UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-16225
EMCON
(Exact name of Registrant as specified in its charter)
California 94-1738964
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
400 South El Camino Real, Suite 1200
San Mateo, California 94402
(Address, of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (650) 375-1522
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock of the Registrant held by
non-affiliates of the Registrant, based on the closing price of the Registrant's
Common Stock as quoted by the National Association of Securities Dealers'
Automated Quotation System on February 28, 1998, was $24,794,995 Shares of
Common Stock held by each officer and director and by each person who owns 5% or
more of the outstanding Common Stock have been excluded in that such persons may
be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of shares of the Registrant's Common Stock outstanding as of
February 28, 1998, was 8,574,839.
<PAGE>
FORM 10-K/A
AMENDMENT NO. 1 TO FORM 10-K
The undersigned registrant hereby amends Part III of its Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 to read in its entirety as
follows:
PART III
Item 10. Directors and Executive Officers of the Registrant
The directors of the Company and their ages as of March 14, 1998 are as follows:
Name Age Director Since
Douglas P. Crane (1)........................ 69 1992
Eugene M. Herson............................ 55 1985
Richard A. Peluso........................... 52 1996
Peter Vardy (2)............................. 67 1994
Donald R. Kerstetter (1) (2)................ 66 1995
Dr. Franklin J. Agardy...................... 65 1998
- --------------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
The executive officers of the Company as of March 14, 1998 were as follows:
Name Age Positions With the Registrant
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
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
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<PAGE>
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. Mr. Andres served as a Vice President in charge of the Southwest Area of
the Company's Professional Services Division from May 1995 through March 1998.
Mr. Andres also served as a member of the EMCON Board of Directors from
September 1976 through May 1993 and from May 1995 through March 1998.
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, 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 served as a director of the Company since
May 1998. 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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.
Item 11. Executive Compensation
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"):
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards
Restricted Shares All Other
Stock Awards Underlying Compensation
Name and Principal Position Year Salary Bonus (1) Options (2)
- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Eugene M. Herson 1997 $200,000 0 0 50,000 $10,345(3)
President and Chief Executive 1996 $203,927 $20,000 0 0 $14,845(4)
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 $7,471 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 $ 7,790 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 $15,566 28,000 $18,353(5)
and Secretary
- -------------------------------------
Gary O. McEntee (6) 1997 $137,609 $ 5,000 0 45,000 $24,359(3)
Vice President
- ---------------------------------------------------------------
</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);
and Mr. Momboisse (4,297 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 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 payment 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
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.
4
<PAGE>
Option Grants
The following table sets forth information concerning grants of options to
purchase the Company's Common Stock made during the year ended December 31, 1997
to the named executive officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants in Fiscal 1997
% of Total Potential Realizable Value
Number of Options at Assumed Annual Rates
Shares Granted to of Stock Price
Underlying Employees Appreciation for
Options in Fiscal Exercise Expiration Option Term (1)
--------------------------
Name Granted (2) Year Price Date 5% 10%
--------------------------
<S> <C> <C> <C> <C> <C> <C>
Eugene M. Herson 50,000 3.9% $3.25 2/21/02 $48,349 $106,839
Donald R. Andres -- -- -- -- -- --
Richard A. Peluso 25,000 2.0% $3.25 2/21/02 $24,175 $53,420
R. Michael Momboisse 40,000 3.1% $3.25 2/21/02 $38,679 $85,471
Gary O. McEntee 20,000 1.6% $3.25 2/21/02 $19,340 $42,736
25,000 2.0% $5.00 12/29/02 $34,535 $76,314
- --------------------------
</TABLE>
(1) Potential gains are net of exercise price, but before taxes
associated with exercise. These amounts represent certain assumed
rates of appreciation only, based on the Securities and Exchange
Commission rules. Actual gains, if any, on stock option exercises are
dependent on the future performance of the common stock, overall
market conditions and the option-holders' continued employment through
the vesting period. The amounts reflected in this table may not
necessarily be achieved.
(2) The options become exercisable in four equal annual installments
commencing on the first anniversary of the date of grant, so long as
employment with the Company or one of its subsidiaries continues. The
Board of Directors retains discretion to modify the terms, including
the exercise price, of outstanding options. In that regard, in the
event of a change of control of the Company, the Board, in its sole
discretion, may either accelerate the vesting of outstanding options
or provide for the assumption or substitution of such options by the
successor company. (See also "Employment Contracts and Termination of
Employment Arrangements.")
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:
<TABLE>
<CAPTION>
YEAR-END OPTION VALUES (1)
Shares Underlying Unexercised Value of Unexercised In-the-Money
Options at December 31, 1997 Options at December 31, 1997 (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 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.
5
<PAGE>
Employment Contracts and Termination of Employment Agreements
The Company has entered into agreements with Eugene M. Herson and
R. Michael Momboisse providing for severance payments equal to 24 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 18 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 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 (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 control of the
Company. The 1988 Option Plan expired at the end of 1997, and in its place the
Company has adopted the 1998 Stock Option Plan, pursuant to which non-employee
directors will receive similar automatic option grants. 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 Insider Participation
Donald R. Kerstetter, a member of the Compensation Committee, served
as President of ET Environmental Corporation ("ET"), the Company's 50/50 joint
venture with Turner Construction Company, until December 1997. Mr. Kerstetter
currently serves as a director of ET.
Item 12. 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) each named executive officer, and
(iv) all executive officers and directors of the Company as a group:
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<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Name and Address Beneficially Owned (1) Percent (1)
------------------------------------------------------------- --------------------------- -------------------
<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%
* Represents less than 1%
</TABLE>
(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.
(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.
7
<PAGE>
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.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to Item 11 of
this report under the caption "Compensation Committee Interlocks and Insider
Participation."
8
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: June 8, 1998 EMCON
By: \o\R. Michael Momboisse
-----------------------------------------
R. Michael Momboisse
Chief Financial Officer, Vice President -
Legal and Secretary
9
