<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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(5) Total fee paid:
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[_] 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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
EEC
new
vision
new
technology
innovative
solutions
NOTICE OF 2000 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
CORPORATION
June 28, 2000
To Our Stockholders:
You are cordially invited to attend this year's Annual Meeting of
Stockholders, to be held Friday, July 28, 2000 at 9:00 a.m., at the
Environmental Elements Corporation headquarters in Baltimore, Maryland. Holders
of Common Stock will elect two 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,
Samuel T. Woodside
Chairman
<PAGE>
ENVIRONMENTAL ELEMENTS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY, JULY 28, 2000
To the Stockholders of Environmental Elements Corporation:
Notice is hereby given that the 2000 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 28, 2000 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 2001 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 2, 2000, 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, 2000
<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, July 28, 2000 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, 2000.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Company's Common Stock at the close of
business on June 2, 2000 will be entitled to notice of and to vote at the
meeting. On that date there were issued and outstanding 7,118,595 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, it
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 Board of Directors has authority under the Company's bylaws to
fill vacancies and to increase or decrease its size between annual meetings. The
two directors serving in Class I, John C. Nichols, last elected at the 1997
Annual Meeting, and Barry Koh, appointed August 1, 1997, have terms 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 Mr. Nichols
and Mr. Koh, 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 2003, or until their successors are duly elected and
qualified. If any nominee is unable to serve as a director, an event which
management does not anticipate, the proxies reserve the right to vote for any
substitute nominee proposed by the Board of Directors.
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> <C> <C>
John C. Nichols Secretary of the Company since July, 1983; Senior Vice 1983 69
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 of 1997 61
B. Koh & Associates, Inc., a provider of consultation and project
management services for environmental restoration and
radioactive waste management projects, since August 1991.
<CAPTION>
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.
CLASS AND
YEAR IN
PRINCIPAL OCCUPATION DIRECTOR WHICH TERM
NAME DURING THE PAST FIVE YEARS SINCE WILL EXPIRE AGE
<S> <C> <C> <C> <C>
Richard E. Hug Chairman Emeritus since October 1, 1995; Chair- 1983 II 2001 65
man of 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.
</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> <C> <C>
F. Bradford Smith Chairman of the Board from October 1, 1995 through March 10, 1983 III 2002 57
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 III 2002 55
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 Elected Chairman of the Board on February 25, 2000; Board 1996 III 2002 47
member since December 12, 1996; President and Chief
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>
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
During the last fiscal year, the Board of Directors held eight regular
meetings and four telephonic meetings to review significant developments
affecting the Company, engage in strategic planning and act on matters requiring
Board of Director approval. 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 2000 fiscal year.
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 Strategic Planning Committee was reactivated by the Board of Directors
during the last fiscal year. The Strategic Planning Committee, consisting of
Messrs. Koh, Woodside and Smith, reviews and provides direction in setting and
monitoring of long-term market positioning, organizational development and other
corporate goals.
The Company does not have a Nominating Committee.
Outside directors 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 2, 2000 as to the
beneficial ownership of Common Stock of the Company (including shares which may
be acquired within sixty days of June 2, 2000 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 OWNED1 OF CLASS
Richard E. Hug 851,955 11.9%
F. Bradford Smith2 675,749 9.5%
State of Wisconsin Investment Board3 598,200 8.4%
P.O. Box 7842
Madison, Wisconsin 53707
Dimensional Fund Advisors Inc.4 309,800 4.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
John C. Nichols 144,593 2.0%
S. Michael Dunseith5 71,800 1.0%
James B. Sinclair6 30,000 *
Samuel T. Woodside7 23,659 *
John L. Sams8 15,000 *
Barry Koh 14,012 *
James S.Potts 7,679 *
All directors and executive officers as a
group (9 persons)9 1,834,447 25.8%
* 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. Dunseith and Sinclair exclude 8,057 and 11,145 shares,
respectively, held for their accounts under the Company's 401(k) Retirement
Savings Plan as of March 31, 2000.
2 Includes 116,482 shares held by profit sharing plans 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 Mr.
Smith has sole voting power, by irrevocable proxy with respect to 100,000 shares
and revocable proxy with respect to 15,000 shares, and as to which he disclaims
beneficial ownership.
3 State of Wisconsin Investment Board has reported on an amended Schedule
13G filed on February 10, 2000, 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 that it is deemed to have beneficial ownership of
309,800 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 Mr. Dunseith resigned on March 27, 2000. His options to purchase 71,800
shares of Common Stock will expire on June 27, 2000.
6 Represents options to purchase 30,000 shares of Common Stock under the
Stock Option Plan which are exercisable within 60 days of June 2, 2000.
7 Includes options to purchase 5,000 shares of Common Stock under the
Option Plan which are exercisable within 60 days of June 2, 2000.
8 Represents options to purchase 15,000 shares of Common Stock under the
Stock Option Plan which are exercisable within 60 days of June 2, 2000.
9 Excludes 19,484 shares represented by vested interests under the
Company's 401(k) Retirement Savings Plan. Includes the 116,482 shares described
in footnote 2, 71,800 shares described in footnote 5, 30,000 shares described in
footnote 6, 5,000 shares described in footnote 7 and 15,000 shares described in
footnote 8.
During the last fiscal year, the Company, Messrs. Hug, Smith, Legg Mason,
Inc., and Raymond A. Mason, were parties to a restrictive stock agreement
providing the Company with the right to purchase their shares if they wanted to
sell them. This agreement expired on May 24, 2000.
- 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,
2000, 1999, and 1998 to the Company's Chief Executive Officer, and to the
executive officers of the Company. The table includes amounts deferred under the
Company's Retirement Savings Plan in connection with services rendered during
the period. Pursuant to the terms of incentive bonus plans put into effect by
the Compensation Committee, no bonuses were paid in fiscal 2000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------------------------------------
LONG TERM
-------------------------------------------------------- COMP.
ANNUAL COMPENSATION AWARDS
--------------------------------------------------------------------------------------------------------------------------
NAME AND FISCAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER (#) COMPENSATION
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John L. Sams 1 2000 $122,192 $0 $0 75,000 $504
President
--------------------------------------------------------------------------------------------------------------------------
James B. Sinclair2 2000 $144,808 $0 $0 0 $2,851
Senior Vice President and Chief 1999 $124,615 $26,000 $0 25,000 $2,299
Financial Officer 1998 $97,308 $15,000 $0 25,000 $792
--------------------------------------------------------------------------------------------------------------------------
E.H.Verdery3 2000 $284,615 $0 $0 0 $25,029
Former Chairman of the Board and 1999 $248,846 $50,000 $0 49,600 $18,183
Chief Executive Officer 1998 $219,558 $30,000 $0 0 $3,286
--------------------------------------------------------------------------------------------------------------------------
S. Michael Dunseith4 2000 $190,192 $0 $0 0 $3,705
Former Executive Vice President 1999 $174,615 $40,000 $0 29,000 $3,424
and Chief Operating Officer 1998 $165,000 $35,000 $0 35,000 $3,148
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Mr. John Sams was appointed to the position of President on February 25,
2000. He previously served as Senior Vice President Business Development from
August 9, 1999 through February 24, 2000. Mr. Sams is 49 years of age. Of the
options to purchase 75,000 shares granted to Mr. Sams the past fiscal year,
15,000 shares are exercisable within 60 days of June 2, 2000, and an additional
15,000 shares become exercisable on each of February 25, 2001, 2002, 2003 and
2004.
2 Effective April 1, 1999, Mr. Sinclair became Senior Vice President
Finance and Administration. He has served the Company in the capacity of Chief
Financial Officer since May 19, 1997. Mr. Sinclair is 47 years of age. Of the
option to purchase 25,000 shares granted to Mr. Sinclair the past fiscal year,
15,000 shares are currently exercisable, and an additional 5,000 shares become
exercisable on each of September 4, 2000 and 2001. Of the option to purchase
25,000 shares granted in fiscal 1999, 15,000 shares are currently exercisable,
and an additional 5,000 shares become exercisable on each of March 19, 2001 and
2002. All other compensation for Mr. Sinclair consists of matching Company
contributions made pursuant to the Company's Retirement Savings Plan of $2,233,
$1,725 and $398, respectively, in fiscal 2000, 1999 and 1998; and payment of
annual life insurance premiums of $618, $574 and $394, respectively, in fiscal
2000, 1999 and 1998.
3 On February 25, 2000, Mr. Verdery resigned from the position of Chairman
of the Board and Chief Executive Officer, President and Board Member. Pursuant
to the Stock Option Plans, all of Mr. Verdery's options were terminated on May
25, 2000, three months after his employment terminated. All other compensation
to Mr. Verdery consisted of matching Company contributions made pursuant to the
Company's Retirement Savings Plan of $2,645, $2,504, $2,466, respectively, in
fiscal 2000, 1999 and 1998; and payment of annual life insurance premiums of
$1,230, $929 and $820,respectively,in fiscal 2000, 1999 and 1998. And, on March
31, 2000, Mr. Verdery was paid $21,154 for vacation due for calendar year 2000.
4 On March 28, 2000, Mr. Dunseith resigned from the position of Executive
Vice President and Chief Operating Officer. All of his unexercised options will
terminate on June 27, 2000 as follows: of the option to purchase 25,500 shares
granted to Mr. Dunseith in fiscal 1997, 25,500 shares are exercisable within 60
days of June 2, 2000. Of the option to purchase 35,000 shares granted in fiscal
1997, 21,000 shares are currently exercisable; of the option to purchase 29,000
shares granted in fiscal 1999, 4,000 option shares were granted on April 24,
1998 of which 2,400 are currently exercisable; and 25,000 option shares were
granted on March 19, 1999, of which 10,000 shares are currently exercisable. All
other compensation to Mr. Dunseith consists of matching Company contributions
made pursuant to the Company's Retirement Savings Plan of $2,853, $2,619 and
$2,475, respectively, in fiscal 2000, 1999 and 1998; and payment of annual life
insurance premiums of $852, $805 and $673, respectively, in fiscal 2000, 1999
and 1998.
- 6 -
<PAGE>
Employment, Termination and Non-Competition Agreements
The Company and Mr. Sams are parties to an employment agreement dated
February 25, 2000 which provides that Mr. Sams as President receives: (i) an
initial salary of $225,000 per year and a target cash incentive, from the
Management Incentive Program, of 25% of his annual base salary for fiscal year
2001; (ii) an award of a 75,000 option to purchase the Company's Common Stock
effective February 25, 2000 at an exercise price of $2.56 per share; and (iii)
in the event of termination of this Agreement by the Company, a severance
payment equal to one times the annual salary in effect in the month prior to
termination. Mr. Sams is also bound to a non-competition covenant during the
period of such severance payments.
The Company and Mr. Verdery are parties to a Separation and Non-Competition
Agreement dated February 25, 2000 by which Mr. Verdery resigned as an employee
of the Company, and further resigned from the offices of the Chairman of the
Board of Directors, President and Director of the Company and from all other
offices of the Company and its subsidiaries effective February 25, 2000. Mr.
Verdery's Agreement provides that he will receive severance pay based on his
annual salary of $275,000 and benefits through March 31, 2001 and will be paid
for all unused vacation, in the amount of $21,154, for calendar year 2000. Mr.
Verdery is also bound to a non-competition covenant during the period of such
severance payments.
The Company and Mr. Dunseith are parties to a Separation, Release and
Non-Competition Agreement dated April 11, 2000 by which Mr. Dunseith resigned as
an employee of the Company and from the office of Executive Vice President and
Chief Operating Officer of the Company and from all other offices of the Company
and its subsidiaries, effective March 27, 2000. Mr. Dunseith's Agreement
provides that he will receive severance pay based on his annual salary of
$185,000 and benefits through December 31, 2000, and an additional three months
salary and benefits in the same amounts as an initial severance payment. These
severance payments will terminate on the earlier of the date which Mr.
Dunseith accepts full-time employment or March 31, 2001. Mr. Dunseith is bound
to a non-competition covenant during the period of such severance payments.
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 compen-
- 7 -
<PAGE>
sation 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 $53,997 for
Mr. Sams and $62,814 for Mr. Sinclair.
Since Mr. Verdery and Mr. Dunseith have resigned, effective February 25, 2000
and March 28, 2000 respectively, and each individual will receive up to one year
of severance pay from the date of termination which compensation (subject to
limit) will count toward their pension benefit, their approximate vested pension
at 65 would be $25,335 annually for Mr. Verdery and $24,753 for Mr. Dunseith.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information at March 31, 2000 and
for the fiscal year then ended with respect to stock options granted to and
exercised by the individuals named in the Summary Compensation Table.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
-----------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES PERCENT OF TOTAL AT ASSUMED
UNDERLYING OPTIONS/SARS EXERCISE OR EXPIRATION ANNUAL RATES OF STOCK
OPTIONS/SARS GRANTED TO BASE PRICE DATE PRICE APPRECIATION FOR
GRANTED1 EMPLOYEES IN ($/SHARE)2 OPTION TERM2
NAME (#) FISCAL YEAR
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5%($) 10%($)
------------------------------------------------------------------------------------------------------------------------------
John L. Sams 75,000 100% 2.563 2/24/05 $53,108 $117,355
------------------------------------------------------------------------------------------------------------------------------
James B. Sinclair None 0 N/A N/A N/A N/A
------------------------------------------------------------------------------------------------------------------------------
E. H. Verdery None 0 N/A N/A N/A N/A
------------------------------------------------------------------------------------------------------------------------------
S. Michael Dunseith None 0 N/A N/A N/A N/A
------------------------------------------------------------------------------------------------------------------------------
</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 $53,108 and
$117,355 with respect to the options expiring on February 24, 2005. This
presentation is determined based upon assumed rates of appreciation and is not
intended to forecast possible future appreciation of the price or value of the
Company's stock. The actual value, if any, an executive may realize will depend
on the actual appreciation, if any, of the price of the Company's stock
following option grant.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
OPTIONS EXERCISED IN 2000 AND 2000 YEAR-END OPTION VALUES
------------------------------------------------------------------------------------------------------------------------------
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT 2000 YEAR-END (#) AT 2000 YEAR-END1($)
------------------------------------------------------------------------------------------------------------------------------
SHARES ACQUIRED VALUE2
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE3 UNEXERCISABLE
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John L. Sams 0 0 15,000 50,000 $0 $0
------------------------------------------------------------------------------------------------------------------------------
James B. Sinclair 0 0 30,000 20,000 $0 $0
------------------------------------------------------------------------------------------------------------------------------
E. H. Verdery4 0 0 219,840 29,760 $3,150 $0
------------------------------------------------------------------------------------------------------------------------------
S. Michael Dunseith5 0 0 71,800 35,700 $1,607 $0
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 No executive officer exercised any options during the year ended March
31, 2000.
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 $2.188 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 2, 2000.
4 Mr. Verdery resigned on February 25, 2000; 25,000 option shares expired
on May 12, 2000 and 224,600 option shares expired on May 25, 2000 which was
90 days after his resignation.
5 Mr. Dunseith resigned on March 27, 2000; 8500 exercisable option shares
expired May 9, 2000. Of the remaining 107,500; 71,800 are exercisable but will
expire along with unexercisable options on June 27,2000, which is 90 days after
his resignation.
- 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, 1995 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
[GRAPH]
As of 3/95 3/96 3/97 3/98 3/99 3/00
EEC 100.0 61.5 65.4 153.8 92.3 67.3
Peer Group 100.0 104.1 131.7 205.1 104.8 105.0
Broad Market 100.0 128.9 151.2 220.0 256.9 299.3
- 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
2001, 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 to 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. No
bonuses were paid in fiscal 2000.
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 75,000 shares were granted to John L.
Sams in fiscal 2000.
Basis of President's Compensation
For the year ended March 31, 2000, Mr. Sams received total cash
compensation of $122,192. Mr. Sams is a participant in the Company's Stock
Option Plan. As with all management and salaried employees, Mr. Sams'
- 10 -
<PAGE>
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.
Long Term Incentive Plan
The Long Term Incentive Plan for Mr.Verdery, approved by the Compensation
Committee on April 24, 1998, which would have awarded up to 50,000 shares of
Environmental Elements Corporation Common Stock based on stock price goals,
terminated pursuant to its terms on February 25, 2000 without any award being
made.
This report is being submitted by the Compensation Committee:
Compensation Committee
Samuel T. Woodside {Chairman}
Richard E. Hug
Barry Koh
F. Bradford Smith
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2000, 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, 2000, lease payments payable to the Company under the agreement of
lease were $114,928. 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, 2001. 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, 2000, 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.
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<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, 2000 were made on a
timely basis except the Form 3, Initial Statement of Beneficial Ownership of
Securities, and the Form 5, Annual Statement of Beneficial Ownership of
Securities, for Mr. John Sams, reporting his grant of options to purchase 75,000
shares of the Company's Common Stock, were not filed in a timely manner due to
an administrative oversight.
Deadline for Receipt of Stockholders Nominations and Proposals
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 2001 Annual Meeting, the stockholder must
deliver notice to the Secretary between May 2, 2001 and June 1, 2001. All
stockholder proposals intended to be presented at the 2001 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,
2001 in order to be considered for inclusion in the proxy material for the 2001
Annual Meeting.
By Order of the Board of Directors,
John C. Nichols, Secretary
Baltimore, Maryland
June 28, 2000
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<PAGE>
ENVIRONMENTAL
ELEMENTS
CORPORATION
3700 Koppers Street . Baltimore, Maryland 21227 . (410) 368-7000 . www.eec1.com
<PAGE>
ENVIRONMENTAL PROXY 3700 Koopers Street
ELEMENTS Baltimore, MD 21227
CORPORATION
ANNUAL MEETING . JULY 28, 2000
The undersigned hereby appoints Samuel T. Woodside and John C. Nichols, 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
Friday, July 28, 2000, 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 Barry Koh and John C. Nichols as Directors for a
three-year term ending in 2003.
Barry Koh ___ FOR ___ AGAINST ___ ABSTAIN
John C. Nichols ___ FOR ___ AGAINST ___ ABSTAIN
2. Proposal to ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending March 31, 2001.
___ 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. ---------------------------
---------------------------
---------------------------
Signature of Stockholder(s)
NOTE: Signature should agree with name on
stock certificate as printed hereon.
Executors, administrators, trustees and
other fiduciaries should so indicate when
signing. When shares are jointly owned,
both owners should sign.
I plan to attend the Annual Meeting. ____ YES ____ NO
