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, 1998
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 March 1, 1999, was $15,912,358. 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
26, 1999 was 8,317,649.
<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, 1998 to read in its entirety as
follows:
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The directors of the company and their ages as of April 23, 1999 are as follows:
Name Age Director Since
Douglas P. Crane (1) (2) (3) ....... 70 1992
Eugene M. Herson (1) ............... 56 1985
Richard A. Peluso................... 53 1996
Peter Vardy (1) (3) ................ 68 1994
Donald R. Kerstetter (2) (3) ....... 67 1995
Dr. Franklin J. Agardy (2) ......... 66 1998
- ----------------------------------------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
Executive Officers
The executive officers of the Company as of March 19, 1999, are as follows:
Name Age Positions with the Company
Eugene M. Herson.............. 56 President, Chief Executive
Officer and Director
R. Michael Momboisse.......... 41 Chief Financial Officer, Vice
President - Legal and Secretary
Richard A. Peluso............. 52 Vice President and Director
Vincent Franceschi............ 40 Vice President
Patrick Gillespie............. 42 Vice President
John Kinsella................. 43 Vice President
Gary McEntee.................. 42 Vice President
Alan Ortiz.................... 44 Vice President
Mark H. Shipps................ 51 Vice President
Officers serve at the discretion of the Board. There are no family relationships
among directors or executive officers of the Company.
<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 Chairman of the Board of 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 and as
a director since May 1996. Mr. Peluso also serves as Vice President in charge of
EMCON's operations and construction division. From June 1972 to April 1994, Mr.
Peluso served as a Senior Vice President of Wehran.
Vincent Franceschi has served as the Area Operations Manager of the
Southwest Area of the Company's Professional Services Division ("PSD") since
April 1998 and a Vice President of the Company since May 1998. From January 1994
to December 1997, Mr. Franceschi served in a variety of roles for Vectra
Technologies, Inc., a nuclear waste technology and services company, including
President and Chief Operating Officer from April 1997 to December 1999 and Vice
President and General Manager from January 1994 to March 1997.
Patrick Gillespie has served as a Vice President of the Company since
May 1998. Mr. Gillespie has served in a number of roles with the Company
including Area Operations Manager of the North region of the PSD since April
1994.
John Kinsella has served as the Area Operations Manager of the
Northeast Areas of the PSD since April 1998 and a Vice President of the Company
since May 1998. From January 1992 to April 1998, Mr. Kinsella served as a Vice
President of SCS Engineers, an environmental consulting firm.
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.
Alan Ortiz has served as the Area Operations Manager of the South Area
of the Professional Services Division since September 1996 and as a Vice
President of the Company since May 1998. From September 1995 to September 1996,
Mr. Ortiz was a Senior Manager with KPMG Peat Marwick Consulting. From October
1991 to August 1995, Mr. Ortiz served as a Vice President of Golder Associates,
a consulting engineering firm.
Mark H. Shipps has served as a Vice President of the Company since May
1998. Mr. Shipps has also served as the President of the Company's wholly-owned
subsidiary, Organic Waste Technologies, Inc. since 1990.
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 also
served as Chairman and Chief Executive Officer of In-Process Technology, Inc., a
manufacturer of specialized air pollution control devices. Dr. Agardy also
served as a member of the board of directors of Thermatrix, 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.
<PAGE>
Donald R. Kerstetter has served as a director of the Company since May,
1994. Mr. Kerstetter 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 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 provider of regulated
medical waste management services.
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, 1996, and 1997, and 1998 to or on behalf of the
Company's Chief Executive Officer and each of the four other highly compensated
executive officers of the Company (hereinafter referred to as the "named
executive officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards
----------------------
Restricted All Other
Stock Shares Compen-
Award(s) Underlying sation
Name and Principal Position Year Salary ($) Bonus ($) ($) Options ($)(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Eugene M. Herson 1998 $240,800 0 0 35,000 $70,345(2)
President and Chief Executive Officer 1997 $200,000 0 0 50,000 $10,345(3)
1996 $203,927 $20,000 0 0 $14,845(4)
R. Michael Momboisse 1998 $205,400 0 0 30,000 $57,500(2)
Chief Financial Officer, 1997 $174,808 0 0 40,000 $7,500(3)
Vice President - Legal and Secretary 1996 $141,057 $18,000 0 0 $11,839(4)
Richard A. Peluso 1998 $180,400 0 0 30,000 $50,000(2)
Vice President 1997 $178,365 0 0 25,000 0
1996 $161,158 0 0 0 $4,500(4)
Mark H. Shipps (5) 1998 $161,212 $30,000 0 25,000 $50,000(2)
Vice President 1997 - - - - -
1996 - - - - -
Patrick Gillespie (5) 1998 $145,400 $50,000 0 10,000 $40,000(2)
Vice President 1997 - - - - -
1996 - - - - -
</TABLE>
(1) The Company maintains a salary continuation plan ("Salary Continuation
Plan") pursuant to which the Company has entered into contracts with
Messrs. Herson, 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, the cash
surrender values of which 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.
Payments to a participant under the Salary Continuation Plan commence
earlier upon the earlier of: (i) the death as permanent disability of the
participant or (ii) termination of the participant's employment from the
Company.
<PAGE>
(2) Consists of (i) Salary Continuation Premiums on behalf of Messrs.
Herson and Momboisse of $10,345 and $7,500 respectively, and (ii)
contribution by the Company on behalf of Messrs. Herson, Momboisse,
Peluso, Shipps and Gillespie under the EMCON Deferred Compensation
Plan (vesting over a four year period) in the amounts of $60,000,
$50,000, $50,000, $50,000 and $40,000, respectively.
(3) Consists of (i) Salary Continuation Premiums on behalf of Messrs.
Herson and Momboisse of $10,345, and $7,500 respectively.
(4) Consists of 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, $4,339 on behalf of Mr. Momboisse, and $4,500
on behalf of Mr. Peluso.
(5) Messrs. Shipps and Gillespie became executive officers of the Company
in May 1998.
Stock Option Grants
The following table contains information concerning the grant of
options to purchase the Company's common stock to the named executive officers
in 1998:
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants in 1998
% of Total Potential Realizable Value at
Options Assumed Annual Rates of Stock
Granted to Exercise Price Appreciation for Option
Options Employees or Base Term (2)
Granted in Fiscal Price Expiration ______________________________
Name (#)(1) Year ($/SH) Date 5% ($) (10% ($)
- ---- ------ ---- ------ ---- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Eugene M. Herson 35,000 6.9% $2.688 11/28/03 $25,900 $57,467
R. Michael Momboisse 30,000 5.9% $2.688 11/28/03 $22,200 $49,232
Richard A. Peluso 30,000 5.9% $2.688 11/28/03 $22,200 $49,232
Mark H. Shipps 25,000 4.9% $2.688 11/28/03 $18,500 $41,026
Patrick Gillespie 10,000 2.0% $2.688 11/28/03 $ 7,400 $16,411
</TABLE>
(1) 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.")
(2) 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. One share of stock purchased at
the exercise price of $2.688 in 1998 would yield profits of $0.74 per share
at 5% appreciation over 5 years or $1.64 per share at 10% appreciation over
the same period.
<PAGE>
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)
Number of Unexercised Value of Unexercised
Options at 12/31/98 In-the-Money Options at 12/31/98
(2)
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Eugene M. Herson 175,000 85,000 0 $17,500
R. Michael Momboisse 75,750 66,250 0 $15,000
Richard A. Peluso 57,500 55,000 0 $15,000
Mark H. Shipps 12,500 67,500 0 $12,500
Patrick Gillespie 10,000 70,000 0 $5,000
- -------------------------------------------
(1) None of the named executive officers exercised options in fiscal 1998.
(2) Based on the closing sales price of the Company's common stock on December
31, 1998 of $3.188.
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 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.
Patrick Gillespie is employed as a Vice President of EMCON under an
Employment Agreement expiring in January 2002. During the term of the agreement,
Mr. Gillespie can be removed only for cause. In the event he is terminated other
than for cause, he will be entitled to severance benefits equal to the full
compensation payable to him over the remaining term of the agreement.
The Company has adopted an internal policy pursuant to which executive
officers of the Company are entitled to receive up to 12 months of severance and
full vesting of any unvested benefits in the event their employment is
involuntarily terminated (including voluntary termination following a demotion
or to avoid a mandatory relocation) following a change of control of the
Company. For these purposes, a change of control 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 1 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 1998
Stock Option Plan (the "1998 Option Plan") each non-employee director is
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. No other directors of the Company are
compensated for their
<PAGE>
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 1998,
Messrs. Crane and Vardy were paid additional consulting fees of $7,000 and
$8,000, respectively.
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, 1998, 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 12. Security Ownership of Certain Beneficial Owners and Management
The following table contains information as of February 28, 1999
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:
Number of Shares
Name and Address Beneficially Owned (1) Percent (1)
- ------------------------------------------------ -------------------------------- -----------------
Franklin Resources, Inc. (2) 1,125,400 13.5%
901 Mariners Island Blvd., 6th Floor
San Mateo, CA 94404
Grace & White, Inc. (3) 1,024,600 12.3%
515 Madison Avenue, Suite 1700
New York, NY 10022
T. Rowe Price Associates, Inc. (4) 715,000 8.6%
100 E. Pratt Street
Baltimore, MD 21202
Dimensional Fund Advisors, Inc. (5) 540,300 6.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Eugene M. Herson (6) 247,854 2.9%
Richard A. Peluso (6) 146,485 1.7%
R. Michael Momboisse (6) 91,288 1.1%
Peter Vardy (6) 25,000 *
Douglas P. Crane (6) 19,000 *
Mark H. Shipps (6) 17,500 *
Patrick Gillespie (6) 16,751 *
Donald R. Kerstetter (6) 10,000 *
Franklin J. Agardy (6) 2,000 *
All executive officers and directors as a group (13 persons) (6) 619,076 7.1%
- -----------------------------------------------
* Represents less than 1%
</TABLE>
<PAGE>
(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, 1999, 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 18, 1999 by
Grace & White, Inc. ("G&W"). Includes 28,000 shares as to which G&W has
sole voting power and $1,024,600 shares as to which G&W has sole
dispositive power.
(4) As reported in a Schedule 13G amendment filed jointly on February 12,
1999 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 715,000 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, 1999 by
Dimensional Fund Advisors Inc. ("Dimensional"). Dimensional, an
investment advisor registered under Section 203 of the Investment
Advisors Act of 1940, furnishes investment advice to four investment
companies registered under the Investment Company Act of 1940, and
services as investment manager to certain other investment vehicles,
including commingled group trusts. (These investment companies and
investment vehicles are the "Portfolios"). In its role as investment
advisor and investment manager, Dimensional possesses both voting and
investment power over the EMCON shares owned by the Portfolios. All such
securities are owned by the Portfolios, and Dimensional disclaims
beneficial ownership of such securities.
(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, 1999: Eugene M. Herson, 187,500; Richard A. Peluso, 63,750;
R. Michael Momboisse, 85,750; Peter Vardy, 8,000; Mark H. Shipps, 17,500;
Patrick Gillespie, 15,000; Douglas P. Crane, 10,000; Donald R.
Kerstetter, 8,000; Franklin J. Agardy, 2,000; and all executive officers
and directors as a group 423,750.
Item 13. Certain Relationships and Related Transactions
Not applicable
<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: April 28, 1999 EMCON
By: /s/ R. Michael Momboisse
R. Michael Momboisse
Chief Financial Officer, Vice President -
Legal and Secretary6
