving the
highest number of votes will be elected directors. Abstentions will have no
effect on the election.
Management knows of no reason why any nominee should be unable or unwilling
to serve. However, if any nominee(s) should for any reason be unable or
unwilling to serve, the proxies will be voted for such substitute nominees as
management may designate. All of the nominees listed below were approved by the
Nominating Committee of the Board of Directors:
Director
Nominee Age Since
________________________________________________
Douglas P. Crane.............. 68 1992
Eugene M. Herson........... 54 1985
Donald R. Andres............ 59 1995
Richard A. Peluso............. 51 1996
Jack M. Marzluft.............. 65 1985
Peter Vardy.................... 66 1994
Donald R. Kerstetter........ 66 1995
EXECUTIVE OFFICERS
The executive officers of the Company as of March 14, 1997, are as
follows:
Name Age Positions with the Company
Douglas P. Crane............68 Chairman of the Board
Eugene M. Herson............54 President, Chief Executive Officer and
Director
R. Michael Momboisse........39 Chief Financial Officer, Vice President -
Legal and Secretary
Richard A. Peluso...........51 Vice President
Donald R. Andres............59 Vice President
Officers serve at the discretion of the Board. There are no family
relationships among directors or executive officers of the Company.
5
<PAGE>
Douglas P. Crane has served as Chairman of the Board since July, 1995 and
as a director of the Company since February 1992. Since February 1989, Mr. Crane
has served as Chairman of CJM Associates, Inc., a management consulting firm.
Mr. Crane currently serves as Chairman of the Board of Trustees of Cogswell
Polytechnical College and as a director with the Foundation for Educational
Achievement.
Eugene M. Herson has served as President and Chief Executive Officer since
October 1994 and as a director since March 1985. From November 1990 through
October 1994, Mr. Herson served in a number of capacities with the Company
including Vice President - Special Operations from April 1993 to October 1994,
Chief Financial Officer from November 1990 through June 1993, and President and
Chief Administrative Officer from February 1991 through March 1993.
R. Michael Momboisse has served as Chief Financial Officer and Vice
President - Legal since July 1993, Secretary since May 1996 and as General
Counsel since joining the Company in April 1991. Prior to that time, Mr.
Momboisse was an attorney in the Corporate Department of the law firm of Ware &
Freidenrich, a Professional Corporation.
Richard A. Peluso has served as a Vice President of EMCON since the
Company's acquisition of Wehran Envirotech, Inc. ("Wehran") in April 1994. Mr.
Peluso also serves as Vice President in charge of EMCON's EOC Division, EMCON's
wholly-owned operations and construction subsidiary. From June 1972 to April
1994, Mr. Peluso served as a Senior Vice President of Wehran.
Donald R. Andres has been employed by EMCON for 23 years and has served as
a Vice President, Regional Vice President or Senior Vice President since 1973
and as a director since May 1995. Mr. Andres currently serves as a Vice
President in charge of the Southwest Area of the Company's Professional Services
Division. Mr. Andres also served as a director on the EMCON Board from September
1976 through May 1993.
Donald R. Kerstetter has served as a director of the Company since February
1995 and as President of ET Environmental Corporation, EMCON's 50/50 joint
venture with Turner Construction Company ("Turner") since May 1994. Mr.
Kerstetter retired in 1996 from his position as an Executive Vice President of
Turner, where he had served as an officer since March 1956.
Jack M. Marzluft, CPA has served as a director of the Company since March
1985. Since 1984, Mr. Marzluft has been President of Marzluft & Giles, an
Accountancy Corporation, a certified public accounting firm. Mr. Marzluft
currently serves as a Director with the San Ramon Valley Community Services
Group.
Peter Vardy has served as a director since July 1994. Mr. Vardy has served
as Managing Director of Peter Vardy & Associates, an international environmental
consulting firm, since June 1990. From April 1973 through May 1990, Mr. Vardy
served as a Vice President of Waste Management, Inc./WMX Technologies, Inc., a
waste management services company. Mr. Vardy currently serves on the Board of
Directors of Stericycle, Inc., a major provider of regulated medical waste
management services, headquartered in Deerfield, Illinois.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors has an Executive Committee, an Audit
Committee, a Compensation Committee and a Nominating Committee.
The Executive Committee currently consists of Messrs. Crane, Herson, and
Vardy. Mr. Crane serves as Chairman of the Committee. The functions of the
Executive Committee include implementing general instructions of the Board,
approving interim policy matters and approving capital expenditures. The
Executive Committee held three (3) formal meetings during 1996.
The Audit Committee currently consists of Messrs. Marzluft, Crane and
Kerstetter. The functions of the Audit Committee include recommending the
independent auditors to the Board of Directors; reviewing and approving the
planned scope of the annual audit, proposed fee arrangements and the results of
the annual audit; reviewing the adequacy of accounting and financial controls;
reviewing the independence of the independent auditors; approving all
assignments to be performed by the independent auditors; reviewing transactions
between the Company and its officers and directors and instructing the
independent auditors, as deemed appropriate, to undertake special assignments.
During 1996, the Audit Committee held one formal meeting.
6
<PAGE>
The Compensation Committee currently consists of Messrs. Crane, Kerstetter
and Vardy. The Compensation Committee reviews and recommends salaries, bonuses
and other compensation for corporate executive officers and other members of
senior management. During 1996, the Compensation Committee held one formal
meeting. (See also, COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.)
In February 1997, the Board of Directors appointed a Nominating Committee,
comprised of Messrs. Crane, Herson, and Vardy, for purposes of nominating the
slate of directors for election at the 1997 Annual Shareholders Meeting. The
Nominating Committee will consider nominations recommended by shareholders,
provided recommendations are submitted in writing on or before the date on which
shareholder proposals to be included in the proxy statement for the
shareholders' meeting must be received by the Company.
During 1996, the Board of Directors held five (5) meetings. All directors
attended at least 75% of the aggregate number of meetings held by the Board of
Directors and meetings held by all committees on which each such director served
during his term of office.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table provides certain summary information concerning the
compensation paid or accrued by the Company and its subsidiaries for the fiscal
years ended December 31, 1994 and 1995, and 1996, to or on behalf of the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company whose salary and bonus during the
last fiscal year exceeded $100,000 (hereafter referred to as the "named
executive officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------- -------------------
Restricted
Stock All Other
Award(s) Option Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1) Shares ($)(2)
<S> <C> <C> <C> <C> <C> <C>
Eugene M. Herson ................................... 1996 $203,927 $ 20,000 0 0 $ 14,845(3)
President and Chief Executive Officer .............. 1995 $183,182 0 $ 23,077 50,000 $ 15,710(4)
1994 $148,154 0 0 0 $ 14,416(5)
Donald R. Andres ................................... 1996 $134,480 0 0 0 $ 25,533(3)
Vice President ..................................... 1995 $124,346 0 0 20,000 $ 38,606(4)
1994 $122,380 0 0 0 $ 41,386(5)
Richard A. Peluso .................................. 1996 $161,158 0 $ 7,789 25,000 $ 4,500(3)
Vice President ..................................... 1995 $130,000 0 0 -- 3,895(4)
1994 -- -- -- -- --
R. Michael Momboisse ............................... 1996 $141,057 $ 18,000 0 0 $ 11,839(3)
Chief Financial Officer, ........................... 1995 $130,0000 0 $ 15,577 28,000 $ 18,353(4)
Vice President - Legal and Secretary ............... 1994 $130,000 0 0 2,000 $ 7,528(5)
Peter W. Clifford .................................. 1996 $119,133 $ 10,000 0 0 $ 3,721(3)
Former Vice President-Finance ...................... 1995 -- -- -- -- --
and Administration ................................. 1994 -- -- -- -- --
</TABLE>
(1) Represents the grant of restricted common stock in December 1995, in
lieu of salary (valued at $3.625 per share, which was the closing sales price of
the Company's common stock on the date of grant) vesting over a three year
period as follows: Mr. Herson (6,366 shares); Mr. Peluso (2,149 shares), Mr.
Momboisse (4,297 shares); Mr. Andres (2,061 shares) and Mr. Clifford (1,592
shares). On December 31, 1996 the value of the aggregate unvested restricted
stock holdings of Messrs. Herson (6,366 shares), Peluso (2,149 shares),
Momboisse (4,297 shares), Andres (2,061 shares) and Clifford (1,592 shares) were
$22,281, $7,521, $15,039, $7,213 and $5,572, respectively, based on the closing
sales price of the Company's Common Stock of $3.50 on that date. Dividends will
only be paid on these shares to the extent dividends are paid on the Company's
Common Stock.
7
<PAGE>
(2) The Company maintains a salary continuation plan ("Salary Continuation
Plan") pursuant to which the Company has entered into contracts with Messrs.
Herson, Andres and Momboisse entitling them to receive payments over various
ten-year periods, 60% of which represent salary continuation payments and 40% of
which represent compensation for their agreement not to compete with the
Company. Salary continuation payments are financed through premiums paid by the
Company on life insurance policies whose cash surrender value are used to fund
the Company's obligations under the Salary Continuation component ("Salary
Continuation Premiums"). In general, 50% of the total benefits vest at the end
of the fifth year of participation in the Salary Continuation Plan and the
remainder vests in equal annual installments at the end of years six through
ten. Under the Salary Continuation Plan, Mr. Herson will receive payments
aggregating $3,000 per month from November 2000 to October 2010, plus an
additional $4,500 per month from November 2004 to October 2014. Mr. Momboisse
will receive payments aggregating $1,000 per month from January 2003 to December
2012, plus an additional $2,000 per month from November 2004 to October 2013,
and an additional $ 1,000 per month from November 2006 to October 2015. Mr.
Andres is currently receiving payments of $3,000 per month; which payments will
continue through December 2002. Payments to a participant under the Salary
Continuation Plan commence earlier upon the death or disability of the
participant or upon termination of the participant's employment from the
Company.
(3) Consists of (i) Salary Continuation Premiums on behalf of Messrs.
Herson and Momboisse of $10,345 and $7,500, respectively, (ii) payouts to Mr.
Andres under the Salary Continuation Plan totaling $21,600 and (iii) matching
contributions by the Company under the EMCON Shared Savings and Profits Sharing
Plan (the "401(k) Plan") in the amount of $4,500 on behalf of Mr. Herson; $3,933
on behalf of Mr. Andres; $4,500 on behalf of Mr. Peluso; $4,339 on behalf of Mr.
Momboisse and $3,721 on behalf of Mr. Clifford.
(4) Consists of (i) Salary continuation Premiums on behalf of Messrs.
Herson and Momboisse of $11,210 and $14,000, respectively, (ii) payouts to Mr.
Andres under the Salary Continuation Plan totaling $34,107 and (iii) matching
contributions by the Company under the 401(k) Plan in the amount of $4,500 on
behalf of Mr. Herson; $4,499 on behalf of Mr. Andres; $3,895 on behalf of Mr.
Peluso, $4,353 on behalf of Mr. Momboisse and $2,845 on behalf of Mr. Clifford.
(5) Consists of (i) Salary Continuation Premiums on behalf of Messrs.
Herson and Momboisse of $9,916 and $3,740, respectively, (ii) payouts to Mr.
Andres under the Salary Continuation Plan totaling $36,900 and (iii) matching
contributions by the Company under the 401(k) Plan in the amount of $4,500 on
behalf of Mr. Herson; $4,486 on behalf of Mr. Andres; $3,788 on behalf of Mr.
Momboisse and $2,481 on behalf of Mr. Clifford.
STOCK OPTION EXERCISES AND HOLDINGS
The following table provides information, with respect to the named
executive officers, concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of the fiscal year:
<TABLE>
<CAPTION>
YEAR-END OPTION VALUES(1)
Number of Unexercised Value of Unexercised in-the-Money
Options at 12/31/96 Options at 12/31/96(2)
------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable(3) Unexercisable
- ---- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Eugene M. Herson 132,500 42,500 $0 $0
Donald R. Andres 17,625 15,500 $0 $0
Richard A. Peluso 22,500 35,000 $0 $0
R. Michael Momboisse 47,000 25,000 $0 $0
Peter W. Clifford 8,687 16,563 $0 $0
</TABLE>
(1) None of the named executive officers exercised options in fiscal 1996.
(2) Based on the closing sales price of the Company's common stock on December
31, 1996 of $3.50.
8
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
In November 1995, the Company entered into separation agreements with
Eugene M. Herson and R. Michael Momboisse providing for severance payments equal
to twenty four months of salary and full vesting of any unvested benefits upon
an involuntary termination of employment within eighteen months after a change
of control event. For these purposes, a change of control event is defined as a
change of ownership of the Company where the shareholders of the Company, before
the event, hold less than 70% of the voting stock of the Company after the
event.
Richard A. Peluso is employed as a Vice President of EMCON under an
Employment Agreement, expiring in May 1998 which was entered into as part of the
Company's acquisition of Wehran. During the term of the agreement, Mr. Peluso
may be removed only for cause, although his employment may be reduced to
part-time status after May 1997 at a salary as low as 5% of the annual salary
paid immediately before such change.
See also footnote 2 to the SUMMARY COMPENSATION TABLE for a discussion of
the Salary Continuation Plan and each named executive officer's participation in
such plan.
DIRECTOR COMPENSATION
During the last fiscal year, the Company paid each non-employee director a
retainer of $1,000 per month. In addition, under the Company's 1988 Stock Option
Plan, as amended, each non-employee director is automatically granted, effective
upon completion of each annual shareholders' meeting, a nonqualified stock
option to purchase 2,000 shares of the Company's Common Stock at an exercise
price equal to the fair market value of the Company's Common Stock at the date
of grant, based on the closing price on the NASDAQ National Market. Such options
become fully vested and exercisable on the first day of January following the
date of grant and remain exercisable for a period of ten years from the date of
grant, subject to earlier termination (i) two years after the individual ceases
to be a director or (ii) upon a transfer of control of the Company. No other
directors of the Company are compensated for their services as members of the
Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDE PARTICIPATION
In 1996, Donald R. Kerstetter retired from his position as an Executive
Vice President of Turner. Mr. Kerstetter has served as the President of ET
Environmental Corporation, the Company's 50/50 joint venture with Turner since
May 1994. Mr. Kerstetter has served as a director of the Company since February
1995, and currently serves on the Board's Compensation and Audit Committees.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors, and greater than ten-percent shareholders
are required to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the last fiscal year ended December 31, 1996, (all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with by such persons.)
9
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised of three non-management directors
of the EMCON Board of Directors. The Compensation Committee is responsible for
setting and administering the policies governing annual compensation of the
Company's executive officers (including Mr. Herson, the Company's Chief
Executive Officer), including reviewing compensation levels of members of
management, evaluating the performance of management and related matters.
The salaries for executive officers, including Mr. Herson, are based on a
review of salaries for comparable positions among competing companies of like
size, and are sometimes adjusted annually to take into account cost of living
increases, merit increases and adjustments deemed necessary to continue to
attract and retain highly qualified executive officers.
In 1996 the Company instituted a company-wide Pay-for-Performance program
covering senior technical and management personnel, up to and including the
Chief Executive Officer. Annual bonus compensation under the Pay-for-Performance
program at targeted levels of performance, when granted, has historically
represented between 10% and 30% of total cash compensation. Bonuses are
determined by the Compensation Committee and paid to the Company's officers
based on their individual performance and the performance of the Company as a
whole. Performance is measured for purposes of compensation decisions under the
Pay-for Performance program against goals established by the Committee in
consultation with management prior to the fiscal year based on the Company's
annual operating plan. The financial goals for the Company for fiscal 1996
related to net revenue, net income and cash flow, and the qualitative goals for
the Company included expansion of the Company's operations and enhancement of
shareholder value. In 1996, particular emphasis was placed on measuring
management's success in continuing to streamline the Company's operations and
diversifying the Company's lines of business through the expansion of the
Company's Operations and Construction (EOC) Division.
The Compensation Committee has also consistently implemented a broad equity
ownership program for senior managers, including the grant of stock options and
shares of restricted stock subject to continuing vesting commitments to provide
additional performance-based incentives and to encourage retention of key
personnel. The Company has also implemented a Salary Continuation Plan providing
the opportunity for the payment of extended benefits, subject to a substantially
longer up front vesting period (5-10 years) to further assure retention of a
select group of top management within the Company. (See "EXECUTIVE COMPENSATION
AND OTHER INFORMATION.")
Shareholders should be aware that the factors on which executive
compensation were based in 1996 are not the only factors which may influence the
Company's stock value or overall performance, and that the same factors may not
be the most significant in any succeeding period. In addition, the achievement
of targeted goals by the Company in any period may not be indicative of the
Company's future performance.
Because the Company's share price responds to many variables in addition to
the Company's performance, and because the Compensation Committee's assessment
of executive performance involves a degree of subjectivity, the performance
based compensation awarded to executive officers may not be reflected in the
current or future market price of the Company's Common Stock and may not
precisely reflect the Company's performance as a whole.
The Company is aware of provisions of the Internal Revenue Code and related
regulations of the Internal Revenue Service which restrict deductibility of
executive compensation paid to any of the five most highly compensated executive
officers at the end of any fiscal year to the extent such compensation exceeds
$1,000,000 in any year, and has determined that the Company does not qualify for
an exemption under the statute or proposed regulations. The Committee does not
believe that the Company's compensation is likely, in the aggregate, to exceed
$1,000,000 for any executive officer in any year in the foreseeable future, and
therefore has concluded that no action to qualify such compensation for
deductibility was necessary at this time. The Committee will continue to
evaluate the advisability of qualifying the deductibility of such compensation
in the future.
COMPENSATION COMMITTEE
Douglas P. Crane
Donald R. Kerstetter
Peter Vardy
10
<PAGE>
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage change in
the cumulative total five-year returns on the Company's Common Stock with the
NASDAQ Composite Index and an index of peer companies selected by the Company.
The Company has selected a group of ten other environmental companies providing
services similar to that of EMCON. A list of these companies follows the graph
below.
Legend: + = EMCON * = NASDAQ OTC Index # = Peer Group Index
- -------------------------------------------------------------------------------
$250 |
|
$200 |
|
$150 |
|
$100 | GRAPH
|
$50 |
|
$0 |________________________________________________________________________
Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
_______________________________________________________________________________
Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96
-------- ------- -------- -------- -------- --------
EMCON $100 $47.06 $38.82 $18.24 $18.82 $16.47
NASDAQ Composite
Index $100 $116.38 $133.59 $130.59 $184.67 $227.14
Peer Group Index $100 $98.44 $ 94.74 $ 79.14 $ 84.52 $ 90.63
(1) The companies included in the peer group index are Dames & Moore Inc.
(DM), Ecology & Environment, Inc. (EEI), GZA Geoenvironmental Tech, Inc. (GZEA),
Harding Lawson Associates Grp. (HRDG), Heidemy N.V. (HEIDF), ICF Kaiser
International,Inc. (ICF), TRC Companies, Inc. (TRR), Tetra Tech, Inc. (WATR),
Versar, Inc. (VSR), and Weston (Roy F.), Inc. (WSTNA). Information concerning
the peer group and the NASDAQ Composite Index was supplied to the Company by
Compustat Corporation.
(2) Assumes that $100.00 was invested on December 31, 1991 at the closing
sales price of the Company's Common Stock and in each index, and that all
dividends were reinvested. Returns are measured through the last trading day of
each of the Company's fiscal years. No cash dividends have been declared on the
Company's Common Stock. Shareholder returns over the indicated period should not
be considered indicative of future shareholder returns.
11
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP, independent
auditors, to audit the financial statements of the Company for 1997. Ernst &
Young LLP has served in such capacity since its appointment on May 27, 1987.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they so desire, and
are expected to be available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast at the Annual Meeting
of Shareholders, at which a quorum representing a majority of all outstanding
shares of Common Stock of the Company is present and voting, either in person or
by proxy, is required for approval of this proposal. If the appointment is not
approved, the Board of Directors will consider the selection of other
independent auditors. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR 1997.
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of shareholder intended to be presented at the next annual
meeting of shareholders of the Company (i) must be received by the Company at
its offices at 400 S. El Camino Real, San Mateo, California 94402 no later than
December 31, 1997, and (ii) must satisfy the conditions established by the
Securities and Exchange Commission for shareholder proposals to be included in
the Company Proxy Statement for that meeting
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which management
intends to present or knows that others will present at the meeting is as
hereinabove set forth. If any other matter or matters are properly brought
before the meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of Proxy to vote the Proxy on such
matters in accordance with their best judgment.
By Order of the Board of Directors
R. MICHAEL MOMBOISSE
Chief Financial Officer,
Vice President - Legal and Secretary
Dated: April 25, 1997
13
<PAGE>
PROXY F0R ANNUAL MEETING OF SHAREHOLDERS OF EMCON
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Douglas P. Crane and Eugene M. Herson, and each
of them. As proxies for the under-signed, with full power of substitution, to
vote any and all shares of Common Stock in EMCON (*the "Company"), held by,
owned by or standing in the name of the undersigned on the Company's books on
March 31, 1997, at the Annual Meeting of Shareholders of the Company, to be held
at the Syracuse Room of the Holiday Inn Select, 1121 Chess Drive, Foster City,
California on May 29, 1997 at 3:00 p.m. local time, and at any continuation or
adjournment thereof, with all the powers which the undersigned would possess if
personally present at the meeting.
The undersigned hereby directs and authorizes said proxies, and each of them,.
Or their substitute or substitutes, to vote as herein above specified with
respect to the two proposal on the reverse side, or if no specifications made,
to vote in favor thereof. The shares represented by the Proxy will be voted in
accordance with specification is made in this Proxy.
The undersigned hereby further confers upon such proxies, and each of them, or
their substitute or substitutes, discretionary authority to vote in respect to
all other matters which may properly come before the meeting or any continuation
or adjournment thereof.
The undersigned hereby acknowledges receipt of (a) the Notice of the Annual
Meeting, (b) the accompanying Proxy Statement and (c) an Annual Report of the
Company for the fiscal year ended December 31, 1996 and hereby expressly revokes
any and all proxies heretofore given or executed by the undersigned with respect
to the shares of stock represented by this Proxy, and by filing this Proxy with
the Secretary of the Company, gives notice of such revocation.
(To be signed on the other side)
Please mark
your vote
as this X
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR all WITHHOLD
nominees AUTHORITY to
listed below vote for all
(except as nominees
The Board of Directors marked to listed below
recommends a vote "FOR" the
the following contrary): FOR AGAINST ABSTAIN
1. Election of the following 2. Ratification of the
directors: Nominees: appointment of Ernst & Young
Douglas P. Crane, Eugene LLP, as the Company's
M. Herson, Donald R. independent auditors.
Kerstetter, Jack M.
Marzluft, and Peter Vardy
(INSTRUCTION: To withhold authority to vote WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
for any individual nominee, strike a line PLEASE SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN
through that nominee's name in the list above.) ENVELOPE SO THAT YOUR STOCK MAY BE REPRESENTED AT THE MEETING
Signature(S) Dated
------------------------------------------------ ----------------------------------------------------
</TABLE>
Sign exactly as your name appears on your stock certificate. If shares of stock
stand of record in the names of two or more persons or in the name of husband
and wife, whether joint tenants or otherwise, both or all of such persons should
sign this proxy. If shares of stock are held of record by a corporation, this
Proxy should be executed by the President or Vice President and the Secretary,
and the corporate seal should be affixed thereto. Executors and administrators
or other fiduciaries who execute the above proxy for a deceased shareholder
should give their full title. Please date this Proxy.
