SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
( ) Filed by the Registrant
( ) Filed by a Party other than the Registrant
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by
Rule 14a-b(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to (section mark)240.14a-11(c) or
(section mark)240.14a-12
ENVIRONMENTAL ELEMENTS CORPORATION
(Name of Registrant as Specified In Its Charter)
CLEO P. BRAVER, GENERAL COUNSEL
(Name of Person(s) Filing Proxy Statement If Other Than Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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: *
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
(Set forth the amount on which the filing fee is calculated and state how
it was determined)
( ) Fee previously paid 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>
ENVIRONMENTAL
ELEMENTS
CORPORATION
NOTICE OF
1996 ANNUAL MEETING
AND
PROXY STATEMENT
IMPORTANT:
PLEASE MARK, SIGN, AND DATE YOUR PROXY CARD AND PROMPTLY
RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE>
ENVIRONMENTAL
ELEMENTS
CORPORATION
June 21, 1996
TO OUR STOCKHOLDERS:
You are cordially invited to attend this year's Annual Meeting of
Stockholders, to be held Friday, August 2, 1996 at 9 a.m., at the Environmental
Elements Corporation headquarters in Baltimore, Maryland. Holders of Common
Stock will elect one director for a three-year term and vote on the selection of
auditors.
In order to ensure maximum stockholder representation, I urge each of you,
whether or not you expect to attend the meeting in person, to sign your proxy
and return it promptly in the enclosed envelope.
Sincerely yours,
/s/ E. H. Verdery
E. H. Verdery
President and
Chief Executive Officer
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY, AUGUST 2, 1996
To the Stockholders of Environmental Elements Corporation:
Notice is hereby given that the 1996 Annual Meeting of Stockholders of
Environmental Elements Corporation, a Delaware corporation (the "Company"), will
be held at 9:00 a.m. (Eastern Daylight Time) on Friday, August 2, 1996 at the
offices of the Company, 3700 Koppers Street, Baltimore, Maryland 21227, for the
following purposes:
1. To elect one director for a three-year term and until his
successor is duly elected and qualified.
2. To vote upon a proposal to ratify the appointment of Arthur
Andersen LLP as independent public accountants for the Company's
1997 fiscal year.
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on June 3, 1996,
as the record date for the determination of stockholders entitled to receive
notice of and to vote at the Annual Meeting.
To assure representation of your shares, you are requested, whether or
not you plan to be present at the meeting, to complete, date, sign and return
the accompanying proxy in the enclosed postage prepaid envelope.
If your shares are held of record by a broker, bank, or other nominee
and you wish to vote your shares at the meeting, you must obtain and bring to
the meeting appropriate authorization from the broker, bank, or other nominee
authorizing you as beneficial owner to vote the shares directly.
By Order of the Board of Directors
/s/ John C. Nichols
John C. Nichols
Secretary
Baltimore, Maryland
June 21, 1996
<PAGE>
ENVIRONMENTAL
ELEMENTS
CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of Environmental Elements Corporation (the "Company"). All proxies in
the accompanying form, which are properly executed and duly returned, will be
voted in accordance with the instructions at the Annual Meeting of Stockholders
to be held on Friday, August 2, 1996 at 9:00 a.m., at the principal offices of
the Company, 3700 Koppers Street, Baltimore, Maryland, 21227, for the purposes
set forth in the accompanying Notice of Meeting.
This proxy statement and the enclosed form of proxy will be mailed to
stockholders on or about June 21, 1996.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Company's Common Stock at the close of business
on June 3, 1996 will be entitled to notice of and to vote at the meeting. On
that date there were issued and outstanding 6,902,322 shares of Common Stock,
excluding shares held in the corporate treasury. Each outstanding share of
Common Stock is entitled to one vote on all matters to come before the meeting.
The cost of soliciting proxies will be borne by the Company. In addition to
the use of mails, officers, directors and regular employees of the Company may
solicit proxies personally or by telephone or telegraph. The Company also
intends to reimburse brokerage firms, banks, custodians, nominees, and
fiduciaries for their reasonable out-of-pocket expenses in forwarding proxy
material to their principals.
The holders of a majority of the total shares issued and outstanding, whether
present in person or represented by proxy, will constitute a quorum for the
transaction of business at the meeting. A plurality of the total votes cast in
person or by proxy at the meeting is required for the election of a director.
Abstentions and broker non-votes are counted as present in determining whether
the quorum requirement is satisfied. Abstentions and broker non-votes will not
count as votes for or against a nominee for director. The affirmative vote of a
majority of shares entitled to vote and represented in person or by proxy at the
meeting is required for approval of the appointment of independent public
accountants. Abstentions and broker non-votes have the effect of votes against
such appointment. A broker non-vote occurs when a nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner.
It is important that proxies be returned promptly. Therefore, whether or not
you plan to attend in person, you are urged to execute and return your proxy, to
which no postage need be affixed if mailed in the United States. The proxy may
be revoked at any time before it is exercised by filing with the Secretary of
the Company an instrument revoking such proxy or a duly executed proxy bearing a
later date, or by attending the meeting and voting in person.
-1-
<PAGE>
ITEM 1
ELECTION OF DIRECTORS
The membership of the Company's Board of Directors is classified into three
classes. Each year the directors in one class are elected to serve for a term of
three years. The two directors serving in Class III, F. Bradford Smith and
Raymond A. Mason, were last elected at the Company's 1993 Annual Meeting and
have terms expiring at the 1996 Annual Meeting.
Mr. Mason, a director since 1983, has chosen to not stand for re-election.
The Board of Directors has not, at this time, identified a nominee to fill the
vacancy created by Mr. Mason's decision. If and at such time as the Board
identifies a prospective director, it will appoint that person as a Class III
director for a term expiring at the 1999 Annual Meeting.
In the absence of instructions to the contrary, the shares represented by
properly executed proxies will be voted in favor of the election of Mr. Smith,
who is recommended by the Board of Directors and has consented to be named and
to serve if re-elected. The director elected will hold office until the Annual
Meeting in 1999, or until his respective successor is duly elected and qualify.
If the nominee is unable to serve, an event which management does not
anticipate, the proxies reserve the right to vote for a substitute nominee
determined by them.
Certain information regarding the nominee for election as a director at this
year's Annual Meeting is set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME DURING THE PAST FIVE YEARS SINCE AGE
<S> <C>
F. Bradford Smith Chairman of the Board since October 1, 1995 and, since 1983 54
March 29, 1996, Chief Financial Officer; Chief
Executive Officer of the Company from 1990 through
October 1, 1995; President of the Company from 1988
through October 1, 1995; and Chief Financial Officer of
the Company from 1983 through October, 1990.
</TABLE>
DIRECTORS CONTINUING IN OFFICE
Certain information regarding members of the Board of Directors who are not
standing for election at this year's Annual Meeting is set forth below.
<TABLE>
<CAPTION>
CLASS AND
YEAR IN
PRINCIPAL OCCUPATION DIRECTOR WHICH TERM
NAME DURING THE PAST FIVE YEARS SINCE WILL EXPIRE AGE
<S> <C>
Edward H. Verdery President and Chief Executive Officer of the Company 1995 I 1997 50
since October 1, 1995; Chief Operating Officer and
Executive Vice President of the Com pany from 1993
through October 1, 1995; President of Asea Brown
Boveri's (ABB) Power Plant Control Division from
1991 through 1992, President and Vice President of
several divisions of Combustion Engineering and ABB
from 1981 to 1991.
John C. Nichols Senior Vice President and Secretary of the Company since 1983 I 1997 65
1983; General Counsel of the Company from 1989 through
March, 1994; President and Chief Executive Officer of
Environmental Elements Service Corporation, a subsidiary
of the Company, from December, 1992 through June, 1994.
</TABLE>
(Listing continued on next page) -2-
<PAGE>
<TABLE>
<CAPTION>
CLASS AND
YEAR IN
PRINCIPAL OCCUPATION DIRECTOR WHICH TERM
NAME DURING THE PAST FIVE YEARS SINCE WILL EXPIRE AGE
<S> <C>
Fred Hittman President and Chief Executive Officer of Hittman 1983 I 1997 67
Materials & Medical Components, Inc., a supplier of
hermetic seals and other components to manufacturers
of cardiac pacemakers and other medical implantables.
Richard E. Hug Chairman Emeritus since October 1, 1995; Chairman of the 1983 II 1998 61
Board of the Company from 1988 through October 1, 1995;
President and Chief Executive Officer of the Company
from 1983 through, respectively, 1988 and 1990.
Russell R. Jones Retired; formerly General Manager of Bethlehem Steel 1983 II 1998 72
Company Sparrows Point plant in Baltimore, Maryland.
</TABLE>
Certain Information Regarding the Board of Directors
and Committees of the Board
During the fiscal year ended March 31, 1996, the Board of Directors met nine
times. Each Director attended 85% or more of the combined number of meetings of
the Board of Directors and of any committees of the Board on which such Director
served.
The Board of Directors has an Audit Committee and a Compensation Committee.
Two meetings of the Audit Committee and five meetings of the Compensation
Committee were held during the 1996 fiscal year.
The Audit Committee consists of Messrs. Hittman, Jones, and Mason. The Audit
Committee is charged with reviewing and examining reports of management and of
the Company's independent public accountants; evaluating internal accounting
controls, audit results and financial reporting procedures; recommending the
engagement and continuation of engagement of the Company's independent public
accountants; and meeting with, reviewing and considering recommendations of the
independent public accountants.
The Compensation Committee consists of Messrs. Hittman, Hug, Jones, and
Mason. The Compensation Committee reviews the performance of the principal
officers of the Company; annually reviews and recommends to the Board of
Directors the level of salaries and other compensation for such officers;
periodically reviews the main elements of the Company's incentive compensation
and employee benefit programs; and grants to eligible employees options to
purchase Common Stock of the Company in accordance with the terms of the
Environmental Elements Corporation Employee Stock Option Plan and interprets and
administers the Stock Option Plan.
The Company does not have a Nominating Committee.
Directors who are employees of the Company receive no additional compensation
for services as a director. Directors not so employed (Messrs. Hittman, Hug,
Jones, and Mason) receive an annual retainer of $2,000 and fees of $500 for each
Board meeting attended, with no additional compensation for committee meetings
attended.
-3-
<PAGE>
SECURITY OWNERSHIP
The following table sets forth information, as of June 3, 1996 as to the
beneficial ownership of Common Stock of the Company (including shares which may
be acquired within sixty days of June 3, 1996 pursuant to stock options) of each
director of the Company, the executive officers appearing in the Summary
Compensation Table, all directors and executive officers as a group, and all
persons or entities known to the Company to own five percent of the Company's
Common Stock.
SHARES OF COMMON STOCK PERCENTAGE
NAME OF OWNER BENEFICIALLY OWNED(1) OF CLASS
F. Bradford Smith 1,145,105(2) 16.6%
Richard E. Hug 871,996 12.6%
State of Wisconsin Investment Board 598,200(3) 8.7%
P.O. Box 7842
Madison, Wisconsin 53707
Dimensional Fund Advisors, Inc. 374,000(4) 5.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Raymond A. Mason 203,800 3.0%
Fred Hittman 153,200 2.2%
John C. Nichols 145,009 2.1%
Edward H. Verdery 57,200(5) *
Russell R. Jones 12,500(6) *
All directors and executive officers as a 2,588,810(7) 37.5%
group (7 persons)
(1) Unless otherwise indicated, the address of all directors and executive
officers is 3700 Koppers Street, Baltimore, Maryland 21227. Unless otherwise
indicated, all shares are held with sole voting and sole investment power. The
figures for Messrs. Nichols, Smith and Verdery exclude 13,070, 2,790, and 1,687,
shares, respectively, held for their accounts under the Company's 401(k)
Retirement Savings Plan as of March 31, 1996.
(2) Includes 95,667 shares held by a trust of which Mr. Smith is co-trustee and
beneficiary. Includes 175,000 shares, as to which the officer has sole voting
power, by irrevocable proxy with respect to 100,000 shares and revocable proxy
with respect to 75,000 shares and as to which the officer disclaims beneficial
ownership.
(3) State of Wisconsin Investment Board reported on an amended Schedule 13G
filed on February 2, 1996, that it has sole voting power and sole dispositive
power with respect to 598,200 shares.
(4) Dimensional Fund Advisors, Inc. reported on an amended Schedule 13G filed on
February 7, 1996, that it has sole dispositive power with respect to 374,000
shares and sole voting power with respect to 296,400 shares. Dimensional Fund
Advisors, Inc. ("Dimensional"), a registered investment advisor, is deemed to
have beneficial ownership of 374,000 shares of Environmental Elements
Corporation stock as of December 31, 1995, 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.
(Notes continued on next page)
-4-
<PAGE>
(5) Consists of options to purchase 57,200 shares of Common Stock under the
Stock Option Plan which are exercisable within 60 days of June 3, 1996.
(6) Includes 11,500 shares of Common Stock held by the estate of Margery C.
Jones for which Mr. Jones serves as trustee.
(7) Excludes 17,547 shares represented by vested interests under the Company's
401(k) Retirement Savings Plan. Includes the 257,667 shares described in
footnote 2 and 57,200 shares described in footnote 5.
* Holdings represent less than 1% of the stock outstanding.
Pursuant to a restrictive stock agreement between the Company and Messrs.
Hug, Smith, and Mason and Legg Mason, Inc., a party who receives an offer to
purchase any shares of Common Stock which the party intends to accept must offer
such shares to the Company at the same price and on the same terms offered by
the prospective buyer. If the Company or an assignee of the Company exercises
this right to purchase, it must purchase all, but not less than all, of the
shares proposed to be sold. If the Company (or its assignee) does not exercise
the purchase right, the stockholder may transfer his or its shares pursuant to
the offer. The agreement contains exceptions to the transfer restrictions for
gifts to family members or affiliated parties and sales made in accordance with
Rule 144 under the Securities Act of 1933.
-5-
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following table sets forth all compensation paid or allocated for
services rendered in all capacities during the fiscal years ended March 31,
1996, 1995, and 1994 to the Company's Chief Executive Officer, and to the
executive officers of the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMP.
ANNUAL COMPENSATION AWARDS
NAME AND OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) OTHER (#) COMPENSATION(3)
<S> <C>
F. Bradford Smith(4) 1996 $216,125 $0 $0 0 $2963
Chairman 1995 $230,100 $0 $0 0 $2784
and Chief Financial Officer 1994 $230,100 $0 $0 0 $4428
Edward H. Verdery(5,6) 1996 $200,362 $0 $0 25,000 $2918
President and Chief Executive 1995 $195,000 $48,750 $0 25,000 $3496
Officer 1994 $ 92,500 $46,250 $30,877 100,000 $ --
John C. Nichols 1996 $149,691 $0 $0 0 $2728
Senior Vice President and 1995 $141,900 $0 $0 0 $2548
Secretary 1994 $141,900 $0 $0 0 $2728
Thomas B. McCord(7,8) 1996 $154,166 $0 $0 8,500 $2560
Former Chief Financial Officer 1995 $146,100 $30,000 $0 17,000 $2650
1994 $146,000 $0 $0 7,000 $2845
</TABLE>
(1) Includes amounts deferred under the Company's Retirement Savings Plan in
connection with services rendered during the period.
(2) Pursuant to the terms of incentive bonus plans put into effect by the
Compensation committee, no bonuses were paid in fiscal 1996 to any executive
officer. In fiscal 1995 and 1994, pursuant to incentive plans then in
effect, no executive officer was paid a bonus, with the exception of Mr.
Verdery who received a bonus pursuant to an employment agreement described
under the heading "Employment and Non-Competition Agreements," and Mr. McCord in
connection with his efforts in effecting the sale of the Company's interest in a
waste- water treatment facility.
(3) For Mr. Smith, consists of matching Company contributions made pursuant
to the Company's Retirement Savings Plan of $2,282, $2,104, and $3,451,
respectively, in fiscal 1996, 1995, and 1994, and payment of annual life
insurance premiums of $681, $680, and $977, respectively, in fiscal 1996,
1995, and 1994. For Mr. Verdery, consists of matching Company contributions
made pursuant to the Company's Retirement Savings Plan of $2,270 and $2,869,
respectively, in fiscal 1996 and 1995; and payment of annual life
insurance premiums of $648 and $627, respectively, in fiscal 1996 and
1995. For Mr. Nichols, consists of matching Company contributions made
pursuant to the Company's Retirement Savings Plan of $2,244, $2,088, and
$2,128, respectively, in fiscal 1996, 1995 and 1994; and payment of annual
life insurance premiums of $484, $460, and $600, respectively, in 1996, 1995
and 1994. For Mr. McCord, consists of matching Company contributions
made pursuant to the Company's Retirement Savings Plan of $2,064, $2,174, and
$2,223, respectively, in fiscal 1996, 1995 and 1994; and payment of annual life
insurance premiums of $496, $476, and $622, respectively, in 1996, 1995 and
1994. Retirement Savings Plan and life insurance benefits reflected for the
individuals set forth in this table are available to all employees on the same
terms under the terms of the Retirement Savings Plan and a single employee
group life insurance policy.
(4) Mr. Smith served as President and Chief Executive Officer through October 1,
1995. From October 1, 1995 through the remainder of the fiscal year, Mr. Smith
has served as Chairman of the Board of Directors. On March 29, 1996, Mr. Smith
was appointed Chief Financial Officer, in addition to his duties as Chairman of
the Board.
(5) Mr. Verdery served as Executive Vice President and Chief Operating
Officer from October 1, 1993 through October 1, 1995, at which time he was
appointed to the office of President and Chief Executive Officer. Fiscal
1994 salary reflects salary paid in connection with six (6) months of services
rendered. "Other Annual Compensation" for fiscal 1994 consists of reimbursement
for relocation expenses.
(6) Of the option to purchase 100,000 shares granted to Mr. Verdery in
consideration of his commencement of employment as the Company's Chief
Operating Officer in fiscal 1994, 37,200 shares are currently exercisable
and an additional 18,600 shares become exercisable on each of October 1,
1996, 1997, and 1998, with full vesting occurring on January 1, 1999. Of the
option to purchase 25,000 shares granted to Mr. Verdery in fiscal 1995, 10,000
shares are exercisable within 60 days of June 3, 1996, and an additional 5,000
shares become exercisable on each of July 29, 1997 and 1998. Of the option to
purchase 25,000 shares granted to Mr. Verdery in fiscal 1996, 10,000 shares are
exercisable within 60 days of June 3, 1996, and an additional 5,000 shares
become exercisable on each of May 9, 1997, 1998, and 1999.
(7) Mr. McCord ceased serving in these positions and resigned employment with
the Company on March 29, 1996.
(8) Of the options to purchase 17,000 shares granted to Mr. McCord during
fiscal year 1995, 6,800 shares are exercisable within 60 days of
-6-
<PAGE>
June 3, 1996, and of the option to purchase 8,500 shares granted to Mr.
McCord during fiscal year 1996, 3,400 shares are exercisable within 60 days
of June 3, 1996. To the extent not exercised on or before June 29, 1996, all
of Mr. McCord's options expire.
Employment and Non-Competition Agreements
The Company and Mr. Verdery are parties to an employment agreement with an
initial term expiring on March 31, 1997. Mr. Verdery's agreement provides that
in the event of termination or non-renewal of his employment or a change in
control, he is entitled to a predetermined severance package. Under the
agreement, Mr. Verdery is bound to a non-competition covenant during the period
of such severance payments. Additionally, in the event of a change in control,
outstanding options to purchase shares of Common Stock under the Stock Option
Plan become exercisable in accordance with the terms of stock option grants made
to Mr. Verdery.
The Company was a party to employment agreements with Messrs. Smith, McCord
and Nichols which expired on March 31, 1996. Effective March 29, 1996 Mr. McCord
resigned his employment with the Company, and Mr. Smith assumed the
responsibilities of Chief Financial Officer. Since that date, Mr. Smith has
continued to render services in his capacities as Chairman of the Board and
Chief Financial Officer, and Mr. Nichols has continued to render services in his
capacities as Secretary and Senior Vice President, each without an employment
agreement.
Retirement Plan
The Company maintains a non-contributory Retirement Plan for Salaried
Employees (the "Retirement Plan") which is qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and covers all salaried
employees, including executive officers. The Retirement Plan provides for annual
payments upon retirement at the normal retirement age (generally age 65). An
employee's retirement payment is equal to the sum determined by adding together
for each year of service (i) an amount equal to 1.5% of the participant's
earnings for the year, plus (ii) 1% of the participant's earnings through
December 31, 1988 in excess of the social security wage base, and .65% of the
participant's earnings from and after January 1, 1989 in excess of his or her
covered compensation. For purposes of calculating benefit amounts, "earnings" is
defined as the total amount of remuneration paid or accrued for services
rendered during each Plan year (but excluding forms of extraordinary service)
and "covered compensation" is defined for any plan year as the average without
indexing, of the social security wage base in effect for each calendar year
during the prescribed period. Amounts payable are subject to deductions (i) to
comply with any limitations imposed by the Code which may be applicable at the
time of payment, and (ii) to integrate such amounts with any Social Security
benefits to which the employee may be entitled at retirement. Benefits provided
under the Retirement Plan are also subject to limitations set forth in Section
415 of the Code. In no event, however, may the retirement payment be less than
$17.00 per month multiplied by the number of years (including fractional years)
of credited service. The Retirement Plan also provides benefits for employees
who are disabled, die, or terminate employment after specified years of credited
service.
Assuming that (1) the maximum compensation limitation for calendar year 1996
set forth in Section 415 of the Code remains the same; (2) the annual
compensation for each individual named in the cash compensation table remains
the same; (3) the covered compensation remains the same; (4) the current
retirement plan formula remains the same; and (5) each individual named in the
table continues to work until the normal retirement age of 65, and subject to
other limitations set forth in Section 415 and 401 of the Code, the accrued
annual benefit under the Retirement Plan would be $83,928 for Mr. Smith; $51,924
for Mr. Verdery; and $33,468 for Mr. Nichols.
-7-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information at March 31, 1996 and for
the fiscal year then ended with respect to stock options granted to and
exercised by the individuals named in the Summary Compensation table above.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF
SECURITIES PERCENT OF TOTAL POTENTIAL REALIZABLE VALUE
UNDERLYING OPTIONS/SARS AT ASSUMED
OPTIONS/SARS GRANTED TO EXERCISE OR ANNUAL RATES OF STOCK
GRANTED(1,2,3,4) EMPLOYEES IN BASE PRICE EXPIRATION PRICE APPRECIATION FOR
NAME (#) FISCAL YEAR ($/SHARE)(5) DATE OPTION TERM(5)
5%($) 10%($)
<S> <C>
F. Bradford Smith None 0 N/A N/A $0 $0
Edward H. Verdery 25,000 27.5% $2-5/8 05/08/00 $18,125 $39,875
John C. Nichols None N/A N/A N/A $0 $0
Thomas B. McCord 8,500 9.3% $2-5/8 05/08/00 $6,162 $13,558
</TABLE>
(1) Options granted in fiscal 1996 have a five year term, subject to earlier
termination in the event of termination of employment.
(2) Under the terms of the Stock Option Plan, the Compensation Committee retains
discretion to modify the terms and conditions of options outstanding, which
discretion extends to repricing of options.
(3) Options are exercisable commencing upon completion of one full year of
employment following the grant date, with twenty-five percent of the shares
becoming exercisable at that time, with shares vesting at the rate of
twenty-five percent per year over the four years following the grant.
(4) The exercise price of the options held by the executive officers is the
market value of the Company's stock on the day preceding the date of grant.
(5) The dollar amounts under these columns use the 5% and 10% rates of
appreciation prescribed by the Securities and Exchange Commission. The 5% and
10% rates of appreciation would result in per share prices of $3.35 and $4.22
with respect to the options expiring on May 8, 2000. This presentation is
determined based upon assumed rates of appreciation and is not intended to
forecast possible future appreciation of the price or value of the Company's
stock. The actual value, if any, an executive may realize will depend on the
actual appreciation, if any, of the price of the Company's stock following
option grant. To the extent not exercised on or before June 29, 1996, all of Mr.
McCord's options expire.
<TABLE>
<CAPTION>
OPTIONS EXERCISED IN 1996 AND 1996 YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT 1996 YEAR-END(#) AT 1996 YEAR-END(1)($)
SHARES ACQUIRED VALUE(2)
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C>
F. Bradford Smith None 0 None None 0 0
Edward H. Verdery None 0 47,200 102,800 0 0
John C. Nichols None 0 None None 0 0
Thomas B. McCord None 0 28,900 30,600 0 0
</TABLE>
(1) None of the executive officers exercised options during the year ended March
31, 1996.
(2) Calculated on the basis of the full market value of the underlying
securities at the exercise date or year-end, as the case may be, minus the
exercise price. The closing price of the Common Stock at year-end was $2.00 per
share. Options are "in-the-money" if the closing price of the Common Stock
exceeds the exercise price of the options.
-8-
<PAGE>
PERFORMANCE GRAPH
The following graph reflects a comparison of the cumulative total shareholder
return (change in stock price plus reinvested dividends) of an initial $100
investment from March 31, 1991 in each of the Company's Common Stock, the
Standard & Poor's 500 Composite Stock Price Index (the "Broad Market"), and a
peer group selected by the Company (the "Peer Group"). The Peer Group consists
of Air and Water Technologies Corporation, Air-Cure Technologies, Inc., Wahlco
Environmental Systems, Inc., and the Company. The comparisons in this table are
required by the Securities and Exchange Commission and, therefore, are not
intended to forecast or be indicative of possible future performance of the
Company's stock.
Environmental Elements Corporation
Cumulative Total Stockholder Return
[GRAPH HERE -- PLOT POINTS BELOW]
AS OF 3/91 3/92 3/93 3/94 3/95 3/96
EEC 100.0 122.8 39.6 18.4 18.4 11.3
Peer Group 100.0 87.8 53.7 38.3 22.8 23.8
Broad Market 100.0 107.6 120.4 118.8 133.4 172.0
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The following report of the Compensation Committee of the Board of Directors,
together with the Performance Graph on the preceding page, shall not be deemed
to be incorporated by reference into any prior or subsequent filings by the
Company under the Securities Act of 1933 or the Securities Exchange Act of 1934.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Compensation Principles for Executive Officers
The Compensation Committee provides oversight of policies under which the
Company's Chief Executive Officer and other executive officers are compensated.
The philosophy of the Company is to have a total compensation structure which
compares favorably to the average compensation provided by the Company's
principal competition and which reflects the specific objectives of the Company.
Variable rather than fixed compensation opportunities are emphasized, and
performance achievements that contribute to growth in the value of shareholder
stock will be rewarded by bonuses such as will bring total compensation to the
highest levels paid by competition.
In setting executive officer base salaries and target bonuses for 1996, the
Committee considered the recommendations of management, compensation paid to
professional peers within the Company's competitors, the Committee's own
subjective evaluations of the executive officers, and information compiled by
the Company regarding prevailing salaries for executives offered by such
competition. Guided by this information, compensation ranges were established
and individual executive compensation within these ranges was determined based
upon the individual's responsibilities and performance.
The Company's compensation program for executive officers is comprised of the
following key compensation elements:
1. Annual base salaries for executive officers are positioned
conservatively compared to appropriate companies in the air pollution
control industry, taking into account such factors as size and
geographic location and, with respect to each officer, the individual
officer's experience and performance. All employees, including
executive officers, are part of the Company's comprehensive structured
job rating system. The rate ranges for this system are reviewed and
revised as appropriate using industry related salary surveys and
independent consultants' advice. Rate adjustments are considered
annually. Based upon operating results, annual base salaries for the
year ended March 31, 1996 were not increased over fiscal 1995 levels,
with the exception of a $5,850 increase in the annual salary rate paid
to Mr. Verdery.
2. Annual bonus incentives for each executive are targeted to produce
incentive compensation more attractive than industry norms to reward
achievement of the Company's annual profit plan. Individual award
levels reflect the contribution of each executive toward the
achievement of these goals. Reward of executives for past performance
through such bonus program appropriately places a substantial component
of executives' pay at risk based on Company performance as measured by
its attainment, or non-attainment, of profit and other goals. Based on
operating results, no bonus incentives were paid to executive officers
for the year ended March 31, 1996.
3. Periodically, the Compensation Committee grants stock options to
executive officers and other key employees. Such awards are designed to
encourage executives to have an equity ownership in the Company and to
incentivize such recipients to attain mid-and longer term increases in
shareholder value. Options to purchase 91,000 shares were granted in
fiscal 1996 to a number of key employees, of which 8,500 shares were
granted to Mr. McCord and 25,000 shares were granted to Mr. Verdery.
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Basis of Chief Executive Officer Compensation
For the year ended March 31, 1996, Mr. Verdery, who served as Chief Operating
Officer until his October 1, 1995 election to the office of Chief Executive
Officer, received total cash compensation of $200,365. Mr. Smith served in such
capacity through October 1995 at an annual salary of $243,000, and since that
time has served as Chairman of the Board at an annual salary of $180,000. He
received total cash compensation of $216,125 for services rendered in fiscal
1996. Mr. Verdery is a participant in the Company's stock option plan. As with
all management and salaried employees, Mr. Smith's and Mr. Verdery's
compensation were derived from the Company's job rating system, analysis of
competitive practices, consultants' recommendations, their individual
performance and the Company's performance.
Compensation Committee
Fred Hittman (Chairman) Richard E. Hug
Russell R. Jones Raymond A. Mason
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Mr. Hug served on the Board's Compensation Committee and, for a
portion of the year, acted as Chairman of the Board. The Company leases office
space in its headquarters building to a corporation of which Mr. Hug is a
director and shareholder. During the fiscal year ended March 31, 1996, lease
payments payable to the Company under the agreement of lease were $101,112.
Management believes that the lease is on terms no less favorable to the Company
than could have been obtained from an unaffiliated third party.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the transactions described under the caption "Employment and Non-
Competition Agreements."
See the transaction described under the caption "Compensation Committee
Interlocks and Insider Participation" on this page and the restrictive stock
agreement described under the caption "Security Ownership" on page 4.
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ITEM 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP (previously known as Arthur Andersen & Co.) has served as
the Company's independent public accountants since the 1983 fiscal year. The
Board of Directors has selected Arthur Andersen LLP to serve as the independent
public accountants of the Company for the fiscal year ending March 31, 1997.
This selection will be submitted for ratification at the Annual Meeting.
Representatives of Arthur Andersen LLP are expected to attend the Annual
Meeting. They will have the opportunity to make a statement if they desire to do
so and are expected to be available to respond to appropriate questions. In the
absence of instruction to the contrary, the shares represented by properly
executed proxies will be voted in favor of the selection of Arthur Andersen LLP
to serve as independent public accountants.
ANNUAL REPORT
The Annual Report to Stockholders (including financial statements) for the
fiscal year ended March 31, 1996, together with a copy of the Annual Report on
Form 10-K as filed with the Securities and Exchange Commission but exclusive of
exhibits, is available to all stockholders without charge by written request to
the Office of the Secretary. The Company additionally undertakes to provide
stockholders with copies of exhibits, at stockholder's expense, upon written
request.
OTHER MATTERS
Management is not aware of any matters to come before the meeting which will
require the vote of stockholders other than those matters indicated in the
Notice of Meeting and this Proxy Statement. However, if any other matter calling
for stockholder action should properly come before the meeting or any
adjournments thereof, those persons named as proxies in the enclosed proxy form
will vote thereon according to their best judgment.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who hold more than ten percent of
the Common Stock of the Company to file with the Securities and Exchange
Commission initial reports of beneficial ownership and reports of changes in
beneficial ownership of Common Stock. Executive officers, directors and greater
than ten percent shareholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based upon review of the copies of such reports, all Section 16(a)
filings required of its executive officers, directors and greater than ten
percent shareholders for the fiscal years ended March 31, 1996 were made on a
timely basis, with the exception that Mr. Jones filed one late report involving
one transaction in fiscal 1996.
The Company's By-Laws provide that, in order for a stockholder to nominate a
candidate for election as a director at an annual meeting of stockholders or to
propose business for consideration at such meeting, notice must be delivered to
the Secretary of the Company not less than 60 days nor more than 90 days prior
to the first anniversary of the preceding year's annual meeting. In order for a
stockholder to propose director nominations or other business for consideration
at the 1997 Annual Meeting, the stockholder must deliver notice to the Secretary
between May 4, 1997 and June 3, 1997. All stockholder
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proposals intended to be presented at the 1997 Annual Meeting must otherwise
comply with the rules of the Securities and Exchange Commission for inclusion
in the Company's proxy statement and form of proxy relating to that meeting. Any
stockholder desiring a copy of the Company's By-Laws will be furnished one
without charge upon written request to the Secretary.
Under regulations of the Securities and Exchange Commission, stockholder
proposals must be received in writing by the Company on or before February 21,
1997 in order to be considered for inclusion in the proxy material for the 1997
Annual Meeting.
By Order of the Board of Directors,
/s/ John C. Nichols
John C. Nichols, Secretary
Baltimore, Maryland
June 21, 1996
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<PAGE>
ENVIRONMENTAL
ELEMENTS
CORPORATION
3700 Koppers Street (bullet) Baltimore, Maryland 21227 (bullet) (410) 368-7000
