<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Emcon
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
EMCON
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 28, 1998
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 28, 1998, at 3:00
p.m. local time, at the Company's regional office located at 1921 Ringwood
Avenue, San Jose, California for the following purposes:
1. To elect six (6) directors for the ensuing year.
2. To consider, approve and ratify the adoption of the Company's 1998 Stock
Option Plan.
3. To consider, approve and ratify the appointment of Ernst & Young LLP as
the Company's independent auditors.
4. To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on March 31, 1998 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 23, 1998
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 ENVELOPE SO THAT YOUR STOCK
MAY BE REPRESENTED AT THE MEETING.
<PAGE> 3
PROXY STATEMENT
------------------------
1998 ANNUAL MEETING OF SHAREHOLDERS
OF
EMCON
400 SOUTH EL CAMINO REAL
SUITE 1200
SAN MATEO, CALIFORNIA 94402
(650) 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 28, 1998, 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 23, 1998.
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, 1998 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, 1998, there were 8,572,862
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.
1
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information as of February 28, 1998, 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, 1997, 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>
Franklin Resources, Inc.(2)......................... 1,125,400 13.1%
901 Mariners Island Blvd. 6th Floor
San Mateo, CA 94404
Grace & White, Inc.(3).............................. 1,003,600 11.7%
515 Madison Avenue, Suite 1700
New York, NY 10022
T. Rowe Price Associates, Inc.(4)................... 600,000 7.0%
100 E. Pratt Street
Baltimore, MD 21202
Dimensional Fund Advisors, Inc.(5).................. 514,900 6.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Donald R. Andres(6)................................. 229,554 2.7%
Eugene M. Herson(6)(7).............................. 196,288 2.3%
Richard A. Peluso(6)................................ 123,711 1.4%
R. Michael Momboisse(6)(7).......................... 73,788 *
Peter Vardy(6)...................................... 23,000 *
Gary O. McEntee(6).................................. 19,799 *
Douglas P. Crane(6)................................. 17,000 *
Jack M. Marzluft(6)................................. 8,300 *
Donald R. Kerstetter(6)............................. 8,000 *
Franklin J. Agardy.................................. 0 *
All executive officers and directors as a group (9
persons)(6)(7).................................... 705,440 7.9%
</TABLE>
- ---------------
* Represents less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options or warrants held by that person
that are currently exercisable, or will become exercisable within 60 days of
February 28, 1998, are deemed outstanding. Such shares, however, are not
deemed outstanding for purposes of computing the percentage ownership of any
other person. Unless otherwise indicated in the footnotes to this table, the
persons and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable.
(2) As reported in a Schedule 13G amendment filed jointly on September 10, 1997
by Franklin Resources, Inc. ("FRI"), Charles B. Johnson, Rupert H. Johnson,
Jr. and Franklin Advisory Services, Inc. Consists of shares held in accounts
that are managed by direct and indirect investment advisory subsidiaries of
FRI ("Advisory Subsidiaries") pursuant to contracts that give such
subsidiaries sole voting and investment power with respect to such shares.
Charles B. Johnson and Rupert H. Johnson, Jr. are principal shareholders of
FRI ("Principal Shareholders"). FRI, the Advisory Subsidiaries and the
Principal Shareholders disclaim any economic interest or beneficial
ownership of the shares.
2
<PAGE> 5
(3) As reported in a Schedule 13G amendment filed on February 17, 1998 by Grace
& White, Inc. ("G&W"). Includes 30,000 shares as to which G&W has sole
voting power and 1,003,600 shares as to which G&W has sole dispositive
power.
(4) As reported in a Schedule 13G amendment filed jointly on February 10, 1998
by T. Rowe Price Associates, Inc. ("Price Associates") and T. Rowe Price
Small Cap Value Fund, Inc. ("Price Small Cap Value"). These securities are
owned by various individual and institutional investors including Price
Small Cap Value (which owns 600,000 shares) which Price Associates serves as
investment adviser with power to direct investments and/or sole power to
vote the securities. 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.
(5) As reported in a Schedule 13G amendment filed on February 11, 1998 by
Dimensional Fund Advisors Inc. ("Dimensional"). Dimensional, a registered
investment advisor, is deemed to have beneficial ownership of 514,900 shares
of EMCON stock as of December 31, 1997, all of which shares are held in
portfolios of DFA Investment Dimensions Group, Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
(6) Includes the following numbers of shares of the Company's Common Stock
subject to outstanding options which are exercisable within 60 days of
February 28, 1998: Donald R. Andres, 23,125; Eugene M. Herson, 160,000;
Richard A. Peluso, 43,125; R. Michael Momboisse, 68,250; Peter Vardy, 6,000;
Gary McEntee, 5,000; Douglas P. Crane, 8,000; Donald R. Kerstetter, 6,000;
Jack M. Marzluft 6,000, and all executive officers and directors as a group,
325,500
(7) Includes shares of the Company's Common Stock beneficially owned and held in
trust.
ELECTION OF DIRECTORS
Six (6) 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.
If a quorum is present and voting, the six (6) 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:
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE AGE SINCE
------- --- --------
<S> <C> <C>
Douglas P. Crane................................... 69 1992
Eugene M. Herson................................... 55 1985
Richard A. Peluso.................................. 52 1996
Peter Vardy........................................ 67 1994
Donald R. Kerstetter............................... 66 1995
Dr. Franklin J. Agardy............................. 65 --
</TABLE>
3
<PAGE> 6
EXECUTIVE OFFICERS
The executive officers of the Company as of March 14, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
<S> <C> <C>
Eugene M. Herson 55 President, Chief Executive Officer and Director
R. Michael Momboisse 40 Chief Financial Officer, Vice President -- Legal and
Secretary
Richard A. Peluso 52 Vice President
Donald R. Andres 59 Vice President
Gary McEntee 42 Vice President
</TABLE>
Officers serve at the discretion of the Board. There are no family
relationships among directors or executive officers of the Company.
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 of the
Company 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, and Secretary since May 1996. Mr. Momboisse
joined the Company as General Counsel in April 1991 and held that position until
December 1997. Prior to joining the Company, 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 division. 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 24 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 will not be standing for reelection
to the Board. 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 member of the EMCON Board of Directors from September 1976 through
May 1993.
Gary O. McEntee has served as Vice President in charge of business
development since February 1997. From April 1994 to February 1997 Mr. McEntee
served in a number of operating roles including manager of the Company's
Northeast and East Consulting areas. Prior to April 1994, Mr. McEntee served as
the Chief Operating Officer of Wehran.
Donald R. Kerstetter has served as a director of the Company since May,
1994. Mr. Kerstetter has served as President of ET Environmental Corporation
("ET"), EMCON's 50/50 joint venture with Turner Construction Company ("Turner")
from May 1994 through December 1997. Mr. Kerstetter continues to serve as a
member of the ET Board of Directors. Mr. Kerstetter retired in 1996 from his
position as an Executive Vice President of Turner, where he was an employee
since 1956 and served as an officer since March 1976.
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,
4
<PAGE> 7
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.
Dr. Franklin J. Agardy has been nominated for election as a director of the
Company. Dr. Agardy has served as President of Forensic Management Associates,
Inc., a forensic management consulting company specializing in environmental
matters since December 1988. From December 1988 to June 1990, Dr. Agardy served
as Chairman and Chief Executive Officer of In-Process Technology, Inc., a
manufacturer of specialized air pollution control devices. Dr. Agardy continued
to serve as a member of the board of directors of Thermatric, Inc., the
successor to In-Process Technology, Inc., until April, 1996. Dr. Agardy is also
a former Professor of Civil and Environmental Engineering at San Jose State
University, where he served from 1962 through September 1971.
Also currently serving on the Company's Board of Directors is Mr. Jack M.
Marzluft. Mr. Marzluft will not be standing for re-election to the Board.
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 seven (7) formal meetings during 1997.
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 1997, the Audit Committee held one formal meeting.
The Compensation Committee currently consists of Messrs. Kerstetter, Vardy
and Marzluft. The Compensation Committee reviews and recommends salaries,
bonuses and other compensation for corporate executive officers and other
members of senior management. During 1997, the Compensation Committee held three
(3) formal meetings. (See COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION.)
In February 1998, 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 1998 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 1997, the Board of Directors held four (4) 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.
5
<PAGE> 8
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, 1995 and 1996, and 1997, 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 (hereinafter referred to as the
"named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
---------------------------
ANNUAL COMPENSATION RESTRICTED SHARES
--------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARD(S)($)(1) OPTIONS COMPENSATION($)(2)
--------------------------- ---- --------- --------- -------------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Eugene M. Herson 1997 $200,000 0 0 50,000 $10,345(3)
President and Chief 1996 $203,927 $20,000 0 0 $14,845(4)
Executive Officer 1995 $183,182 0 $23,077 50,000 $15,710(5)
Donald R. Andres 1997 $135,000 0 0 0 $10,000(3)
Vice President 1996 $134,480 0 0 20,000 $ 3,933(4)
1995 $124,346 0 0 0 $ 4,499(5)
Richard A. Peluso 1997 $178,365 0 0 25,000 0(3)
Vice President 1996 $161,158 0 0 0 $ 4,500(4)
1995 $130,000 0 $ 7,789 0 $ 3,895(5)
R. Michael Momboisse 1997 $174,808 0 0 40,000 $ 7,500(3)
Chief Financial Officer, 1996 $141,057 $18,000 0 0 $11,839(4)
Vice President -- Legal 1995 $130,000 0 $15,577 28,000 $18,353(5)
and Secretary
Gary O. McEntee(6) 1997 $137,609 $ 5,000 0 20,000 $24,359(3)
Vice President 1996 -- -- -- -- --
1995 -- -- -- -- --
</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. Andres (2,061 shares), Mr.
Peluso (2,149 shares), Mr. Momboisse (4,297 shares); and Mr. McEntee (2,148
shares).
(2) The Company maintains a salary continuation plan ("Salary Continuation
Plan") pursuant to which the Company has entered into contracts with Messrs.
Herson, Andres, Momboisse and McEntee 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
values 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 each 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, plus
an additional $1,000 per month from November 2006 to October 2015 and $1,000
per month from July 2007 to June 2016. Mr. McEntee will receive payments
aggregating $1,000 per month from November 2004 to October 2014. 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 earliest to occur of (i) the
death or disability of the participant or (ii) termination of the
participant's employment from the Company.
(3) Consists of (i) Salary Continuation Premiums on behalf of Messrs. Herson,
Momboisse and McEntee of $10,345, $7,500 and $4,359 respectively, and (ii)
contributions by the Company on behalf of
6
<PAGE> 9
Messrs. Andres and McEntee under the EMCON Deferred Compensation Plan in the
amounts of $10,000 (vesting over a one year period) and $20,000 (vesting
over a six year period), respectively.
(4) Consists of (i) Salary Continuation Premiums on behalf of Messrs. Herson and
Momboisse of $10,395 and $7,500, respectively, and (ii) matching
contributions by the Company under the EMCON Shared Savings and Profit
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, and
$4,339 on behalf of Mr. Momboisse.
(5) Consists of (i) Salary Continuation Premiums on behalf of Messrs. Herson and
Momboisse of $11,210 and $14,000, respectively, and (ii) 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, and $4,353 on behalf of Mr. Momboisse.
(6) Mr. McEntee became an executive officer of the Company in February 1997.
STOCK OPTION EXERCISES AND YEAR-END 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:
YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT 12/31/97 MONEY OPTIONS AT 12/31/97(2)
--------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Eugene M. Herson 160,000 65,000 $49,375 $95,625
Donald R. Andres 23,125 10,000 $10,000 $10,000
Richard A. Peluso 43,125 39,375 $71,875 $47,656
R. Michael Momboisse 68,250 43,750 $35,094 $70,031
Gary O. McEntee 5,000 15,000 $ 9,375 $28,125
</TABLE>
- ---------------
(1) None of the named executive officers exercised options in fiscal 1997.
(2) Based on the closing sales price of the Company's common stock on December
31, 1997 of $5.125.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company has entered into 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 a separation from the
Company (other than as a result of a termination for cause) 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.
See also footnote 3 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 (the "1988 Option Plan") each non-employee director has been
automatically granted, effective upon completion of each annual shareholders'
meeting, a nonstatutory 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 of the
Company's shares on the NASDAQ National Market. Such options become fully vested
and exercisable on the first day of January following the date of grant, subject
to the optionee's continued service as a director up to and as of that date, and
remain exercisable until 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
7
<PAGE> 10
control of the Company. The 1988 Option Plan expired at the end of 1997 and in
its place the Company is proposing to adopt the 1998 Stock Option Plan, pursuant
to which non-employee directors will receive similar automatic option grants.
See "APPROVAL OF ADOPTION OF 1998 STOCK OPTION PLAN". No other directors of the
Company are compensated for their services as members of the Board. From time to
time non-employee directors will serve as consultants to the Company with
respect to special matters within their areas of expertise, for which they are
paid consulting fees. During 1997, Messrs. Crane and Vardy were paid additional
consulting fees of $10,000 and $8,000, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDE PARTICIPATION
In 1997, Donald R. Kerstetter retired from his position as an Executive
Vice President of Turner. Mr. Kerstetter serves as a member of the Board of
Directors of ET Environmental Corporation ("ET"), the Company's fifty/fifty
joint venture with Turner Construction Company. 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, 1997, (all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with by such persons.)
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, comprised of three non-management members of
the EMCON Board of Directors, is responsible for setting and administering the
policies governing annual compensation of the Company's executive officers
including reviewing compensation levels of members of management, evaluating the
performance of management and related matters.
The salaries for executive officers, including Mr. Herson, the Company's
Chief Executive Officer, 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, typically represents
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 1997
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 1997, particular emphasis was placed on measuring
management's success in improving profitability, 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 Division.
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<PAGE> 11
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 and a
Deferred Compensation 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 1997 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 bear a direct relationship to 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
Donald R. Kerstetter
Jack Marzluft
Peter Vardy
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<PAGE> 12
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 OTC Index and an index of peer companies selected by the Company. The
Company has selected a group of twelve other environmental companies providing
services similar to that of EMCON. A list of these companies follows the graph
below.
TOTAL RETURN INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ INDEX PEER GROUP
(FISCAL YEAR COVERED) EMCON COMPOSITE INDEX
<S> <C> <C> <C>
DEC-92 100 100 100
DEC-93 82.5 114.8 96.25
DEC-94 38.75 112.21 80.4
DEC-95 40 158.7 85.86
DEC-96 35 195.19 92.06
DEC-97 51.25 239.53 99.87
</TABLE>
(1) The companies included in the peer group index are Arcadis NV (ARCAF), Dames
& Moore Inc. (DM), Ecology & Environment, Inc. (EEI), GZA Geoenvironmental
Tech, Inc. (GZEA), Harding Lawson Associates Grp. (HRDG), ICF Kaiser
International, Inc. (ICF), Tetra Tech, Inc. (WATR), TRC Companies, Inc.
(TRR), 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 S & P Compustat and Nasdaq.
(2) Assumes that $100.00 was invested on December 31, 1992 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.
APPROVAL OF THE COMPANY'S 1998 STOCK OPTION PLAN
At the annual meeting, the shareholders will be asked to approve the EMCON
1998 Stock Option Plan (the "1998 Option Plan"). The 1998 Option Plan was
adopted by the Board of Directors on February 5, 1998, to become effective upon
the date of its approval by shareholders (the "Effective Date"). The 1998 Option
Plan is intended to replace the Company's 1988 Stock Option Plan, which expired
in January 1998, with a total of 1,558,515 shares still available for grant, but
not granted, at the time of expiration.
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<PAGE> 13
Competition for highly qualified individuals in the Company's industry is
intense. To successfully attract and retain the best possible candidates for
positions of responsibility within the Company, the Board of Directors believes
that the Company must continue to offer a competitive equity incentive program.
The Board expects that the 1998 Option Plan will be an important factor in
attracting and retaining the high caliber employees, directors and consultants
essential to the success of the Company and in motivating these individuals to
strive to enhance the Company's growth and profitability. The proposed 1998
Option Plan is intended to ensure that the Company will continue to have
available a reasonable number of shares to meet these goals. It authorizes the
issuance of up to 1,000,000 shares of the Company's Common Stock (subject to
adjustment for certain changes in the capital structure of the Company).
The 1998 Option Plan is also designed to preserve the Company's ability to
deduct in full for federal income tax purposes the compensation recognized by
its executive officers in connection with options granted under the plan.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
sets a limit of $1 million on the amount of compensation paid to each of the
Company's chief executive officer and four other most highly compensated
executive officers that the Company may deduct as an expense for federal income
tax purposes. In combination with other types of compensation received by these
employees, it is possible that their option-related compensation could exceed
this limit in a particular year. However, Section 162(m) exempts certain
"performance-based compensation" from this limit. To permit compensation
attributable to options granted under the 1998 Option Plan to qualify as
performance-based compensation, the 1998 Option Plan limits the number of shares
for which options may be granted in any fiscal year to any employee, including
the Company's executive officers, to a maximum of 125,000. This grant limit is
subject to appropriate adjustment in the event of certain changes in the
Company's capital structure.
SUMMARY OF THE 1998 OPTION PLAN
The following summary of the 1998 Option Plan is qualified in its entirety
by the specific language of the 1998 Option Plan, a copy of which is available
to any shareholder upon request.
General. The purpose of the 1998 Option Plan is to advance the interests of
the Company and its shareholders by providing an incentive to attract, retain
and reward the Company's employees, directors and consultants and by motivating
such persons to contribute to the Company's growth and profitability. The 1998
Option Plan provides for the grant to employees of incentive stock options
within the meaning of Section 422 of the Code and the grant to employees,
directors and consultants of nonstatutory stock options.
Shares Subject to Plan. A maximum of 1,000,000 of the authorized but
unissued or reacquired shares of Common Stock of the Company may be issued under
the 1998 Option Plan. However, in order to comply with the requirements of the
exemption under Section 162(m) of the Code for performance-based compensation,
the 1998 Option Plan provides that no employee may be granted in any fiscal year
of the Company options which in the aggregate are for more than 125,000 shares
(the "Grant Limit"). Appropriate adjustments will be made to the shares subject
to the 1998 Option Plan, the Grant Limit, the automatic outside director grants
discussed below and to outstanding options upon any stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or similar
change in the capital structure of the Company. If any outstanding option
expires, terminates or is canceled, or if shares acquired pursuant to an option
are repurchased by the Company at their original exercise price, the expired or
repurchased shares are returned to the 1998 Option Plan and again become
available for grant.
Administration. The 1998 Option Plan will be administered by the Board of
Directors or a duly appointed committee of the Board, which, in the case of
options intended to qualify for the performance-based compensation exemption
under Section 162(m) of the Code, must be comprised solely of two or more
"outside directors" within the meaning of Section 162(m). (For purposes of this
discussion, the "Board" shall refer to either the Board of Directors or such
committee thereof.) Subject to the provisions of the 1998 Option Plan, the Board
determines the persons to whom options are to be granted, the number of shares
to be covered by each option, whether an option is to be an incentive stock
option or a nonstatutory stock option, the timing and terms of exercisability
and vesting of each option, the purchase price and the type of consideration to
be paid to the Company upon the exercise of each option, the time of expiration
of each option, and all other
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<PAGE> 14
terms and conditions of the options. The Board may amend, modify, extend,
cancel, renew, or grant a new option in substitution for, any option, waive any
restrictions or conditions applicable to any option, and accelerate, continue,
extend or defer the exercisability or vesting of any option, including with
respect to the period following an optionee's termination of service with the
Company. The 1998 Option Plan provides, subject to certain limitations, for
indemnification by the Company of any director, officer or employee against all
reasonable expenses, including attorneys' fees, incurred in connection with any
legal action arising from such person's action or failure to act in
administering the plan The Board will interpret the 1998 Option Plan and options
granted thereunder, and all determinations of the Board will be final and
binding on all persons having an interest in the 1998 Option Plan or any option.
Eligibility. Options may be granted under the 1998 Option Plan to employees
, directors and consultants of the Company or of any present or future parent or
subsidiary corporations of the Company. In addition, options may be granted to
prospective service providers in connection with written employment offers,
provided that no shares may be purchased prior to such person's commencement of
service. As of February 28, 1998, the Company had approximately 978 employees,
including five executive officers, seven directors and no consultants who would
be eligible under the 1998 Option Plan. While any eligible person may be granted
a nonstatutory stock option, only employees may be granted incentive stock
options.
Terms and Conditions of Options. Each option granted under the 1998 Option
Plan is evidenced by a written agreement between the Company and the optionee
specifying the number of shares subject to the option and the other terms and
conditions of the option, consistent with the requirements of the plan. The
exercise price of each incentive stock option may not be less than the fair
market value of a share of the Common Stock on the date of grant, while the
exercise price of a nonstatutory stock option may not be less than 85% of such
fair market value. However, any incentive stock option granted to a person who
at the time of grant owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company (a "Ten Percent Shareholder") must have an exercise
price equal to at least 110% of the fair market value of a share of Common Stock
on the date of grant. As of February 28, 1998, the closing price of the
Company's Common Stock, as reported on the Nasdaq National Market, was $5.00 per
share.
The 1998 Option Plan provides that the option exercise price may be paid in
cash, by check, or in cash equivalent, by the assignment of the proceeds of a
sale or loan with respect to some or all of the shares being acquired upon the
exercise of the option, to the extent legally permitted, by tender of shares of
Common Stock owned by the optionee having a fair market value not less than the
exercise price or by means of a promissory note if the optionee is an employee,
by such other lawful consideration as approved by the Board, or by any
combination of these. Nevertheless, the Board may restrict the forms of payment
permitted in connection with any option grant. No option may be exercised unless
the optionee has made adequate provision for federal, state, local and foreign
taxes, if any, relating to the exercise of the option.
Options will become vested and exercisable at such times or upon such
events and subject to such terms, conditions, performance criteria or
restrictions as specified by the Board. The maximum term of an incentive stock
option granted under the 1998 Option Plan is ten years, provided that an
incentive stock option granted to a Ten Percent Shareholder must have a term not
exceeding five years. However, in general, the Board currently intends to limit
the terms of all options granted under the 1998 Option Plan to a period of five
years. An option generally will remain exercisable for one month following the
optionee's termination of service, provided that if termination results from the
optionee's death or disability, the option generally will remain exercisable for
six months. In any event the option must be exercised no later than its
expiration date. The Board, in its discretion, may provide for longer
post-service exercise periods in particular instances.
Incentive stock options are nontransferable by the optionee other than by
will or by the laws of descent and distribution, and are exercisable during the
optionee's lifetime only by the optionee. Nonstatutory stock options granted
under the 1998 Option Plan may be assigned or transferred to the extent
permitted by the Board and set forth in the optionee's option agreement.
Automatic Grant of Outside Director Options. In addition to authorizing the
Board to grant options to employees, directors and consultants on a
discretionary basis, the 1998 Option Plan provides for the automatic
12
<PAGE> 15
grant of options to outside directors. For purposes of the 1998 Option Plan, an
"outside director" is a member of the Board of Directors who, at the time of
grant, is neither an employee of the Company or any parent or subsidiary thereof
nor an individual who performs services (as an employee, consultant, director or
otherwise) to any entity that beneficially owns more than five percent of the
total combined voting power of all classes of stock of the Company. Upon the
completion of each annual meeting of the shareholders on or after the Effective
Date, each person then serving as an outside director will be granted
automatically an option to purchase 2,000 shares of Common Stock (an "Outside
Director Option"). The per-share exercise price of each Outside Director Option
will equal the fair market value of a share of Common Stock on the date of
grant, generally the closing price reported on the Nasdaq National Market.
Generally, each Outside Director Option will become exercisable in full on
January 1 immediately following the date of grant and, unless earlier terminated
under the terms of the 1998 Option Plan, will expire five years after the date
of grant. Outside Director Options will remain exercisable for two years
following the director's termination of service for any reason, provided that in
no event may the option be exercised after its expiration date.
Change in Control. The 1998 Option Plan defines a "Change in Control" of
the Company as any of the following events upon which the shareholders of the
Company immediately before the event do not retain immediately after the event,
in substantially the same proportions as their ownership of shares of the
Company's voting stock immediately before the event, direct or indirect
beneficial ownership of more than 50% of the total combined voting power of the
stock of the Company or its successor: (i) a sale or exchange by the
shareholders in a single or series of related transactions of more than 50% of
the Company's voting stock; (ii) a merger or consolidation in which the Company
is a party; (iii) the sale, exchange or transfer of all or substantially all of
the assets of the Company; or (iv) a liquidation or dissolution of the Company.
If a Change in Control occurs, the surviving, continuing, successor or
purchasing corporation or parent corporation thereof may either assume the
Company's rights and obligations under the outstanding options or substitute
substantially equivalent options for such corporation's stock. The 1998 Option
Plan authorizes the Board to provided in any option agreement under the plan
(other than an agreement documenting an Outside Director Option) for
acceleration of the vesting and exercisability of options upon such
circumstances in connection with a Change in Control and to such extent as the
Board determines in its discretion. Each outstanding Outside Director Option
will become exercisable in full automatically upon a Change in Control. To the
extent that the outstanding options are not assumed, replaced or exercised prior
to the Change in Control, they will terminate.
Termination or Amendment. The 1998 Option Plan will continue in effect
until the earlier of its termination by the Board or the date on which all
shares available for issuance under the plan have been issued and all
restrictions on such shares under the terms of the plan and the agreements
evidencing options granted under the plan have lapsed, provided that all
incentive stock options must be granted within ten years of the date on which
the Board adopted the 1998 Option Plan. The Board may terminate or amend the
1998 Option Plan at any time. However, without shareholder approval, the Board
may not amend the 1998 Option Plan to increase the total number of shares of
Common Stock issuable thereunder, change the class of persons eligible to
receive incentive stock options, or effect any other change that would require
shareholder approval under any applicable law, regulation or rule. No
termination or amendment may adversely affect an outstanding option without the
consent of the optionee, unless the amendment is required to preserve an
option's status as an incentive stock option or is necessary to comply with any
applicable law, regulation or rule.
SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide as to the U.S.
federal income tax consequences under current law of participation in the 1998
Option Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.
Incentive Stock Options. An optionee recognizes no taxable income for
regular income tax purposes as a result of the grant or exercise of an incentive
stock option qualifying under Section 422 of the Code. Optionees who do not
dispose of their shares for two years following the date the option was granted
nor within one year following the exercise of the option will normally recognize
a capital gain or loss equal to the difference, if any,
13
<PAGE> 16
between the sale price and the purchase price of the shares. If an optionee
satisfies such holding periods upon a sale of the shares, the Company will not
be entitled to any deduction for federal income tax purposes. If an optionee
disposes of shares within two years after the date of grant or within one year
from the date of exercise (a "disqualifying disposition"), the difference
between the fair market value of the shares on the determination date (see
discussion under "Nonstatutory Stock Options" below) and the option exercise
price (not to exceed the gain realized on the sale if the disposition is a
transaction with respect to which a loss, if sustained, would be recognized)
will be taxed as ordinary income at the time of disposition. Any gain in excess
of that amount will be a capital gain. If a loss is recognized, there will be no
ordinary income, and such loss will be a capital loss. The tax rate applicable
to any capital gain will depend upon a number of factors, including the date on
which the optionee acquired the shares, the optionee's holding period, and the
optionee's ordinary income marginal tax rate. Any ordinary income recognized by
the optionee upon the disqualifying disposition of the shares generally should
be deductible by the Company for federal income tax purposes, except to the
extent such deduction is limited by applicable provisions of the Code or the
regulations thereunder.
The difference between the option exercise price and the fair market value
of the shares on the determination date of an incentive stock option (see
discussion under "Nonstatutory Stock Options" below) is treated as an adjustment
in computing the optionee's alternative minimum taxable income and may be
subject to an alternative minimum tax which is paid if such tax exceeds the
regular tax for the year. Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition, certain basis
adjustments for purposes of computing the alternative minimum taxable income on
a subsequent sale of the shares and certain tax credits which may arise with
respect to optionees subject to the alternative minimum tax.
Nonstatutory Stock Options. Options not designated or qualifying as
incentive stock options will be nonstatutory stock options having no special tax
status. An optionee generally recognizes no taxable income as the result of the
grant of such an option. Upon exercise of a nonstatutory stock option, the
optionee normally recognizes ordinary income in the amount of the difference
between the option exercise price and the fair market value of the shares on the
determination date (as defined below). If the optionee is an employee, such
ordinary income generally is subject to withholding of income and employment
taxes. The "determination date" is the date on which the option is exercised
unless the shares are subject to a substantial risk of forfeiture (as in the
case where an optionee is permitted to exercise an unvested option and receive
unvested shares which, until they vest, are subject to the Company's right to
repurchase them at the original exercise price upon the optionee's termination)
and are not transferable, in which case the determination date is the earlier of
(i) the date on which the shares become transferable or (ii) the date on which
the shares are no longer subject to a substantial risk of forfeiture. If the
determination date is after the exercise date, the optionee may elect, pursuant
to Section 83(b) of the Code, to have the exercise date be the determination
date by filing an election with the Internal Revenue Service no later than 30
days after the date the option is exercised. Upon the sale of stock acquired by
the exercise of a nonstatutory stock option, any gain or loss, based on the
difference between the sale price and the fair market value on the determination
date, will be taxed as capital gain or loss. The tax rate applicable to any
capital gain will depend upon a number of factors, including the date on which
the optionee acquired the shares, the optionee's holding period, and the
optionee's ordinary income marginal tax rate. No tax deduction is available to
the Company with respect to the grant of a nonstatutory stock option or the sale
of the stock acquired pursuant to such grant. The Company generally should be
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee as a result of the exercise of a nonstatutory stock option, except to
the extent such deduction is limited by applicable provisions of the Code or the
regulations thereunder.
NEW PLAN BENEFITS
No options will be granted under the 1998 Option Plan prior to its approval
by the shareholders of the Company. With the exception of the automatic grant of
options to Outside Directors, future grants under the 1998 Option Plan will be
made at the discretion of the Board, and, accordingly, are not yet determinable.
In addition, benefits under the 1998 Option Plan will depend on a number of
factors, including the fair market value of the Company's Common Stock on future
dates and the exercise decisions made by the optionees.
14
<PAGE> 17
Consequently it is not possible to determine the benefits that might be received
by optionees receiving discretionary grants under the 1998 Option Plan. In
fiscal 1998, Outside Director Options exercisable for an aggregate of 8,000
shares of the Company's Common Stock will be granted to the Outside Directors
nominated for election, consisting of Messrs. Crane, Kerstetter, Vardy and
Agardy, under the 1998 Option Plan, assuming the plan is approved by the
shareholders and that each such director standing for reelection at the Annual
Meeting is elected.
VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION
The affirmative vote of a majority of the shares represented and voting at
the Annual Meeting, provided that a quorum is present and that the shares voting
affirmatively constitute at least a majority of a quorum, shall be required to
approve the 1998 Option Plan.
The Board of Directors believes that adoption of the proposed 1998 Option
Plan is in the best interests of the Company and the shareholders for the
reasons stated above. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THE PROPOSAL TO APPROVE THE 1998 OPTION PLAN.
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 1998. 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 1998.
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, 1998, 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 herein
above 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 23, 1998
15
<PAGE> 18
PROXY FOR 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 undersigned, 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, 1998, at the Annual Meeting of Shareholders of the Company, to be
held at the Company's regional office located at 1921 Ringwood Avenue, San
Jose, California on May 28, 1998 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 proposals on the reverse side, or if no specification is
made, to vote in favor thereof. The shares represented by the Proxy will be
voted in accordance with specifications 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 Annual
Meeting, (b) the accompanying Proxy Statement and (c) an Annual Report of the
Company for the fiscal year ended December 31, 1997 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)
FOLD AND DETACH HERE
<PAGE> 19
The Board of Directors recommends a vote "FOR" the following:
WITHHOLD
FOR AUTHORITY
nominees listed to vote for
(except as marked nominees listed
to the contrary): at left
1. Election of the following directors: [ ] [ ]
Nominees: Douglas P. Crane,
Eugene M. Herson, Richard A. Peluso,
Donald R. Kerstetter, Peter Vardy,
and Dr. Franklin J. Agardy
(INSTRUCTION: To withhold authority to vote
for any individual nominee, strike a line
through that nominee's name in the list
above.)
FOR AGAINST ABSTAIN
2. Approval and ratification of the adoption [ ] [ ] [ ]
of the Company's 1998 Stock Option Plan.
3. Ratification of the appointment of [ ] [ ] [ ]
Ernst & Young LLP as the Company's
independent auditors.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND
PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE
REPRESENTED AT THE MEETING.
Signature(s) Date
---------------------------------------- ---------------------
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.
FOLD AND DETACH HERE
