SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
ENVIRONMENTAL ELEMENTS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
EEC
technology
competence
experience
commitment
GRAPHIC HERE
A breath of fresh air. (TM)
NOTICE OF 1999 ANNUAL MEETING
AND PROXY STATEMENT
FOR
ENVIRONMENTAL ELEMENTS CORPORATION
IMPORTANT:
PLEASE MARK, SIGN, AND DATE YOUR PROXY CARD AND
PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE>
ENVIRONMENTAL
ELEMENTS
C O R P O R A T I O N
June 28, 1999
TO OUR STOCKHOLDERS:
You are cordially invited to attend this year's Annual Meeting of
Stockholders, to be held Friday, July 30, 1999 at 9:00 a.m., at the
Environmental Elements Corporation headquarters in Baltimore, Maryland. Holders
of Common Stock will elect three directors 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,
E. H. Verdery
Chairman of the Board and
Chief Executive Officer
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY, JULY 30, 1999
To the Stockholders of Environmental Elements Corporation:
Notice is hereby given that the 1999 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, July 30, 1999 at the
offices of the Company, 3700 Koppers Street, Baltimore, Maryland 21227, for the
following purposes:
1. To elect three 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 2000 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 4, 1999,
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 28, 1999
<PAGE>
ENVIRONMENTAL
ELEMENTS
C O R P O R A T I O N
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, July 30, 1999 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 28, 1999.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Company's Common Stock at the close of business
on June 4, 1999 will be entitled to notice of and to vote at the meeting. On
that date there were issued and outstanding 7,092,205 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 and approval. 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 your proxy 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 three directors serving in Class III, F. Bradford Smith, last
elected at the 1996 Annual Meeting, Samuel T. Woodside, appointed December 12,
1996 and James S. Potts, appointed on August 1, 1997 and have terms 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,
Mr. Potts, and Mr. Woodside, who are recommended by the Board of Directors and
have consented to be named and to serve if elected. The directors elected will
hold office until the Annual Meeting in 2002, or until their successors are duly
elected and qualified. If any nominee is unable to serve, an event which
management does not anticipate, the proxies reserve the right to vote for
substitute nominees.
Certain information regarding the nominees for election as directors 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 from October 1, 1995 through March 1983 56
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 1995.
James S. Potts Board member since August 1, 1997; Vice President - 1997 54
Environment of Potomac Electric Power Company, a utility,
and responsible for environmental planning and compliance
with respect to the operation and maintenance of that
company's generating stations, since April 1993.
Samuel T. Woodside Board member since December 12, 1996; President and Chief 1996 46
Executive Officer of Energy Controls International, an
energy controls manufacturer and service provider, since
1997; President and Chief Executive Officer of E.I.L.
Instruments, Inc., an instrument distributor and
manufacturer, from 1985 through 1997.
</TABLE>
(LISTING CONTINUED ON NEXT PAGE)
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<PAGE>
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>
E. H. Verdery Chairman of the Board of Directors since March 10, 1997; 1995 I 2000 53
President and 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.
Richard E. Hug Chairman Emeritus since October 1, 1995; Chairman of the 1983 II 2001 64
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.
John C. Nichols Secretary of the Company since July, 1983; Senior Vice 1983 I 2000 68
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.
Barry Koh Board member since August 1, 1997; Chief Executive Officer 1997 I 2000 60
of B. Koh & Associates, Inc., a provider of consultation
and project management services for environmental
restoration and radioactive waste management projects,
since August 1991.
</TABLE>
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
During the fiscal year ended March 31, 1999, the Board of Directors met ten
times one of which was via a teleconference call. 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 a
Strategic Planning Committee. Three meetings of the Audit Committee, two
meetings of the Compensation Committee, and one meeting of the Strategic
Planning Committee were held during the 1999 fiscal year and strategic planning
is now handled by the entire Board of Directors.
The Audit Committee consists of Messrs. Potts, Hug, Woodside, and Smith. 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.
- 3 -
<PAGE>
The Compensation Committee consists of Messrs. Woodside, Hug, Smith, and Koh.
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 (including stock option plans) and makes recommendations with respect
to the establishment of new plans; and grants to eligible employees and other
individuals' options to purchase Common Stock of the Company in accordance with
the terms of the applicable plan and interprets and administers such plans.
The Company does not have a Nominating Committee.
Directors who are employees of the Company (Mr. Verdery) receive no
additional compensation for services as a director. Directors not so employed
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 4, 1999 as to the
beneficial ownership of Common Stock of the Company (including shares which may
be acquired within sixty days of June 4, 1999 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
Richard E. Hug 848,640 12.0%
F. Bradford Smith 672,434(2) 9.5%
State of Wisconsin Investment Board 598,200(3) 8.4%
P.O. Box 7842
Madison, Wisconsin 53707
Dimensional Fund Advisors Inc. 321,700(4) 4.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
E. H. Verdery 199,920(5) 2.8%
John C. Nichols 145,278 2.0%
S. Michael Dunseith 67,500(6) * %
Samuel T. Woodside 15,344 * %
James B. Sinclair 15,000(7) * %
Barry Koh 10,697 * %
James S. Potts 9,697 * %
All directors and executive officers as a
group (9 persons) 1,984,510(8) 28.0%
* Holdings represent less than 1% of the stock outstanding.
(NOTES CONTINUED ON NEXT PAGE.)
- 4 -
<PAGE>
(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. Verdery, Dunseith and Sinclair exclude 4,270, 2,957 and 559
shares, respectively, held for their accounts under the Company's 401(k)
Retirement Savings Plan as of March 31, 1999.
(2) Includes 116,482 shares held by a profit sharing plan of which Mr. Smith
is co-trustee and beneficiary and held by a Uniform Gift to Minors Act Trust of
which Mr. Smith's spouse is trustee. Excludes 115,000 shares, as to which the
director has sole voting power, by irrevocable proxy with respect to 30,000
shares and revocable proxy with respect to 85,000 shares and as to which the
director disclaims beneficial ownership.
(3) State of Wisconsin Investment Board has reported on an amended Schedule
13G filed on January 16, 1999, 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 11, 1999,
that it is deemed to have beneficial ownership of 321,700 shares of
Environmental Elements Corporation stock as of that date, 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) Represents options to purchase 199,920 shares of Common Stock under the
Stock Option Plan which are exercisable within 60 days of June 4, 1999.
(6) Represents options to purchase 67,500 shares of Common Stock under the
Stock Option Plan which are exercisable within 60 days of June 4, 1999.
(7) Represents options to purchase 15,000 shares of Common Stock under the
Stock Option Plan which are exercisable within 60 days of June 4, 1999.
(8) Excludes 7,787 shares represented by vested interests under the Company's
401(k) Retirement Savings Plan. Includes the 231,482 shares described in
footnote 2, 199,920 shares described in footnote 5, 67,500 shares described in
footnote 6, and 15,000 shares described in footnote 7.
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,
1999, 1998, and 1997 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(4) 1999 $248,846 $50,000 $0 49,600(7) $18,183
Chairman of the Board and 1998 $219,558 $30,000 $0 0 $3,286
Chief Executive Officer 1997 $200,000 $10,000 $0 50,000 $2,986
- -----------------------------------------------------------------------------------------------
S. MICHAEL DUNSEITH(5) 1999 $174,615 $40,000 $0 29,000(8) $3,424
Senior Vice President of 1998 $165,000 $35,000 $0 35,000 $3,148
Operations 1997 $143,050 $0 $0 25,500 $ 476
- -----------------------------------------------------------------------------------------------
JAMES B. SINCLAIR(6)
Vice President and 1999 $124,615 $26,000 $0 25,000(9) $2,299
Chief Financial Officer 1998 $97,308 $15,000 $0 25,000 $ 792
- -----------------------------------------------------------------------------------------------
</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, bonuses of $50,000, 40,000, and 26,000 were paid,
respectively, to Messrs. Verdery, Dunseith and Sinclair in fiscal 1999. Bonuses
of $30,000 and $10,000 were paid to Mr. Verdery in fiscal 1998 and 1997, a bonus
of $35,000 was paid to Mr. Dunseith in fiscal 1998, and a bonus of $15,000 was
paid to Mr. Sinclair in fiscal 1998.
(3) For Mr. Verdery, consists of matching Company contributions made pursuant
to the Company's Retirement Savings Plan of $2,504, $2,466, and $2,250,
respectively, in fiscal 1999, 1998 and 1997; and payment of annual life
insurance premiums of $929, $820, and $736, respectively, in fiscal 1999, 1998
and 1997. And, in 1999, transfer of ownership of company car valued at $14,750
to Mr. Verdery. For Mr. Dunseith, consists of matching Company contributions
made pursuant to the Company's Retirement Savings Plan of $2,619, $2475, and $0,
respectively, in fiscal 1999, 1998 and 1997; and payment of annual life
insurance premiums of $805, $673, and $476, respectively, in fiscal 1999, 1998,
and 1997. For Mr. Sinclair, consists of matching Company contributions made
pursuant to the Company's Retirement Savings Plan of $1,725, $398, and $0,
respectively, in fiscal 1999, 1998, and 1997; and payment of annual life
insurance premiums of $574, $394, and $0, respectively, in fiscal 1999, 1998,
and 1997. Retirement Savings Plan and life insurance benefits reflected for
Messrs. Verdery, Dunseith and Sinclair 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. 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.
(5) Mr. Dunseith was rehired by the Company on April 30, 1990 and served as
Sales Manager, Particulate Director, and Vice President of Business Development.
Since July 31, 1997 he has served as Senior Vice President of Operations.
Effective April 1, 1999, Mr. Dunseith became Executive Vice President and Chief
Operating Officer. Mr. Dunseith is 47 years of age.
(6) Mr. Sinclair has served the Company in the capacity of Chief Financial
Officer since May 19, 1997. Effective April 1, 1999, Mr. Sinclair became Senior
Vice President Finance and Administration. Mr. Sinclair is 46 years of age.
(7) Of the option to purchase 50,000 shares granted to Mr. Verdery in fiscal
1997, 40,000 shares are exercisable within 60 days of June 4, 1999, and an
additional 10,000 shares become exercisable on August 2, 2000. Of the option to
purchase 49,600 shares granted in fiscal 1999, 9,920 shares are currently
exercisable and an additional 9,920 become exercisable on each of March 19,
2000, 2001, 2002, and 2003.
(8) Of the option to purchase 25,500 shares granted to Mr. Dunseith in fiscal
1997, 20,400 shares are exercisable within 60 days of June 4, 1999, and an
additional 5,100 shares become exercisable on August 2, 2000. Of the option to
purchase 35,000 shares granted to Mr. Dunseith in fiscal 1998, 14,000 shares are
currently exercisable, and an additional 7,000 shares become exercisable on each
of September 4, 1999, 2000, and 2001. Of the option to purchase 4,000 shares
granted in fiscal 1999, 1,600 shares are currently exercisable and an additional
800 shares become exercisable on each of April 24, 2000, 2001, and 2002. Of the
option to purchase 25,000 shares granted in fiscal 1999, 5,000 shares are
currently exercisable and an additional 5,000 become exercisable on each of
March 19, 2000, 2001, 2002, and 2003.
- 6 -
<PAGE>
(9) Of the option to purchase 25,000 shares granted to Mr. Sinclair in fiscal
1998, 10,000 shares are currently exercisable, and an additional 5,000 shares
become exercisable on each of September 4, 1999, 2000, and 2001. Of the option
to purchase 25,000 shares granted in fiscal 1999, 5,000 shares are currently
exercisable, and an additional 5,000 shares become exercisable on each of March
19, 2000, 2001, 2002, and 2003.
EMPLOYMENT AND NON-COMPETITION AGREEMENTS
The Company and Mr. Verdery are parties to an employment agreement dated
March 29, 1996 with an initial term expiring March 31, 1997. The initial term is
subject to automatic renewal terms of one year each, unless either party to the
agreement shall have given written notice not less than ninety (90) days prior
to the annual renewal date that they wish to terminate this agreement. 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, (i) 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, and (ii) unawarded Company stock under the Long-Term Incentive Plan
will be awarded to Mr. Verdery.
RETIREMENT PLAN
The Company maintains a noncontributory 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 for each year
of service through December 31, 1988 in excess of the social security wage base,
.65% of the participant's earnings for each year of service 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 1998
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 $54,621 for Mr. Verdery,
$72,492 for Mr. Dunseith, and $47,581 for Mr. Sinclair.
- 7 -
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information at March 31, 1999 and for the
fiscal year then ended with respect to stock options granted to and exercised by
the individuals named in the Summary Compensation table on preceding page.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF POTENTIAL
SECURITIES PERCENT OF TOTAL REALIZABLE VALUE
UNDERLYING OPTIONS/SARS AT ASSUMED
OPTIONS/SARS GRANTED TO EXERCISE OR ANNUAL RATES OF STOCK
GRANTED(1) EMPLOYEES IN BASE PRICE EXPIRATION PRICE APPRECIATION FOR
NAME (#) FISCAL YEAR(3) ($/SHARE)(2) DATE OPTION TERM(2)
- ---------------------------------------------------------------------------------------------------------
5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------------
<S><C>
E. H. Verdery 49,600 18% $3.375 3/19/04 $46,376 $102,424
- ---------------------------------------------------------------------------------------------------------
S. Michael Dunseith 4,000 1.5% $4.75 4/24/03 $5,240 $11,600
25,000 9.2% $3.375 3/19/04 $23,375 $51,625
- ---------------------------------------------------------------------------------------------------------
James B. Sinclair 25,000 9.2% $3.375 3/19/04 $23,375 $51,625
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options granted (i) have a five-year term, subject to earlier termination
in the event of termination of employment, and (ii) are exercisable immediately
to the extent of twenty percent of the shares, with additional shares vesting at
the rate of twenty percent per year over the four years following the grant, and
(iii) 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.
(2) 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 $4.31 and $5.44
with respect to the options expiring on March 19, 2004 and $6.06 and $7.65 with
respect to the options expiring on April 24, 2003. This presentation is
determined based upon assumed rates of appreciation and is not intended to
forecast possible future appreciation of the price or value of the Company's
stock. The actual value, if any, an executive may realize will depend on the
actual appreciation, if any, of the price of the Company's stock following
option grant.
(3) During fiscal year 1999, 75,100 options were granted from the Employee
Stock Option Plan (old Plan which terminates in November, 1999) and 196,500
options were granted from the 1998 Employee Stock Option Plan (new Plan
effective August 1, 1998) for a total of 271,600 options granted in fiscal year
1999.
<TABLE>
<CAPTION>
OPTIONS EXERCISED IN 1999 AND 1999 YEAR-END OPTION VALUES
-------------------------------------------------------------------------------------------------
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
---------------------------- ------------------------------
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT 1999 YEAR-END (#) AT 1999 YEAR-END(1)($)
---------------------------- ------------------------------
SHARES ACQUIRED VALUE(2)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE(3) UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------------
<S><C>
E. H. Verdery None 0 199,920 49,680 $44,375 $ 8,750
- ----------------------------------------------------------------------------------------------------------------------
S. Michael Dunseith None 0 67,500 48,500 $32,413 $ 21,526
- ----------------------------------------------------------------------------------------------------------------------
James B. Sinclair None 0 15,000 35,000 $ 8,125 $ 12,188
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No executive officer exercised any options during the year ended March 31,
1999.
(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 $3.00 per
share. Options are "in-the-money" if the closing price of the Common Stock
exceeds the exercise price of the options.
(3) Exercisable within 60 days of June 4, 1999.
On April 24, 1998, the Compensation Committee approved the cancellation of
the 12,000 shares with an exercise price of $17.00 granted on April 7, 1992 to
each of four employees, including S. Michael Dunseith and issued 12,000 new
option grants with an exercise price of $4.75 to each of the four employees
including S. Michael Dunseith. The decision to approve this cancellation and
reissuance followed a review by the Compensation Committee of existing option
grants and the recognition that because of a significant decline in the market
value of the Company's Common Stock, these particular grants were exercised at
prices which substantially exceeded the market value of the Company's Common
Stock. The New Options modify the exercise price, reduced the term from ten
years to five years, and reduced the vesting period from five years to four
years. The Compensation Committee determined that due to this decline in market
value, these 1992 Options were significantly less likely to serve their purposes
of retaining and motivating the employees who hold such options. The following
table provides information with respect to S. Michael Dunseith who is the only
individual named in the Summary Compensation Table who participated in this
transaction.
<TABLE>
<CAPTION>
TEN YEAR OPTION/SAR REPRICING
- -----------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING MARKET PRICE OF STOCK EXERCISE PRICE AT
OPTIONS/SARs REPRICED AT TIME OF REPRICING OR TIME OF REPRICING OR
NAME DATE OR AMENDED (#) AMENDMENT ($) AMENDMENT ($)
- -----------------------------------------------------------------------------------------------------
<S><C>
S. Michael Dunseith 4/24/98 4,000 $4.75 $17.00
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TEN YEAR OPTION/SAR REPRICING
- ------------------------------------------------------------------------
NEW LENGTH OF ORIGINAL OPTION
EXERCISE TERM REMAINING AT DATE OF
NAME PRICE ($) REPRICING OR AMENDMENT
- ------------------------------------------------------------------------
<S><C>
S. Michael Dunseith $4.75 3 years
- ------------------------------------------------------------------------
</TABLE>
- 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, 1994 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 BHA Group Holding, Crown Anderson, Dames Moore GP, EA Engineering, HACH
Company, ITEQ, Inc., MFRI, 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
GRAPHIC HERE
AS OF 3/94 3/95 3/96 3/97 3/98 3/99
- ------------------------------------------------------------------------
EEC 100.0 100.0 61.5 65.4 153.8 92.3
- ------------------------------------------------------------------------
Peer Group 100.0 73.3 76.3 96.7 150.3 76.8
- ------------------------------------------------------------------------
Broad Market 100.0 112.3 144.8 169.8 247.2 288.6
- ------------------------------------------------------------------------
- 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 fiscal
2000, 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.
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 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. In
fiscal 1999, bonuses of $50,000, $40,000 and $26,000, respectively, were paid to
Mr. Verdery, Mr. Dunseith, and Mr. Sinclair.
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 271,600 shares were granted in fiscal 1999 to a number of
key employees, of which Mr. Verdery was granted options to purchase 49,600
shares, Mr. Dunseith was granted options to purchase 29,000 shares, and Mr.
Sinclair was granted an option to purchase 25,000 shares.
- 10 -
<PAGE>
BASIS OF CHIEF EXECUTIVE OFFICER COMPENSATION
For the year ended March 31, 1999, Mr. Verdery received total cash
compensation of $248,846. 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
industry, competitive practices, consultants' recommendations, his individual
performance and the Company's performance.
On April 24, 1998, the Compensation Committee of the Board of Directors
approved a Stock Bonus Plan for Mr. Verdery based on Environmental Elements
Corporation's stock price over a three-year period. The terms of this Bonus Plan
were that Mr. Verdery would be awarded the 50,000 shares in accordance with the
following:
1. 25,000 shares upon the stock price reaching $7.50 a share and maintaining
that level or higher for a period of 90 calendar days.
2. 25,000 shares upon the stock price reaching $10.00 a share and maintaining
that level or higher for a period of 90 calendar days.
3. Notwithstanding 1 and 2 above, the entire 50,000 shares or any unawarded
amount up to the 50,000 shares, whichever is applicable if there is a change in
control of Environmental Elements Corporation within three years.
Upon expiration of the three years or upon termination or death of Mr.
Verdery, the Plan will terminate and no further awards will be made.
LONG TERM INCENTIVE PLAN
AWARD IN LAST FISCAL YEAR
Pursuant to the terms of a long-term incentive plan (three years) approved by
the Compensation Committee, starting April 24, 1998 and terminating April 23,
2001, Mr. Verdery would be awarded 50,000 shares of the Company's stock, based
on the price of Environmental Elements Corporation's stock over the above stated
three-year period. The stock awards will be made in accordance with the
following criteria: (i) 25,000 shares upon the stock price reaching $7.50 a
share and maintaining at least that level for a period of 90 calendar days; (ii)
25,000 shares upon the stock price reaching $10.00 a share and maintaining at
least that level for a period of 90 calendar days; and (iii) the entire 50,000
shares or any unawarded share up to 50,000 shares, whichever is applicable, will
be awarded if there is a change in control of Environmental Elements within the
three-year period. Upon expiration of the three years or upon termination or
death of Mr. Verdery during such period, this Plan will terminate and no further
awards will be made.
<TABLE>
<CAPTION>
NUMBER OF SHARES, PERFORMANCE OR
UNITS, OR OTHER OTHER PERIOD UNTIL
RIGHTS MATURATION OR ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
NAME (#) PAYOUT PRICE-BASED PLANS
- -------------------------------------------------------------------------------------------------------------------
THRESHOLD ($ OR #) TARGET ($ OR #) MAXIMUM ($ OR #)
- -------------------------------------------------------------------------------------------------------------------
<S><C>
E. H. Verdery 50,000 3 YEARS -- -- --
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- 11 -
<PAGE>
COMPENSATION COMMITTEE
Samuel T. Woodside
Chairman
Richard E. Hug
Barry Koh
F. Bradford Smith
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, 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, 1999, lease payments payable to the Company under the agreement of lease
were $132,787. 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.
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, 2000. 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, 1999, 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.
-12-
<PAGE>
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, 1999 were made on a
timely basis.
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 2000 Annual Meeting, the stockholder must deliver notice to the Secretary
between May 2, 2000 and June 1, 2000. All stockholder proposals intended to be
presented at the 2000 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,
2000 in order to be considered for inclusion in the proxy material for the 2000
Annual Meeting.
By Order of the Board of Directors,
John C. Nichols, Secretary
Baltimore, Maryland
June 28, 1999
-13-
<PAGE>
ENVIRONMENTAL
ELEMENTS
C O R P O R A T I O N
3700 KOPPERS STREET O BALTIMORE, MARYLAND 21227 O (410) 368-7000
