SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ENVIRONMENTAL ELEMENTS CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
ENVIRONMENTAL
ELEMENTS
CORPORATION
NOTICE OF
1997 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 23, 1997
To Our Stockholders:
You are cordially invited to attend this year's Annual Meeting of
Stockholders, to be held Thursday, July 31, 1997 at 9 a.m., at the Environmental
Elements Corporation headquarters in Baltimore, Maryland. Holders of Common
Stock will elect two directors for three-year terms 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,
E. H. Verdery
Chairman of the Board and
Chief Executive Officer
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, JULY 31, 1997
To the Stockholders of Environmental Elements Corporation:
Notice is hereby given that the 1997 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 Thursday, July 31, 1997 at the
offices of the Company, 3700 Koppers Street, Baltimore, Maryland 21227, for the
following purposes:
1. To elect two directors for a three-year term and until their
successors are 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 1998 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 6, 1997,
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
John C. Nichols
Secretary
Baltimore, Maryland
June 23, 1997
<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 Thursday, July 31, 1997 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 23, 1997.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Company's Common Stock at the close of business
on June 6, 1997 will be entitled to notice of and to vote at the meeting. On
that date there were issued and outstanding 6,967,401 shares of Common Stock.
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. The affirmative vote of 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. Two of the three directors serving in Class I, Fred Hittman and
John C. Nichols, were last elected at the Company's 1994 Annual Meeting and have
terms expiring at the 1997 Annual Meeting. The third director serving in Class
I, E. H. Verdery, was elected by the Board of Directors in 1995, when the Board
expanded the Board of Directors from six to seven members.
Mr. Hittman, a director since 1983, has chosen to not stand for reelection.
The Board of Directors has not, at this time, identified a nominee to fill the
vacancy created by Mr. Hittman's decision. If and at such time as the Board
identifies a prospective director, it will appoint that person as a Class I
director for a term expiring at the 2000 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 Messrs.
Verdery and Nichols, who are recommended by the Board of Directors and have
consented to be named and to serve if reelected. The directors elected will hold
office until the Annual Meeting in 2000, or until their respective successors
are duly elected and qualify. If either nominee is unable to serve, an event
which management does not anticipate, the proxies reserve the right to vote for
a substitute nominee for each of such nominees determined by them.
Certain information regarding the nominees for election as directors at this
year's Annual Meeting are set forth below.
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION DIRECTOR AGE
DURING THE PAST FIVE YEARS SINCE
<S><C>
E. H. Verdery Chairman of the Board of Directors since March 10, 1997; President and 1995 51
Chief Executive Officer of the Company since October 1, 1995; Chief
Operating Officer and Executive Vice President of the Company 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 Secretary of the Company since July, 1983; Senior Vice 1983 66
President of the Company from July, 1983 through June, 1996;
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>
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
NAME PRINCIPAL OCCUPATION DIRECTOR WHICH TERM AGE
DURING THE PAST FIVE YEARS SINCE WILL EXPIRE
<S><C>
F. Bradford Smith Chairman of the Board from October 1, 1995 through 1983 III 1999 55
March 10, 1997; Chief Financial Officer from March 29,
1996 through March 31, 1997 and from 1983 through
October, 1990; Chief Executive Officer of the Company
from 1990 through October 1, 1995; President of the
Company from 1988 through October 1, 1995.
</TABLE>
(Listing continued on next page)
-2-
<PAGE>
<TABLE>
<CAPTION>
CLASS AND
YEAR IN
NAME PRINCIPAL OCCUPATION DIRECTOR WHICH TERM AGE
DURING THE PAST FIVE YEARS SINCE WILL EXPIRE
<S><C>
Richard E. Hug Chairman Emeritus since October 1, 1995; Chairman of 1983 II 1998 62
the 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 73
Company Sparrows Point plant in Baltimore, Maryland.
Samuel T. Woodside Board member since December 12, 1996 (when elected by 1996 III 1999 44
the Board to fill the vacancy created by the decision of Mr.
Mason to not stand for reelection in 1996); President and
Chief Executive Officer of Energy Controls International, an
energy controls manufacturer and service provider, since
1987.
</TABLE>
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
During the fiscal year ended March 31, 1997, the Board of Directors met seven
times. Each Director attended 75% 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, a Compensation Committee and,
as of March 10, 1997, a Strategic Planning Committee. Three meetings of the
Audit Committee and five meetings of the Compensation Committee were held during
the 1997 fiscal year.
The Audit Committee consists of Messrs. Hittman, Hug, Jones, and Woodside.
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, Smith,
and Woodside. 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 Strategic Planning Committee consists of Messrs. Hug, Smith, Verdery and
Woodside. The Strategic Planning Committee is charged with reviewing and
providing direction in the setting and monitoring of long-term market
positioning, organizational development and other corporate goals.
-3-
<PAGE>
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, Nichols and Woodside and, as of March 31, 1997, Mr. Smith) receive an
annual retainer of $12,000, paid in the form of the Common Stock of the Company,
and fees of $1,000 for each Board meeting attended and $500 for each committee
meeting attended.
SECURITY OWNERSHIP
The following table sets forth information, as of June 6, 1997 as to the
beneficial ownership of Common Stock of the Company (including shares which may
be acquired within sixty days of June 6, 1997 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 1,105,105(2) 15.9%
Richard E. Hug 878,943 12.6%
State of Wisconsin Investment Board 598,200(3) 8.6%
P.O. Box 7842
Madison, Wisconsin 53707
Dimensional Fund Advisors Inc. 381,600(4) 5.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Fred Hittman 158,847 2.3%
John C. Nichols 150,647 2.2%
E. H. Verdery 111,447(5) 1.6%
Russell R. Jones 18,147(6) * %
Samuel T. Woodside 5,647 * %
All directors and executive officers as a 2,428,783(7) 34.8%
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. Smith, Verdery, and Nichols exclude 3,815, 2,719, and 15,145
shares, respectively, held for their accounts under the Company's 401(k)
Retirement Savings Plan as of March 31, 1997.
(2) Includes 95,667 shares held by a trust of which Mr. Smith is co-trustee
and beneficiary. Includes 135,000 shares, as to which the officer has sole
voting power, by irrevocable proxy with respect to 50,000 shares and revocable
proxy with respect to 85,000 shares and as to which the officer disclaims
beneficial ownership.
(Notes continued on next page)
-4-
<PAGE>
(3) State of Wisconsin Investment Board has reported on an amended Schedule
13G file on January 21, 1997, that it has sole voting power and sole dispositive
power with respect to 598,200 shares.
(4) Dimensional Fund Advisors Inc., a registered investment advisor
("Dimensional") reported on an amended Schedule 13G filed on February 5, 1997,
that it is deemed to have beneficial ownership of 381,600 shares of
Environmental Elements Corporation stock as of December 31, 1996, 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 serves as investment manager. Dimensional disclaims beneficial
ownership of all such shares.
(5) Includes options to purchase 105,800 shares of Common Stock under the
Stock Option Plan which are exercisable within 60 days of June 6, 1997.
(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 6,541 shares represented by vested interests under the Company's
401(k) Retirement Savings Plan. Includes the 230,667 shares described in
footnote 2 and 105,800 shares described in footnote 5.
* Holdings represent less than 1% of the stock outstanding.
Pursuant to a restrictive stock agreement between the Company, Messrs. Hug,
Smith, Legg Mason, Inc., and Raymond A. Mason, 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,
1997, 1996, and 1995 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>
E. H. Verdery(5,6) 1997 $200,850 $10,000 $0 50,000 $2,986
President and Chief Executive 1996 $200,362 $0 $0 25,000 $2,918
Officer 1995 $195,000 $48,750 $0 25,000 $3,496
- --------------------------------------------------------------------------------------------------
F. Bradford Smith(4) 1997 $180,000 $0 $0 0 $2,909
Chairman 1996 $216,125 $0 $0 0 $2,963
and Chief Financial Officer 1995 $230,000 $48,750 $0 0 $2,784
- --------------------------------------------------------------------------------------------------
</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 an incentive bonus plans put into effect by the
Compensation Committee, a bonus of $10,000 was paid to Mr. Verdery. In fiscal
1996, pursuant to an incentive plan then in effect, neither executive officer
was paid a bonus. In fiscal 1995, Mr. Verdery received a bonus pursuant to an
employment agreement described under the heading "Employment and Non-Competition
Agreements."
(3) For Mr. Smith, consists of matching Company contributions made pursuant to
the Company's Retirement Savings Plan of $2,250, $2,282, and $2,104,
respectively, in fiscal 1997, 1996, and 1995, and payment of annual life
insurance premiums of $659, $681, and $680, respectively, in fiscal 1997, 1996,
and 1995. For Mr. Verdery, consists of matching Company contributions made
pursuant to the Company's Retirement Savings Plan of $2,250, $2,270 and $2,869,
respectively, in fiscal 1997, 1996 and 1995; and payment of annual life
insurance premiums of $736, $648 and $627, respectively, in fiscal 1997, 1996
and 1995. Retirement Savings Plan and life insurance benefits reflected for
Messrs. Verdery and Smith 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, as Chairman of the Board of Directors from October 1, 1995 through March
10, 1997, and as Chief Financial Officer from March 29, 1996 through March 31,
1997.
(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. On March 10, 1997, he
assumed the additional duties of Chairman of the Board of Directors.
(6) Of the option to purchase 100,000 shares granted to Mr. Verdery in fiscal
1994, 55,800 shares are currently exercisable and an additional 18,600 shares
become exercisable on each of October 1, 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, 15,000 shares are exercisable within 60 days of June
6, 1997, and an additional 5,000 shares become exercisable on July 29,1998. Of
the option to purchase 25,000 shares granted to Mr. Verdery in fiscal 1996,
15,000 shares are exercisable within 60 days of June 6, 1997, and an additional
5,000 shares become exercisable on each of May 9,1998, and 1999. Of the option
to purchase 50,000 shares granted to Mr. Verdery in fiscal 1997, 20,000 shares
are exercisable within 60 days of June 6, 1997, and an additional 10,000 shares
become exercisable on each of August 2, 1998, 1999, and 2000.
-6-
<PAGE>
Employment and Non-Competition Agreements
The Company and Mr. Verdery are parties to an employment agreement with an
initial term which expired on March 31, 1997, which term has been renewed
through March 31, 1998. 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 severance payment equal to his then current annual salary for the
unexpired portion, if any, of the current term and one additional year. 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 and Mr. Smith are parties to a separation and non-competition
agreement effective April 1, 1997. Under that agreement, Mr. Smith covenants not
to compete for a period of one year in consideration of payments of $180,000,
payable through March 31, 1998.
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 $85,292 for Mr. Smith and
$52,816 for Mr. Verdery.
-7-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information at March 31, 1997 and for
the fiscal year then ended with respect to stock options granted to and
exercised by the individuals named in the Summary Compensation table above.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
-------------------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES PERCENT OF TOTAL AT ASSUMED
UNDERLYING OPTIONS/SARs EXERCISE OR EXPIRATION ANNUAL RATES OF STOCK
NAME OPTIONS/SARs GRANTED TO BASE PRICE DATE PRICE APPRECIATION FOR
GRANTED(1,2,3,4) EMPLOYEES IN ($/SHARE)(5) OPTION TERM(5)
(#) FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------------------
<S><C>
5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------------------------
Edward H. Verdery 50,000 27.3% $2-1/8 08/01/01 $29,250 $64,750
- ---------------------------------------------------------------------------------------------------------------------
F. Bradford Smith None 0 N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options granted in fiscal 1996 and 1997 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 Mr. Verdery 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 $2.71 and $3.42
with respect to the options expiring on August 2, 2001. This presentation is
determined based upon assumed rates of appreciation and is not intended to
forecast possible future appreciation of the price or value of the Company's
stock. The actual value, if any, an executive may realize will depend on the
actual appreciation, if any, of the price of the Company's stock following
option grant.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
OPTIONS EXERCISED IN 1997 AND 1997 YEAR-END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
- ---------------------------------------------------------------------------------------------------------
OPTIONS/SARs IN-THE-MONEY OPTIONS/SARs
AT 1997 YEAR-END (#) AT 1997 YEAR-END(1)($)
- ---------------------------------------------------------------------------------------------------------
NAME SHARES ACQUIRED VALUE(2)
ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------------
<S><C>
Edward H. Verdery None 0 85,800 114,200 0 0
- ---------------------------------------------------------------------------------------------------------
F. Bradford Smith None 0 None None 0 0
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Verdery did not exercise any options during the year ended March 31,
1997.
(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 $2.125 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, 1992 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 & Water Technologies Corporation, ITEQ, Inc. (previously known as
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 appears here--see plot points below]
As of 3/92 3/93 3/94 3/95 3/96 3/97
- ---------------------------------------------------------------------------
EEC 100.0 39.9 18.9 18.9 11.6 12.3
- ---------------------------------------------------------------------------
Peer Group 100.0 62.9 47.8 27.4 29.3 27.6
- ---------------------------------------------------------------------------
Broad Market 100.0 109.9 111.0 124.7 160.8 192.7
-9-
<PAGE>
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 1997, 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
annually and revisions, if any, are determined by reference to the appropriate
industry related salary surveys and independent consultants' advice. Due to a
lack of profitability for the Company in fiscal 1997, there were no salary
adjustments for executive officers.
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. Due
to a lack of profitability for the Company in fiscal 1997, no bonus was paid to
either executive officer, with the exception of a small bonus paid to Mr.
Verdery in connection with the fourth quarter of 1997, which was profitable.
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 183,000 shares were granted in fiscal 1997 to a number of
key employees, of which 50,000 shares were granted to Mr. Verdery.
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<PAGE>
Basis of Chief Executive Officer Compensation
For the year ended March 31, 1997, Mr. Verdery received total cash
compensation of $210,850. Mr. Verdery is a participant in the Company's stock
option plan. As with all management and salaried employees, Mr. Verdery's
compensation was 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 F. Bradford Smith
Samuel T. Woodside
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, Mr. Hug served on the Board's Compensation Committee. 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, 1997, lease payments payable to the Company under the agreement of lease
were $103,459. 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 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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<PAGE>
ITEM 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP 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, 1998. 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, 1997, 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, 1997 were made on a
timely basis, except that Mr. F. Bradford Smith and Mr. E. H. Verdery, directors
and executive officers of the Company, each filed one late report relating to
one transaction.
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<PAGE>
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 1998 Annual Meeting, the stockholder must deliver notice to the Secretary
between May 2, 1998 and June 1, 1998. All stockholder proposals intended to be
presented at the 1998 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 23,
1998 in order to be considered for inclusion in the proxy material for the 1998
Annual Meeting.
By Order of the Board of Directors,
John C. Nichols, Secretary
Baltimore, Maryland
June 23, 1997
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<PAGE>
ENVIRONMENTAL
ELEMENTS
CORPORATION
3700 Koppers Street o Baltimore, Maryland 21227 o (410) 368-7000
<PAGE>
ENVIRONMENTAL PROXY 3700 Koppers Street
ELEMENTS ANNUAL MEETING o JULY 31, 1997 Baltimore, MD 21227
C O R P O R A T I O N
The undersigned hereby appoints E. H. Verdery and S. Michael Dunseith, and
each of them, as Proxies with the power to appoint his substitute, to represent
and to vote all shares which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of Environmental Elements Corporation, to be held on
Thursday, July 31, 1997, at 9:00 a.m., and at any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2 BELOW
1. Proposal to elect E. H. Verdery and John C. Nichols as Directors for a three-
year term ending in 2000.
_____ FOR all nominees listed above (except as marked to the contrary below)
_____ WITHHOLD AUTHORITY to vote for all nominees listed above
_____ WITHHOLD AUTHORITY TO VOTE FOR ________________________________________
2. Proposal to ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending March 31, 1998.
_____ FOR _____ AGAINST _____ ABSTAIN
please sign on the reverse side
<PAGE>
This Proxy When Properly Executed Will Be Voted in the Manner Specified
Herein By the Undersigned Stockholder. Unless Otherwise Specified, the Shares
Will Be Voted for Proposals 1 and 2. In Their Discretion, the Proxies Are
Authorized to Vote Upon Such Other Business That May Properly Come Before the
Meeting.
This Proxy Is Solicited on Behalf of the Board of Directors. It May Be
Revoked Prior to Its Exercise.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN Date ______________________
THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
<TABLE>
<CAPTION>
<S><C>
__________________________________________
__________________________________________
Signature of Stockholder(s)
Note: Signature should agree with name on
stock certificate as printed hereon. Execu-
tors, administrators, trustees and other
fiduciaries should so indicate when sign-
ing. When shares are jointly owned, both
owners should sign.
</TABLE>
I plan to attend the Annual Meeting. ___ YES ___ NO
