SCHEDULE 14A INFORMATION
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PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ENGELHARD CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ENGELHARD CORPORATION
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
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* Set forth the amount on which the filing fee is calculated and state how it
was determined.
[_] 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:
Notes:
ENGELHARD 101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
ORIN R. SMITH
Chairman and
Chief Executive Officer
March 31, 1995
Dear Shareholder:
You are cordially invited to attend the 1995 Annual Meeting of Shareholders
which will be held at 10:00 a.m. on Thursday, May 4, in Auditoriums A and B,
Ground Floor, at Chase Manhattan Bank, One Chase Manhattan Plaza, New York
City. You may enter at Liberty or William Street.
The enclosed Notice and Proxy Statement contain complete information about
matters to be considered at the Annual Meeting, at which the business and
operations of Engelhard will also be reviewed. Discussions at our Annual
Meeting have generally been interesting and useful, and we hope that you will
be able to attend. If you plan to attend, please check the box provided on the
proxy card and an admission ticket will be sent to you. Only shareholders and
their proxies will be permitted to attend the Annual Meeting. If you do not
attend the Annual Meeting, you will receive the post-meeting report on the
proceedings which will be sent to all shareholders.
Whether or not you plan to attend, we urge you to complete, sign and return
the enclosed proxy card, so that your shares will be represented and voted at
the Annual Meeting.
Sincerely yours,
/s/ Orin R. Smith
ENGELHARD CORPORATION
101 WOOD AVENUE
ISELIN, NEW JERSEY 08830
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NOTICE OF THE 1995 ANNUAL MEETING OF SHAREHOLDERS
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To our Shareholders: March 31, 1995
The Annual Meeting of Shareholders of Engelhard Corporation, a Delaware
corporation, will be held on Thursday, May 4, 1995, at 10:00 a.m., New York
City time, in Auditoriums A and B, Ground Floor, at Chase Manhattan Bank, One
Chase Manhattan Plaza, New York, New York, for the following purposes:
(1) To elect three Directors;
(2) To consider and vote upon the Company's Directors Stock Option Plan;
(3) To consider and vote upon amendments to the Company's Stock Option
Plan of 1991;
(4) To consider and vote upon amendments to the Company's Stock Option
Plan of 1981;
(5) To ratify the appointment of Coopers & Lybrand as independent public
accountants;
(6) To transact such other business as may properly come before the
meeting.
The record date for the determination of the shareholders entitled to vote at
the meeting or at any adjournment thereof is the close of business on March 14,
1995.
A list of shareholders entitled to vote at the Annual Meeting will be open to
the examination of any shareholder, for any purpose germane to the meeting, at
the offices of the Company's Transfer Agent and Registrar, Mellon Securities
Trust Company, 120 Broadway, New York, New York 10271, during ordinary business
hours for ten days prior to the meeting.
By Order of the Board of Directors
ARTHUR A. DORNBUSCH, II
Vice President, General Counsel
and Secretary
SHAREHOLDERS ARE URGED TO MARK, SIGN AND RETURN PROMPTLY
THE ACCOMPANYING PROXY IN THE ENCLOSED RETURN ENVELOPE
ENGELHARD CORPORATION
101 WOOD AVENUE
ISELIN, NEW JERSEY 08830
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PROXY STATEMENT FOR THE 1995
ANNUAL MEETING OF SHAREHOLDERS
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SOLICITATION AND REVOCATION OF PROXIES
The accompanying proxy, being mailed to shareholders on or about March 31,
1995, is solicited by the Board of Directors of Engelhard Corporation (the
"Company") for use at the Annual Meeting of Shareholders (the "Meeting") to be
held on Thursday, May 4, 1995. In case the Meeting is adjourned, the proxy will
be used at any adjournments thereof. If a proxy is received before the Meeting,
the shares represented by it will be voted unless the proxy is revoked by
written notice prior to the Meeting or by voting by ballot at the Meeting. If
matters other than those set forth in the accompanying Notice of Annual Meeting
are presented at the Meeting for action, which is not currently anticipated,
the proxy holders will vote the proxies in accordance with their best judgment.
Holders of Common Stock as of the close of business on March 14, 1995 will be
entitled to vote. On such date there were outstanding and entitled to vote
95,403,945 shares of Common Stock of the Company, each of which is entitled to
one vote with respect to each matter to be voted on at the Meeting. The
presence at the Meeting in person or by proxy of the holders of a majority of
the outstanding shares of Common Stock entitled to vote shall constitute a
quorum for the transaction of business. Proxies marked as abstaining (including
proxies containing broker non-votes) on any matter to be acted upon by
stockholders will be treated as present at the meeting for purposes of
determining a quorum but will not be counted as votes cast on such matters.
The cost of soliciting proxies in the form enclosed will be borne by the
Company. In addition to the solicitation by mail, proxies may be solicited
personally, or by telephone, by employees of the Company. The Company has also
engaged D.F. King & Co., Inc., 77 Water Street, New York, New York, to assist
in such solicitation at an estimated fee of $14,500 plus disbursements. The
Company may reimburse brokers holding Common Stock in their names or in the
names of their nominees for their expenses in sending proxy material to the
beneficial owners of such Common Stock.
INFORMATION AS TO CERTAIN SHAREHOLDERS
Set forth below is certain information with respect to the only persons known
to the Company who owned beneficially more than five percent of the Company's
voting securities as of March 2, 1995:
AMOUNT PERCENT
BENEFICIALLY OF
OWNED CLASS
------------ -------
Minorco................................................. 30,639,120 32.1%(1)
9 rue Sainte Zithe, L-2763 Luxembourg City,
Grand Duchy of Luxembourg
Wellington Management Company........................... 6,527,706 6.8%(2)
75 State Street
Boston, Massachusetts 02109
State Farm Mutual Automobile Insurance Company.......... 6,447,262 6.8%(3)
One State Farm Plaza,
Bloomington, Illinois 61710
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(1) The Company is informed by Minorco, a company incorporated under the laws
of Luxembourg as a societe anonyme, as follows:
Minorco, through a wholly-owned subsidiary, holds 30,639,120 shares of
Common Stock of the Company, representing approximately 32.1% of the
outstanding voting securities of the Company. Shares granted to Messrs. Lea
and Slack pursuant to the Company's Stock Bonus Plan for Non-Employee
Directors have been ceded to Minorco pursuant to arrangements between
Messrs. Lea and Slack, respectively, and Minorco.
Minorco is an international natural resources company with operations in
gold, base metals, industrial minerals, paper and packaging and
agribusiness. The capital stock of Minorco is owned in part as follows:
approximately 43%, directly or through subsidiaries, by Anglo American
Corporation of South Africa Limited ("Anglo American"), a publicly held
mining and finance company, approximately 23%, directly or through
subsidiaries, by De Beers Centenary AG ("Centenary"), a publicly held Swiss
diamond mining and investment company, and approximately 3% by Anglo
American Gold Investment Company Limited ("Amgold"), a publicly held mining
investment company. Approximately 39% of the capital stock of Anglo
American is owned, directly or through subsidiaries, by De Beers
Consolidated Mines Limited ("De Beers"), a publicly held diamond mining and
investment company. Approximately 29% of the capital stock of Centenary and
approximately 33% of the capital stock of De Beers is owned, directly or
through subsidiaries, by Anglo American. De Beers owns approximately 9% of
Centenary. Approximately 50% of the capital stock of Amgold is owned,
directly or through subsidiaries, by Anglo American.
2
Mr. Nicholas F. Oppenheimer, Deputy Chairman and a director of Anglo
American, Centenary, De Beers, Chairman and a director of Amgold, and a
director of Minorco, and Mr. Slack, a director of the Corporation and
Minorco USA, Chief Executive, President and a director of Minorco and a
director of Anglo American, have indirect partial interests in
approximately 7% of the outstanding shares of Minorco, approximately 8% of
the outstanding shares of Anglo American and less than one percent of the
outstanding shares of Amgold.
Mr. Richards beneficially owns 1,000 Minorco Ordinary Shares, constituting
less than one percent of the outstanding shares of Minorco. Mr. Richards is
Chairman of the Board, Chief Executive Officer and President of Minorco USA
and a director of Minorco. Mr. Lea is a director of Minorco and Minorco
USA. Minorco has announced that Mr. Smith has been invited to join the
board of directors of Minorco subject to the approval of Minorco's
shareholders at the next Annual General Meeting in May 1995.
(2) As reported by Wellington Management Company and related entities on
Schedule 13G filed with the Securities and Exchange Commission and dated
February 3, 1995.
(3) As reported by State Farm Mutual Automobile Insurance Company and related
entities on Schedule 13G filed with the Securities and Exchange Commission
and dated January 28, 1995.
1. ELECTION OF DIRECTORS
The Board of Directors of the Company consists of three classes, Class I,
Class II and Class III, each class serving for a full three-year term. Ms.
Alvarado, Mr. Napier and Mrs. Pace all of whom are incumbent Class II Directors
are nominees for election as Class II Directors at the Annual Meeting. If
elected, the Class II Directors will serve three-year terms expiring in 1998.
Mr. Robert L. Guyett, a Class II Director since 1991, will not stand for
reelection as a result of his plans to retire. The Class III Directors will be
considered for reelection at the 1996 Annual Meeting. The Class I Directors
will be considered for reelection at the 1997 Annual Meeting.
Messrs. Slack and Smith have been members of the Board of Directors since
1981, Mr. Richards since 1983, Mr. Antonini since 1985, Mr. Napier since 1986,
Mrs. Pace since 1987, Mr. LaTorre since 1990, Mr. Watson since 1991, Mr. Lea
since 1994 and Ms. Alvarado since 1995.
Directors will be elected by the affirmative vote of a majority of the votes
cast at the Meeting.
The persons named as proxies in the accompanying proxy, who have been
designated by the Board of Directors, intend to vote, unless otherwise
instructed in such proxy, FOR the election of Ms. Alvarado, Mr. Napier and Mrs.
Pace as Class II Directors.
3
INFORMATION WITH RESPECT TO NOMINEES AND
DIRECTORS WHOSE TERMS CONTINUE
The following table sets forth the name and age of each nominee and Director;
all other positions and offices, if any, now held by him or her with the
Company and his or her principal occupation during the last five years.
DIRECTORS WITH TERMS EXPIRING MAY 1995 AND NOMINEES, AGES,
PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST
FIVE YEARS, BOARD MEMBERSHIPS (CLASS II)
----------------------------------------
LINDA G. ALVARADO
Age 42. President and Chief Executive Officer of Alvarado Construction, Inc.,
from prior to 1990.
Ms. Alvarado is also a director of Cyprus Amax Minerals Company, Norwest Banks
of Colorado, Inc,. Pena Investment Advisors and Pitney Bowes, Inc.
JAMES V. NAPIER
Age 58. Chairman of Scientific-Atlanta, Inc., a communications manufacturing
company, since December 1992; Chairman and President of Commercial Telephone
Group, Inc. prior thereto.
Mr. Napier is also a director of Intelligent Systems Corporation, Vulcan
Materials Company, HBO & Company, Rhodes, Inc. and Summit Communications
Group.
NORMA T. PACE
Age 73. Senior Advisor and Director of WEFA Group, Inc., economic consultants,
since 1992; President of Economic Consulting and Planning Inc. prior
thereto.
Mrs. Pace is also a director of Hasbro, Inc. and Georgia-Pacific Corporation.
4
DIRECTORS WITH TERMS EXPIRING MAY 1996, AGES,
PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST
FIVE YEARS, BOARD MEMBERSHIPS (CLASS III)
-----------------------------------------
L. DONALD LATORRE
Age 57. President and Chief Operating Officer of the Company since January
1995; Senior Vice President and Chief Operating Officer of the Company from
June 1990 to January 1995; Vice President of the Company and President of
the Pigments and Additives Division prior thereto.
REUBEN F. RICHARDS
Age 65. Chairman of the Board, Terra Industries Inc., agribusiness, from prior
to 1990; Chief Executive Officer and President thereof from prior to 1990 to
May 1991; Chairman of the Board of Minorco (U.S.A.) Inc. since May 1990 and
Chief Executive Officer and President thereof since February 1994.
Mr. Richards is also a director of Santa Fe Energy Resources, Inc., Ecolab
Inc., Minorco and Potlatch Corporation.
HENRY R. SLACK
Age 45. Chief Executive of Minorco since December 1992; President and a
director thereof since prior to 1990; director of Anglo American Corporation
of South Africa Limited since prior to 1990.
Mr. Slack is also a director of Terra Industries Inc.
ORIN R. SMITH
Age 59. Chairman and Chief Executive Officer of the Company since January
1995; President and Chief Executive Officer of the Company prior thereto.
Mr. Smith is also a director of Vulcan Materials Company, The Summit
Bancorporation, The Louisiana Land and Exploration Company and Perkin-Elmer
Corporation.
5
DIRECTORS WITH TERMS EXPIRING MAY 1997, AGES,
PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST
FIVE YEARS, BOARD MEMBERSHIPS (CLASS I)
---------------------------------------
MARION H. ANTONINI
Age 64. Chairman, President and Chief Executive Officer of Welbilt
Corporation, a food service equipment and consumer products company, since
September 1990; Chairman and Managing Director of KD Equities prior thereto.
Mr. Antonini is also a director of Vulcan Materials Company, Scientific-
Atlanta, Inc., ABC Rail Corporation and Berisford International (UK).
ANTHONY W. LEA
Age 46. Executive Director and Member of the Executive Committee of Minorco
since prior to 1990; Joint Managing Director thereof from January 1990 to
December 1992; Director of Anglo American Corporation of South Africa since
November 1993.
Mr. Lea is also a director of Terra Industries Inc.
DOUGLAS G. WATSON
Age 50. President of the Pharmaceuticals Division and Director of CIBA-GEIGY
Corporation since prior to 1990.
Mr. Watson is also a director of The Summit Bancorporation.
6
SHARE OWNERSHIP OF DIRECTORS AND OFFICERS
Set forth in the following table is the beneficial ownership of Common Stock
as of March 2, 1995 for all nominees, continuing Directors, each of the
Executive Officers listed on the Summary Compensation Table and all Directors
and Executive Officers as a group. No Director or Executive Officer owns more
than 1% of the total outstanding shares (including exercisable options). All
Directors and Executive Officers as a group own approximately 2% of the total
outstanding shares (including exercisable options).
NAME SHARES
---- ---------
Linda G. Alvarado.................................................. 5,062
Marion H. Antonini................................................. 10,508
Arthur A. Dornbusch, II............................................ 120,618(1)
Robert L. Guyett................................................... 279,162(1)
L. Donald LaTorre.................................................. 482,701(1)
Anthony W. Lea..................................................... 500
James V. Napier.................................................... 7,774
Norma T. Pace...................................................... 13,927
Reuben F. Richards................................................. 6,750
Robert J. Schaffhauser............................................. 118,050(1)
Henry R. Slack..................................................... 1,687(2)
Orin R. Smith...................................................... 881,559(1)
Douglas G. Watson.................................................. 15,329
All Directors and Executive Officers as a group.................... 2,209,905(1)
--------
(1) Includes 329,062, 197,500, 165,626, 43,750, 36,689 and 845,531 shares of
Common Stock subject to options granted to Messrs. Smith, LaTorre, Guyett,
Schaffhauser, Dornbusch and all Directors and Executive Officers as a
group, respectively, under the Company's Stock Option Plan of 1981 (the
"1981 Stock Option Plan") and the Company's Stock Option Plan of 1991 (the
"Stock Option Plan", together with the 1981 Stock Option Plan, the "Stock
Option Plans"), which options may be exercised within 60 days from March 2,
1995, and also includes 4,724 shares owned by family members in which
persons in the group disclaim any beneficial interest.
(2) Excludes 548,122 shares of Common Stock in which Mr. Slack has an indirect
partial interest and in which he disclaims any beneficial interest.
7
BOARD OF DIRECTORS' MEETINGS, COMMITTEES AND FEES
The Board of Directors of the Company held a total of nine meetings during
1994. Among the standing committees of the Board of Directors are the Audit
Committee, the Compensation Committee and the Stock Option/Stock Bonus
Committee. The Board does not have a nominating committee.
The members of the Audit Committee are Mrs. Pace (Chairman), Ms. Alvarado,
Messrs. Antonini, Lea and Richards, all of whom are non-employee Directors. The
Audit Committee periodically reviews the Company's accounting policies,
internal accounting controls and the scope and results of the independent
accountants' audit of the Company's financial statements. The Audit Committee
held three meetings during 1994.
The members of the Compensation Committee are Messrs. Antonini (Chairman),
Napier, Richards, Slack and Watson and Mrs. Pace, all of whom are non-employee
Directors. The Compensation Committee determines the appropriate level of
compensation for the Officers and employees of the Company. The Compensation
Committee held five meetings during 1994.
The members of the Stock Option/Stock Bonus Committee are Messrs. Antonini
(Chairman), Napier, Richards, Slack and Watson and Mrs. Pace, all of whom are
non-employee Directors. The Stock Option/Stock Bonus Committee administers the
Company's stock option and stock bonus plans and determines the terms and
conditions for the issuance of stock options and stock bonus awards to the
Officers and employees of the Company. The members of the Committee are not
eligible to participate in such plans. The Stock Option/Stock Bonus Committee
held four meetings during 1994.
During 1994 all of the Directors of the Company attended all of the meetings
of the Board and meetings of committees of the Board on which they served,
except for Mr. Slack, who attended fewer than 75% of such meetings.
Directors who are not employees of the Company each received a retainer at
the annual rate of $30,000 in 1994. There was also a Chairman's fee paid in
1994 of $75,000. In addition, non-employee Directors received a $1,350
attendance fee for each Board meeting attended in 1994. During 1994, non-
employee Directors also received a $1,000 attendance fee for each committee
meeting attended; a $5,000 annual retainer for each committee on which they
served; and an additional $5,000 annual retainer for each chairman of a
committee. Directors who are employees of the Company do not receive any
Directors' fees or retainers.
Pursuant to the Company's Retirement Plan for Directors, a Director or
Director Emeritus will receive retirement benefits following his or her
retirement as a Director if at the time of such retirement either (i) he or she
has six or more years of service as a non-employee Director or (ii) his or her
age and years of service as a non-employee Director equal at least 65. Such
retirement
8
benefits will be an annual amount equal to the annual Board retainer fee
(excluding meeting and committee fees) in effect on the date of the Director's
retirement and will be payable in equal monthly installments commencing on the
first day of the month coinciding with or next following the Director's 65th
birthday or, if later, the date of the Director's retirement and continuing
until the earlier of (i) the Director's death or (ii) the completion of
payments for a period equal to the period of the Director's service as a non-
employee Director.
Pursuant to the Company's Stock Bonus Plan for Non-Employee Directors (the
"Directors Stock Bonus Plan") each person who becomes such a non-employee
Director prior to June 30, 1996 shall be awarded 5,062 shares of the Company's
Common Stock effective as of such person's election to the Board of Directors.
Such shares will vest in equal increments over a ten year period. Directors are
entitled to receive cash dividends on and to vote shares which are the subject
of an award prior to their distribution or forfeiture. Upon termination of the
Director's service as a non-employee Director, the Director (or, in the event
of his or her death, his or her beneficiary) shall be entitled, in the
discretion of the committee formed to administer the Directors Stock Bonus
Plan, to receive the shares awarded to such Director which have tentatively
vested up to the date of such termination of service; shares may be received
prior to such date if there has been an "acquisition of a control interest".
Pursuant to the Company's Directors and Executives Deferred Compensation
Plan, the Company's Deferred Compensation Plan for Directors and the Company's
Directors Stock Bonus Plan, non-employee Directors may elect to defer payment
of all or a designated portion of their compensation for services as a
Director.
9
COMPENSATION COMMITTEE INTERLOCKS, INSIDER
PARTICIPATION AND CERTAIN TRANSACTIONS
The members of the Compensation Committee are Messrs. Antonini (Chairman),
Napier, Richards, Slack and Watson and Mrs. Pace, all of whom are non-employee
directors. Messrs. Richards and Slack are the Chairman of the Board, Chief
Executive Officer and President of Minorco (U.S.A.) Inc. and the Chief
Executive, President and Director of Minorco, respectively. Minorco
beneficially owns more than five percent of the Company's voting securities.
For additional information regarding Minorco, see "Information as to Certain
Shareholders" on page 2.
The Company markets, fabricates and processes various metals, minerals and
ores acquired from numerous domestic and foreign suppliers. The Company makes
and will continue to make purchases of such materials, in the ordinary course
of its business, from entities in which it is informed Anglo American has a
material interest, upon terms which are no less favorable to the Company than
those obtainable from other sources. The Company's purchases of such materials
from all sources during 1994 approximated $1.5 billion including purchases of
approximately $233 million from, and metal leases of approximately $50 million
to, entities in which the Company is informed Anglo American has a material
interest.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Executive Officers and Directors and persons who own more than 10% of a
registered class of the Company's equity securities to file initial reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC") and the New York Stock Exchange. Such Officers, Directors and
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on a review of the copies of
such forms furnished to the Company and written representations from the
Company's Executive Officers and Directors, all persons subject to the
reporting requirements of Section 16(a) filed the required reports on a timely
basis for 1994, except that options granted to Executive Officers in December
1994 that were required to be reported in February 1995 were inadvertently not
reported until March 1995.
10
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the compensation paid by the Company for
services rendered in all capacities during each of the last three fiscal years
to the Chief Executive Officer and the other four most highly compensated
Executive Officers. All share and per share data have been restated to give
effect to all relevant stock splits, the last of which occurred in September,
1993.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS (1)(2)(3)
------------------------------------------ -----------------------
RESTRICTED ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) AWARD(S) ($)(4) (#) ($)(5)
------------------ ---- ---------- --------- ---------------- --------------- ------- ------------
Orin R. Smith Director, 1994 699,996 630,000 -- 422,925 291,250 --
Chairman and Chief 1993 670,034 585,000 686 1,323,000 191,250 --
Executive Officer 1992 620,000 670,000 1,265 1,674,750 225,000 --
L. Donald LaTorre, 1994 394,146 300,000 -- 304,500 187,000 3,329
Director, President and 1993 376,269 250,000 3,985 945,000 115,000 2,697
Chief Operating Officer 1992 341,250 350,000 2,872 1,196,250 135,000 1,826
Robert L. Guyett, 1994 363,396 200,000 -- 177,625 102,000 2,618
Director, Senior Vice 1993 351,660 200,000 3,136 588,000 77,500 1,882
President and Chief 1992 330,684 250,000 61,033(6) 747,656 90,000 741
Financial Officer
Robert J. Schaffhauser, 1994 262,656 125,000 -- 126,875 75,000 --
Vice President, 1993 249,696 110,000 2,785 378,000 40,000 --
Technology and 1992 231,600 160,000 2,077 478,500 45,000 --
Corporate Development
Arthur A. Dornbusch, II 1994 242,460 75,000 -- 42,300 30,000 2,663
Vice President, General 1993 233,711 100,000 2,409 329,000 26,000 2,158
Counsel, and Secretary 1992 223,038 100,000 1,722 398,750 30,000 1,461
--------
(1) The Company's Key Employee Stock Bonus Plan and the Company's Stock Option
Plans provide for acceleration of vesting in the event of a "change in
control." For information on what constitutes a "change in control," see
"Employment Contracts, Termination of Employment and Change In Control
Arrangements" on page 16.
(2) Currently, the Company has no Long Term Incentive Plans which are required
to be reported pursuant to the General Rules and Regulations of the
Securities and Exchange Commission.
(3) The decrease in Restricted Stock Awards and increase in Options for 1994
compared with prior years represents a shift in compensation policy which
is discussed in greater detail in Section 3 of the Report on Executive
Compensation on page 19.
11
(4) As of December 31, 1994, Messrs. Smith, LaTorre, Guyett, Schaffhauser and
Dornbusch held 169,200, 116,550, 72,090, 46,350 and 42,650 unvested shares,
respectively, of stock which were awarded pursuant to the Company's Key
Employee Stock Bonus Plan having a market value of $3,743,550, $2,578,669,
$1,594,991, $1,025,494 and $943,631, respectively. The foregoing amounts do
not include the reported grants, which were made in February 1995 for
services rendered during 1994. Restricted stock awards of the Company's
Common Stock granted under the Key Employee Stock Bonus Plan vest in five
equal annual installments commencing on the first anniversary of the date
of the grant. Vesting will be accelerated upon the occurrence of a "change
in control." The Company pays dividends on restricted stock, if and to the
extent paid on Common Stock generally. For information on what constitutes
a "change in control," see "Employment Contracts, Termination of Employment
and Change In Control Arrangements" on page 16.
(5) Represents interest accrued during 1992, 1993 and 1994 in excess of 120% of
the applicable federal interest rate with respect to salary and bonus
deferrals.
(6) Mr. Guyett joined the Company on September 23, 1991 and received $58,658 in
1992 pursuant to the Company's Relocation Policy in connection with his
relocation from California.
12
The following table sets forth information concerning individual grants of
stock options made under the Stock Option Plan in December 1994 and February
1995 for services rendered during 1994 by each of the named Executive Officers.
OPTION GRANTS FOR SERVICES RENDERED DURING 1994
GRANT DATE
INDIVIDUAL GRANTS VALUE
--------------------------------------------------------------------- ------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS FOR SERVICES OR BASE GRANT DATE
GRANTED RENDERED PRICE EXPIRATION PRESENT
NAME (#)(1) DURING 1994 ($/Sh) DATE VALUE ($)(2)
---- ---------- ------------ -------- ---------- ------------
Orin R. Smith........... 191,250 11% 21.32 12/15/2004 1,145,588
100,000 6% 25.25 02/02/2005 732,000
L. Donald LaTorre....... 115,000 6% 21.32 12/15/2004 688,850
72,000 4% 25.25 02/02/2005 527,040
Robert L. Guyett........ 60,000 3% 21.32 12/15/2004 359,400
42,000 2% 25.25 02/02/2005 307,440
Robert J. Schaffhauser.. 45,000 2% 21.32 12/15/2004 269,550
30,000 2% 25.25 02/02/2005 219,600
Arthur A. Dornbusch, II. 20,000 1% 21.32 12/15/2004 119,800
10,000 1% 25.25 02/02/2005 73,200
--------
(1) Options have a ten year term and vest in four equal annual installments
commencing on the first anniversary of the date of grant. Vesting will be
accelerated upon the occurrence of a "change in control." For information
as to what constitutes a "change in control," see "Employment Contracts,
Termination of Employment and Change In Control Arrangements" on page 16.
(2) Based on a binomial option pricing model. The model assumes: (a) an option
term of 4 years, which primarily represents historic exercise trends for
the named Executive Officers; (b) an interest rate of 7% that represents
the current yield curve which shows a flat to down bias during the term;
(c) an average volatility of approximately 30% calculated using average
weekly stock prices for the three years prior to the grant date; and (d)
dividends at the rate of $.48 per share (the current annual dividend rate)
with an upward adjustment during the term which represents historic trends.
The Company does not believe that the values estimated by the model will
necessarily be indicative of the values to be realized by an executive.
13
The following table sets forth information concerning each exercise of stock
options during 1994 by each of the named Executive Officers and the value of
unexercised options at December 31, 1994.
AGGREGATED OPTION EXERCISES IN 1994
AND VALUES AT DECEMBER 31, 1994
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1994(#) AT DECEMBER 31, 1994($)
------------------------- -------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------
Orin R. Smith........... 191,249 3,315,278 329,064 551,250 2,286,567 544,922
L. Donald LaTorre....... 50,625 915,924 191,250 331,250 1,287,578 326,953
Robert L. Guyett........ -0- -0- 146,250 216,250 898,828 299,609
Robert J. Schaffhauser.. 25,874 419,222 42,189 118,750 278,509 54,492
Arthur A. Dornbusch, II. 21,937 362,649 30,189 69,437 214,640 40,870
14
PENSION PLANS
The following table shows estimated pension benefits payable to a covered
participant at normal retirement age under the Company's qualified defined
benefit pension plan, as well as non-qualified supplemental pension plans that
provide benefits that would otherwise be denied participants by reason of
certain Internal Revenue Code limitations on qualified plan benefits and
provide additional credited years of service, based on remuneration that is
covered under the plans and years of service with the Company and its
subsidiaries.
PENSION PLAN TABLE
YEARS OF SERVICE
--------------------------------------------
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
------------ -------- -------- -------- -------- --------
$ 50,000..................... $ 10,156 $ 13,541 $ 16,927 $ 20,312 $ 23,697
100,000..................... 21,406 28,541 35,677 42,812 49,947
200,000..................... 43,906 58,541 73,177 87,812 102,447
300,000..................... 66,406 88,541 110,677 132,812 154,947
400,000..................... 88,906 118,541 148,177 177,812 207,447
500,000..................... 111,406 148,541 185,677 222,812 259,947
600,000..................... 133,906 178,541 223,177 267,812 312,447
700,000..................... 156,406 208,541 260,677 312,812 364,947
800,000..................... 178,906 238,541 298,177 357,812 417,447
900,000..................... 201,406 268,541 335,677 402,812 469,947
1,000,000..................... 223,906 298,541 373,177 447,812 522,447
1,100,000..................... 246,406 328,541 410,677 492,812 574,947
1,200,000..................... 268,906 358,541 448,177 537,812 627,447
1,300,000..................... 291,406 388,541 485,677 582,812 679,947
1,400,000..................... 313,906 418,541 523,177 627,812 732,447
1,500,000..................... 336,406 448,541 560,677 672,812 784,947
A participant's remuneration covered by the Company's pension plans is his or
her average monthly earnings, consisting of base salary and regular cash
bonuses, if any (as reported in the Summary Compensation Table, except as set
forth below), for the highest 60 consecutive calendar months out of the 120
completed calendar months next preceding termination of employment. With
respect to each of the individuals named in the Summary Compensation Table on
page 11, credited years of service under the plans as of December 31, 1994 are
as follows: Mr. Smith, 23 years; Mr. LaTorre, 10 years; Mr. Guyett, 3 years;
Mr. Schaffhauser, 5 years; and Mr. Dornbusch, 18 years. Messrs. Smith, LaTorre,
Guyett, Schaffhauser and Dornbusch had $1,284,996, $644,146, $563,396, $372,656
and $342,460, respectively, of annual remuneration covered by the plans during
1994. Benefits shown are computed as a straight line single life annuity
beginning at age 65 and the benefits listed in the Pension Plan Table are not
subject to any deduction for Social Security or other offset amounts.
15
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
In May 1986, the Company entered into a three-year employment agreement with
Mr. Smith. Commencing May 20, 1987, and on each May 20 thereafter, Mr. Smith's
agreement shall automatically be extended for another year unless notice of the
Company's intention not to extend shall have been given in writing no later
than December 31st of the preceding year. The agreement provides for an annual
salary of not less than $400,000, an annual cash bonus as the Company, in its
sole discretion, shall determine, but not less than $216,645, and grants of
shares of the Company's Common Stock pursuant to the Key Employees Stock Bonus
Plan, then in effect, in such amounts as the Company, in its sole discretion,
shall determine; provided, however, that such annual bonus share grants may not
be less than 14,999 shares, conditioned on the Company achieving its financial
plan, as approved by the Board of Directors, for the year with respect to which
the grant is made. Such financial plan is established by the Board of Directors
in its discretion and may or may not require an improvement in the Company's
performance from the prior year. In addition, Mr. Smith is entitled to
participate in the benefit plans of the Company.
Mr. Guyett has announced his intention to retire. It is anticipated that,
subject to final agreement, Mr. Guyett will retain his previously granted stock
options, stock bonus awards and medical and certain other benefits and will be
eligible to receive the value of his pension for a period of service ending
December 1, 1996. He will also receive compensation at the same rates as
currently paid for the same period or such earlier date as he dies or certain
other circumstances occur and will earn additional amounts for services to be
rendered not to exceed $75,000 for any calendar year.
The Company's Key Employee Stock Bonus Plan and the Company's Stock Option
Plans, in which all of the Executive Officers participate, provide for the
acceleration of vesting of awards granted in the event of a change in control.
Pursuant to these plans a "change in control" shall occur if (a) twenty-five
percent or more of the Company's outstanding securities entitled to vote in the
election of directors shall be beneficially owned, directly or indirectly, by
any person or group of persons, other than the groups presently owning the
same, or (b) a majority of the Board of Directors of the Company ceases to
consist of the existing membership or successors nominated by the existing
membership or their similar successors.
REPORT ON EXECUTIVE COMPENSATION
Under the overall direction of the Compensation Committee and the Stock
Option/Stock Bonus Committee of the Board of Directors and in accordance with
the Company's Stock Option Plan and Stock Bonus Plan approved by its
shareholders, the Company has developed and implemented compensation programs
designed to:
. Attract and retain people who can build and continue to grow a
successful company;
. Provide incentives to achieve high levels of company, business, and
individual performance; and
16
. Maintain and enhance alignment of employee and shareholder interests.
The Compensation and Stock Option/Stock Bonus Committees are composed
entirely of non-employee Directors individually noted as signatories to this
report.
The Compensation Committee is responsible for overseeing the development and
for review and approval of:
. Overall compensation policy;
. Salaries for the Chief Executive Officer and for approximately 40 other
senior managers worldwide; and
. Aggregate cash incentive awards for the Company and specific individual
cash awards under the annual plan for the Chief Executive Officer and
approximately 40 other senior managers worldwide.
The Stock Option/Stock Bonus Committee is responsible for overseeing the
development and for review and approval of:
. Plan design and policies related to senior management and employee
awards of options and restricted stock; and
. Individual grants under the Stock Option Plan and restricted stock
awards under the Key Employee Stock Bonus Plan to the Chief Executive
Officer and approximately 325 employees worldwide.
In exercising those responsibilities and in determining the compensation in
particular of Mr. Smith and in general of other senior managers individually
reviewed, the Committees examine and set:
1. Base Salary
Salaries are reviewed annually against industry practices as determined
by professional outside consultants who conduct annual surveys. The
Company's current competitive target is to pay somewhat above the
median for positions of comparable level as adjusted for company size.
This target is on average being achieved for the entire professional,
technical, and managerial salaried work force with a somewhat higher
position at lower levels and a somewhat lower position at higher
levels. Salary structures are set each year based on the Company's
target and its actual competitive position. There was no increase in
the structure for 1994 for US professional, technical, and managerial
group. The structure increase for 1995 is 3%. Likewise, merit budgets
are established based on a competitive target, actual competitive
position, and the Company's desire to recognize and reward individual
contribution. For international employees and non-exempt salaried
employees in the US, structure adjustments and merit budgets are
determined based on local market conditions and individual performance.
Individual adjustments are earned based upon the managers' quantitative
and qualitative evaluation of individual performance, including
feedback from customers served, against business objectives such as
earnings, return on assets employed, return on capital, market
17
share, new customers, and development of new commercial products.
Performance is also considered in the context of the individuals'
position in their respective salary ranges. The better the performance
and the lower the position in range, the greater will be the percentage
base salary increase. Conversely, the lower the performance and the
higher the position in range, the lower will be the percentage base
salary increase.
Mr. Smith's salary was increased 5% for 1995 based on excellent
business results, which included substantial earnings growth while
funding significant investments in research and development, joint
ventures, and acquisitions. Base salary continues to be less than one-
fourth of total compensation for Mr. Smith and generally less than one-
half of total compensation for other senior management. This reflects
the Company's emphasis on non-fixed compensation which varies with
Company performance and on other equity vehicles which are closely
aligned with shareholder interests.
2. Annual Cash Incentive Program
This program is designed to provide focus on expected annual results
and recognition of accomplishment for the year. Approximately 275
employees worldwide are eligible to participate in the Company's
program. While the overall incentive pool is not determined
mathematically, the sum of competitively determined target incentives
for the Company and each business group are factored up or down based
upon the Committee's judgment primarily of performance (pre-tax
earnings for the business groups and earnings per share for the
Company) against the annual operating plan. This may be adjusted
considering return on net asset performance for the business groups and
return on equity performance for the Company, earnings performance
against the prior year and the overall economic and competitive
climate. Historically, the Committee's judgment has been to leverage
the size of incentives paid such that they increase or decrease more
rapidly as performance exceeds or falls short of target annual earnings
levels. For 1995 the Company has modified its plan to better link
employee compensation with business group and Company earnings
performance against plan and to encourage identification and commitment
to "breakthrough" targets. It also provides for greater clarity of
expected results and includes a threshold performance level below which
annual incentives will not normally be paid.
For 1994, payouts relative to competitive target incentives ranged from
73% to 116% for business groups and 85% for the Company as a whole.
Earnings per share increased 16% over 1993 (before the 1993 sale of M&T
Harshaw and excluding a 1993 special charge and the cumulative effect
of an accounting change).
For the year 1994, Mr. Smith received a cash incentive award of
$630,000, an increase of $45,000 from the 1993 award but $40,000 less
than 1992. This was consistent with the plan payout for the overall
Company and reflected the Committee's judgment that the Company had
achieved significant earnings growth despite higher than usual expenses
and losses associated with new business development efforts that are
expected to be positive factors in the future.
18
While highly variable from year to year in the survey information,
senior management bonuses are on average close to the median of
competitive pay.
3. Restricted Stock
The Key Employee Stock Bonus Plan is designed to align key employee and
shareholder long term interests by providing designated employees an
equity interest in the Corporation which vests in equal amounts over a
period of five years. Approximately 325 employees participate in the
Company's plan worldwide. Eligible employees are reviewed annually for
award grants. The size of the award is not determined mathematically
but rather by Stock Option/Stock Bonus Committee judgment. This
judgment was based primarily on award history factored by Company
performance. Adjustments are then made for individual performance
reflecting such factors as the earnings of the respective business
group and the performance of the individual against business objectives
and within the context of expected results. The pool of shares for 1994
was approximately 75% of historical levels and approximately equal to
the number granted for 1993. However, for 1994 the Committee approved
modifying the form of payout to decrease the number of shares approved
for grant by two-thirds and to provide an equivalent value (as
determined by actuarial and financial models) in the form of stock
options. The intent of this shift toward options, which the Company
anticipates continuing in the future, is to increase the alignment of
employee total compensation with shareholder interests by providing a
greater proportion in the form of options which increase employee
compensation only when shareholders profit through stock appreciation.
This resulted in 155,255 shares awarded which were less than one-third
of those awarded for 1993.
For the year 1994, Mr. Smith received a grant of 16,667 shares plus
options noted below. This compares with 47,250 shares in 1993 and
63,000 shares in 1992. Mr. Smith's pool award, prior to splitting the
form of grant into share awards and options as described earlier, was
50,000 which reflected the Committee's judgment that the Company had
achieved significant earnings growth while at the same time investing
in its future.
4. Stock Options
The Stock Option Plan has been designed to link employee compensation
growth directly to growth in share price. In conjunction with
restricted stock, options are the major driver of senior management
compensation aligning their reward with shareholder interests. As noted
above, implementation of the plans was modified in 1994 to provide over
two-thirds of the compensation value in the form of options that was
formerly provided in the form of stock awards. Utilizing actuarial and
financial models, the value of an option was calculated to be
approximately one-third of the value of a share award. Therefore, in
addition to options historically awarded to a senior management group
of approximately 60 employees worldwide, the form of payment for the
share pool was changed to provide two-thirds of the value in the form
of options to the approximately 325 participants in the restricted
stock plan. This change ties a significantly increasing percentage of
participant
19
total compensation directly to appreciation in the share price. As in
the past, participants will be reviewed annually for option grants.
Options vest in equal increments over four years and normally have a
ten year life.
The size of the award is not determined mathematically, but rather by
Stock Option/Stock Bonus Committee judgment. This judgment is based
primarily on award history factored by Company performance. Adjustments
are then made for individual performance, reflecting such factors as
the earnings of the respective business group and the performance of
the individual against business objectives and within the context of
expected results. The pool of options for 1994 (excluding the
conversion of restricted stock as noted above) was approximately 85% of
historical levels and equal to the number granted for 1993.
For the year 1994, Mr. Smith was awarded 191,250 options plus an
additional 100,000 options representing value paid in the form of
options instead of restricted stock. The 191,250 is consistent with the
plan grants for the overall Company and reflected the Committee's
judgment that the Company had achieved significant earnings growth
while at the same time investing in its future.
To further strengthen senior manager alignment with shareholder interests, in
early 1995 the Committee implemented stock ownership guidelines for corporate
officers and seven other key senior managers. The guidelines are expressed as a
multiple of base salary and are to be attained within five years of working in
a covered position. If stock ownership remains below the appropriate guideline
multiple after that period, excepting special circumstances, additional
ownership will be encouraged through such measures as paying part of the annual
cash incentive in the form of stock.
The Committees direct the purchase of compensation survey information from
several independent professional consultants in order to review the base,
annual cash incentive, and total compensation of Mr. Smith and other individual
senior managers and employee groups. There is some overlap with the Dow Jones
Chemicals Group used in the Performance graph. There are two key reasons for
the divergence in samples: (1) the Company generally utilizes standard surveys
in the belief that the general lack of precision inherent in survey methodology
and compensation decision making does not normally warrant the additional cost
of specialized surveys (most of the Dow Jones Chemicals Group do not
participate in the standard surveys purchased); (2) the predominant labor
markets in which the Company competes for people differ from the Dow Jones
Chemicals Group in that they also include firms in other business line
industries, e.g., petroleum and in geographic concentrations, e.g., New Jersey.
Compensation paid in 1994 did not exceed one million dollars in non-excluded
compensation to any of the executives named in the Summary Compensation Table
on page 11. As of the time of issuing this report the Committees are still
evaluating the Company's compensation policies with respect to qualifying
compensation to be paid its executive officers for deductibility under section
162(m) of the Internal Revenue Code.
20
Based on the surveys and the achievements of the Company against its targets
in the context of the economic and competitive climate, the Committees are
satisfied the Company's compensation plans meet the objectives of attracting
and retaining talent, providing incentives for superior performance, and
aligning employee and shareholder interests.
COMPENSATION COMMITTEE
STOCK OPTION/STOCK BONUS COMMITTEE
Marion H. Antonini James V. Napier Norma T. Pace
Reuben F. Richards Henry R. Slack Douglas G. Watson
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG ENGELHARD CORPORATION, S&P 500 INDEX AND
DOW JONES CHEMICAL SECTOR
[GRAPH APPEARS HERE]
DECEMBER 31,
-----------------------------------------
1989 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------
Engelhard Corporation................. 100.00 101.45 179.03 289.66 313.10 289.41
S&P 500............................... 100.00 96.90 126.42 136.05 149.76 151.74
Dow Jones (Chemical).................. 100.00 91.28 122.29 133.46 147.72 160.89
--------
* Assumes $100 invested on December 31, 1989 in each referenced group with
reinvestment of dividends.
21
2. APPROVAL OF THE ADOPTION OF DIRECTORS STOCK OPTION PLAN
On February 2, 1995, the Board of Directors (the "Board") adopted, subject to
shareholder approval, the Engelhard Corporation Directors Stock Option Plan
(the "Directors Plan") to become effective as of May 4, 1995.
The Directors Plan provides for the automatic grant of options (the
"Options") to acquire shares of the Company's Common Stock (the "Shares") to
the non-employee directors of the Company. The purposes of the Directors Plan
are to advance the interests of the Company and its shareholders by providing a
means to attract, retain, and motivate non-employee directors of the Company
upon whose judgment, initiative and efforts the continued success, growth and
development of the Company is dependent.
The following summary of certain features of the Directors Plan is qualified
in its entirety by reference to the full text of the Directors Plan which is
attached hereto as Exhibit A.
SUMMARY DESCRIPTION OF THE DIRECTORS PLAN
The Directors Plan provides for the automatic issuance of Options to non-
employee members of the Board of Directors of the Company to purchase Shares of
the Company. An aggregate of 250,000 Shares would be reserved for issuance
under the Directors Plan, subject to adjustment in the event of stock splits,
stock dividends and other transactions involving the Shares. The Directors Plan
will be administered by a committee consisting of Directors of the Company who
are not eligible to participate therein (the "Committee"). However, because the
Directors Plan is intended to operate automatically, the Committee will have no
discretion with respect to the director optionees, the determination of the
exercise price of the Options, the timing of such grants or number of Shares
covered by the Options.
On the date of the regular meeting of the Board in December of each year (or
if the Board does not meet in December, the date of the next regular Board
meeting), beginning with the date of the regular meeting in December 1995, each
non-employee director in office on such date shall automatically be granted an
Option to purchase 2,000 Shares with an exercise price per Share equal to 100
percent of the fair market value of one Share at the date of grant. Each option
granted under the Directors Plan shall become exercisable in four equal
installments, commencing on the first anniversary of the date of grant and
annually thereafter. Each option will terminate on the tenth anniversary of the
date of grant. Notwithstanding the foregoing, each Option held by a director
which was granted more than one year before his or her termination of service
as a director shall become fully exercisable upon termination if such
termination is a result of disability, death or retirement after attaining age
65. In addition, each Option held by a director shall become fully exercisable
upon an "acquisition of a control interest" as defined in the Directors Plan.
If a director's service is terminated, each Option exercisable under the
Directors Plan held by said director may be exercised for a period of three
months after termination of his or her service. If a director's service is
terminated by reason of disability, retirement after attainment of age 65 or
death while serving as
22
a director, any Options held by the director which are exercisable under the
Directors Plan at the time of his or her termination may be exercised for the
period ending on the tenth anniversary of the date of grant. If a director dies
after the termination of his or her service as a director, the person to whom
the rights are transferred by will or the laws of descent may exercise any
Options that could have been exercised at the time of the director's death for
the remainder of the period allowed under the Directors Plan, as if the
director had survived. Options granted under the Directors Plan shall be
transferable only to the extent allowed under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3").
The Board may amend, alter, suspend, discontinue or terminate the Directors
Plan without shareholder consent unless such consent is required by federal law
or regulation (including Rule 16b-3), except that the Directors Plan may not be
amended more than once every six months other than to comport with changes in
the Internal Revenue Code or the rules thereunder. No amendment, alteration,
suspension, discontinuation or termination may impair the rights of a holder of
an outstanding Option without the consent of such holder.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
associated with the grants of Options under the Directors Plan. This summary is
based on the provisions of the Internal Revenue Code of 1986, as amended, the
Treasury regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect as of the date hereof. It does not
describe all federal income tax consequences under the Directors Plan, nor does
it describe foreign, state or local tax consequences.
In general, the grant of a stock option is not a taxable event to the
recipient and it will not result in a tax deduction for the Company. All
Options granted under the Directors Plan will be nonqualified stock options for
federal income tax purposes. Upon the exercise of a nonqualified stock option,
the participant will generally recognize ordinary taxable income equal to the
excess, if any, of the fair market value of the Shares received upon exercise
over the exercise price. Any gain or loss upon a subsequent sale or exchange of
the Shares will be capital gain or loss, long-term or short-term, depending on
the holding period for the Shares.
Special rules apply to the participants because each is subject to Section
16(b) of the Securities Exchange Act of 1934. Certain additional special rules
may apply if the exercise price for an Option is paid for with Shares
previously owned by the optionee rather than in cash.
The table below indicates the present value of and the number of options that
would have been issued on December 15, 1994 under the Directors Plan had it
been in effect during 1994. At present there are 8 non-employee directors who
are eligible to participate in the Directors Plan.
23
NEW PLAN BENEFITS
ENGELHARD CORPORATION DIRECTORS STOCK OPTION PLAN
NON-EMPLOYEE PRESENT NUMBER OF
DIRECTORS VALUE($)(1) OPTIONS
------------ ----------- ---------
Eligible Non-Employee
Directors as a Group (8 in number)................. 95,840 16,000
--------
(1) Calculated using the same methodology and assumptions as used to determine
grant date present value of options granted to the named Executive Officers
in the table on page 13.
Adoption of the Directors Plan will require the affirmative vote of a
majority of the votes present or represented and entitled to vote (including
abstentions but not including broker non-votes) at the Meeting.
The Board of Directors recommends that you vote FOR the approval of the
proposed Engelhard Corporation Directors Stock Option Plan.
3. APPROVAL OF THE AMENDMENTS TO THE STOCK OPTION PLAN OF 1991
On February 2, 1995, the Board of Directors approved certain amendments to
the Engelhard Corporation Stock Option Plan of 1991 (the "1991 Plan"), subject
to shareholder approval.
The following summary of the proposed amendments to the 1991 Plan and the
general summary of the 1991 Plan are qualified in their entirety by reference
to the full text of the 1991 Plan, which is attached hereto as Exhibit B.
SUMMARY DESCRIPTION OF THE 1991 PLAN
The 1991 Plan was originally adopted by the Board on March 7, 1991 and was
approved by the shareholders at the Company's 1991 Annual Meeting. The 1991
Plan authorizes the Committee to provide for the granting of stock options,
including "incentive stock options" as defined in Section 422 of the Internal
Revenue Code of 1986, as amended, to key employees as compensation for their
services to the Company and to incent future performance. Options for up to
11,250,000 shares (as adjusted for stock splits) of the Company's Common Stock
in the aggregate may be granted prior to termination of the 1991 Plan on June
30, 2001, at the fair market value of such stock on the date of grant. The
closing price per share of the Common Stock of the Company on the New York
Stock Exchange--composite tape on March 2, 1995 was $26 5/8. As of December 31,
1994, there were 7,541,181 options available for grant under the 1991 Plan.
Options may be made exercisable in installments over the option period, but
generally no option may be exercised before one year (except in the event of an
"acquisition of a control interest" in the Company) or
24
after ten years from the date of grant. Outstanding options may be cancelled
and reissued under terms complying with the requirements of the 1991 Plan for
the granting of options. The purchase price of stock subject to an option may
be paid in stock of the Company. The 1991 Plan permits the satisfaction of
Federal income tax or other tax withholding obligations arising on the exercise
of an option by the withholding of shares of stock acquired under such option.
All outstanding options will become immediately exercisable upon an
"acquisition of a control interest" in the Company (as defined in the 1991
Plan).
The Committee has discretion to determine the key employees who shall
participate in the 1991 Plan, the number of shares of Common Stock subject to
options to be awarded to each, the terms and conditions, if any, upon which
such options may be awarded, and all other matters arising in the
administration of the 1991 Plan. Key employees are those employees of the
Company and its subsidiaries, including officers, who, in the judgment of the
Committee, make important contributions to the Company and its business. There
are approximately 325 employees of the Company eligible to receive options
under the 1991 Plan. Directors of the Company who are not officers or employees
of the Company or its subsidiaries are not eligible to participate in the 1991
Plan. Grants under the 1991 Plan may be in addition to, or in lieu of, other
forms of compensation. No option may be exercised upon termination of service
of any key employee who was previously granted an option, except under certain
circumstances where such termination of service is due to retirement, permanent
disability or death or certain involuntary terminations.
The shares of Common Stock covered by the 1991 Plan are subject to adjustment
in the event of a stock a split, stock dividend or other change in Common
Stock.
The Board may amend or terminate the 1991 Plan without stockholder consent
provided however that any such amendment or termination shall be subject to
shareholder approval to the extent such approval is required in order to ensure
that options granted under the 1991 Plan are exempt (i) under Rule 16b-3 or
(ii) under Section 422 of the Internal Revenue Code of 1986, as amended. No
amendment or termination may impair the rights of a holder of an outstanding
option without the consent of such holder.
The Company will receive a tax deduction for compensation expense when a key
employee exercises a non-qualified stock option, but generally will not receive
such deduction when an employee exercises an incentive stock option under the
1991 Plan. The key employee will generally be taxed on the amount by which the
fair market value of the stock exceeds the option price on the date the
underlying stock is sold for incentive stock options and on the date of
exercise for non-qualified stock options. The gain recognized on the sale of
stock received upon exercise of incentive stock options will generally be
treated as long-term capital gain provided the key employee meets certain
holding period requirements. The key employee may be subject to an alternative
minimum tax when he or she exercises an incentive stock option on the amount by
which the fair market value of the stock exceeds the option price at the date
of exercise.
25
The 1991 Plan was in effect throughout 1994. In December 1994 and February
1995, the Executive Officers of the Company received an aggregate of 809,150
options under the 1991 Plan and all other employees, excluding the Executive
Officers, received an aggregate of 878,155 options under the 1991 Plan for
services rendered during 1994. For additional information on options granted to
certain Executive Officers under the 1991 Plan, see "Option Grants for Services
Rendered During 1994" on page 13.
SUMMARY DESCRIPTION OF PROPOSED AMENDMENTS
The 1991 Plan was established so that the Company could make available to key
executives the opportunity to acquire ownership of Company stock and,
accordingly, significantly assist the Company in providing incentives to these
executives for future performance. The 1991 Plan is proposed to be amended in
the following manner: (i) establish a maximum of 1,000,000 shares for which
options may be granted during any calendar year to any employee; (ii) (x) if an
employee terminates employment by reason of disability or retirement, options
granted on or after February 2, 1995 and at least one year prior to termination
may be exercised any time up to ten years from the date of grant (the exercise
period will remain at three months from the date of termination for all options
granted before February 2, 1995), (y) if an employee dies after termination,
the proper transferees will have the full exercise period as permitted under
the 1991 Plan as if the optionee had survived (rather than three months) and
(z) if an employee dies while still employed, options granted on or after
February 2, 1995 and at least one year prior to termination may be exercised
any time up to ten years from the date of grant (the exercise period will
remain at one year from the date of death for options granted before February
2, 1995); (iii) notwithstanding any other provision of the 1991 Plan, provide
the Stock Option/Stock Bonus Committee (the "Committee") (which consists of
Directors not eligible to participate in the 1991 Plan) with the authority to
accelerate the exercisability of all or any portion of any option granted under
the 1991 Plan, including the authority to permit options to be exercised within
one year from the date of grant and the authority to extend the exercise period
of any option (provided that no option is exercisable for more than ten years
from the date of grant); and (iv) make certain other modifications, including
amending those circumstances under which the Board must seek shareholder
approval before it may amend or terminate the 1991 Plan.
Adoption of the amendments to the Stock Option Plan of 1991 will require the
affirmative vote of a majority of the votes present or represented and entitled
to vote (including abstentions but not including broker non-votes) at the
meeting.
The Board of Directors recommends that you vote FOR the amendments to the
Stock Option Plan of 1991.
4. APPROVAL OF THE AMENDMENTS TO THE STOCK OPTION PLAN OF 1981
On February 2, 1995, the Board of Directors approved certain amendments to
the Engelhard Corporation Stock Option Plan of 1981 (the "1981 Plan"), subject
to shareholder approval.
The Company's 1981 Plan expired by its terms on June 30, 1991 and was
replaced by the 1991 Plan. The 1981 Plan was substantially identical to the
1991 Plan, prior to the amendments
26
described above (the 1991 Plan is attached hereto as Exhibit B). There are
426,613 options outstanding on grants under the 1981 Plan.
The 1981 Plan is proposed to be amended in the following manner: (i)
notwithstanding any provisions of the 1981 Plan to the contrary, the Committee
shall have the authority (which may be exercised at any time) to extend the
exercise period of any option (provided that no option is exercisable for more
than ten years from the date of grant) and (ii) in the event that any options
issued under the 1981 Plan remain outstanding after June 30, 1991, and if the
Committee shall determine that it is in the interest of the Company to amend
the terms and conditions, including exercise price or prices, of such options,
the Committee shall have the right, by written notice to the holders thereof,
to amend the terms and conditions of such options including exercise price or
prices; provided, however, that (x) no such amendment shall be adverse to the
holders of the options, and (y) the amended terms of an option, including
exercise price or prices, would have been permitted under the 1981 Plan had the
1981 Plan been outstanding at the time of such amendment.
Adoption of the amendments to the Stock Option Plan of 1981 will require the
affirmative vote of a majority of the votes present or represented and entitled
to vote (including abstentions but not including broker non-votes) at the
meeting.
The Board of Directors recommends that you vote FOR the amendments to the
Stock Option Plan of 1981.
5. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, based on the recommendation of the Audit Committee,
voted to retain Coopers & Lybrand to serve as independent public accountants
for the year 1995. Coopers & Lybrand expects to have a representative at the
meeting who will have the opportunity to make a statement and who will be
available to answer appropriate questions.
It is understood that even if the appointment is ratified, the Board of
Directors, in its discretion, may direct the appointment of a new independent
accounting firm at any time during the year if the Board of Directors believes
that such a change would be in the best interests of the Company and its
shareholders.
The Board of Directors recommends that you vote FOR the ratification of the
appointment of Coopers & Lybrand as the Company's independent public
accountants for the year 1995.
FUTURE SHAREHOLDER PROPOSALS
The Company will not consider any shareholder proposal for inclusion in the
1996 Annual Meeting of Shareholders' proxy material unless received by the
Company not later than November 30, 1995.
27
OTHER MATTERS
At the date of this Proxy Statement, the Board of Directors has no knowledge
of any business other than that described herein which will be presented for
consideration at the meeting. In the event any other business is presented at
the meeting, the persons named in the enclosed proxy will vote such proxy
thereon in accordance with their judgment in the best interests of the Company.
By Order of the Board of Directors
ARTHUR A. DORNBUSCH, II
Vice President, General Counsel
and Secretary
March 31, 1995
28
EXHIBIT A
ENGELHARD CORPORATION
DIRECTORS STOCK OPTION PLAN
1. Purposes. The purposes of the Directors Stock Option Plan are to advance
the interests of Engelhard Corporation and its shareholders by providing a
means to attract, retain, and motivate non-employee directors of the Company
upon whose judgment, initiative and efforts the continued success, growth and
development of the Company is dependent.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(c) "Company" means Engelhard Corporation, a corporation organized under
the laws of Delaware, or any successor corporation.
(d) "Director" means a non-employee member of the Board.
(e) "Fair Market Value" means, with respect to Shares on any day, the
following:
(i) If the Shares are at the time listed or admitted to trading on
any stock exchange, then the Fair Market Value shall be the mean
between the high and low selling prices per Share on the day in
question on the stock exchange which is the primary market for the
Shares, as such prices are officially quoted on such exchange. If there
is no reported sale of Shares on such exchange on such date, then the
Fair Market Value shall be the mean between the high and low selling
prices per Share on the exchange on the last preceding date for which
such quotations exist; and
(ii) If the Shares are not at the time listed or admitted to trading
on any stock exchange but are traded in the over-the-counter market,
the Fair Market Value shall be the mean between the high and low
selling prices per Share on the day in question, as such prices are
reported by the National Association of Securities Dealers through the
NASDAQ National Market System or any successor system. If there is no
reported selling price for Shares on such date, then the mean between
the high and low selling prices per Share on the last preceding date
for which such quotations exist shall be determinative of Fair Market
Value.
(f) "Option" means a right, granted under Section 5, to purchase Shares.
(g) "Participant" means a Director who has been granted a Director's
Option.
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(h) "Plan" means this Directors Stock Option Plan.
(i) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Securities Exchange Act of
1934, as amended.
(j) "Shares" means common stock, $1.00 par value per share, of the
Company.
3. Administration. This Plan is intended to operate automatically and not
require administration. However, to the extent that administration is
necessary, the Plan shall be administered by a committee consisting of
directors of the Company who are not eligible to participate in this Plan (the
"Committee"). Since the Director's Options are awarded automatically, this
function will be limited to ministerial matters. The Committee will have no
discretion with respect to the selection of Director optionees, the
determination of the exercise price of Director's Options, the timing of such
grants or number of Shares covered by the Director's Options.
4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 5(f), the total number
of Shares reserved for issuance under the Plan shall be 250,000. If any
Option granted hereunder is forfeited, cancelled, terminated, exchanged or
surrendered, any Shares counted against the number of Shares reserved and
available under the Plan with respect to such Option shall, to the extent
of any such forfeiture, cancellation, termination, exchange or surrender,
again be available under the Plan.
(b) Any Shares distributed pursuant to an Option may consist, in whole or
in part, of authorized and unissued Shares or treasury Shares including
Shares acquired by purchase in the open market or in private transactions.
5. Director's Options
(a) Annual Grant. On the date of the regular meeting of the Board in
December of each year (or if the Board does not meet in December, the date
of the next regular Board meeting), beginning with the date of the regular
meeting in December of 1995, each Director in office on such date shall
automatically be granted an Option to purchase 2,000 Shares with an
exercise price per Share equal to 100 percent of the Fair Market Value of
one Share at the date of grant; provided, however, that such price shall be
at least equal to the par value of a Share.
(b) Option Period. Except as provided under Section 5(c) hereof in the
event of the earlier termination of service of a Director, each Option
shall expire on the tenth anniversary of its date of grant. Each Option
granted hereunder shall become exercisable in four equal installments,
commencing on the first anniversary of the date of grant and annually
thereafter. Notwithstanding the foregoing, each Option held by a Director
which was granted more than one year before his or her termination of
service as a Director shall become fully exercisable upon the termination
of service of the Director if such termination is as a result of his or her
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disability, death or retirement after attaining age 65, and each Option
held by a Director shall become fully exercisable upon an "acquisition of a
control interest" in the Company. For purposes of this Plan, an
"acquisition of a control interest" shall occur if: (A) twenty-five percent
(25%) or more of the Company's outstanding securities entitled to vote in
elections of directors ("voting securities") shall be beneficially owned,
directly or indirectly (including options, conversion rights, warrants, and
the like, considered as if exercised), by any person or group of persons,
other than the group owning the same (including their affiliates and
associates) on May 4, 1995; or (B) the majority of the Board ceases to
consist of the existing membership or successors nominated by the existing
membership or their similar successors. Any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
voting securities owned by other holders shall, for the purposes of the
foregoing definition of "acquisition of a control interest", be deemed to
constitute each party to such agreement, arrangement or understanding as
the owner of such securities.
(c) Effect of Termination of Service or Death. Each Option held by a
Participant, to the extent it is exercisable under Section 5(b) hereof at
the time of termination of the Participant's service as a Director, may be
exercised by the Participant for a period of three months after termination
of the Participant's service as a Director, except that: (i) if such
termination is by reason of disability or retirement after attainment of
age 65, any Options held by the Participant which are exercisable under
Section 5(b) hereof at the time of his or her termination may be exercised
by the Participant for the period ending on the tenth anniversary of the
date of grant of the Option; (ii) in the event of the death of a
Participant after the termination of his or her service as a Director, the
person or persons to whom the Participant's rights are transferred by will
or the laws of descent and distribution may exercise any Options which the
Participant could have exercised at the time of his or her death for the
remainder of the period under this Section 5(c) during which the
Participant could have exercised the Option if the Participant had
survived; and (iii) in the event of the death of a Participant while
serving as a Director, the person or persons to whom the Participant's
rights are transferred by will or the laws of descent and distribution
shall have a period ending on the tenth anniversary of the date of grant to
exercise any Options which are exercisable under Section 5(b) hereof at the
time of his or her death. In no event, however, shall any Option be
exercisable more than ten years from the date of grant thereof.
(d) Exercise of Options. To exercise an Option, the holder thereof shall
give written notice to the Company specifying the number of Shares to be
purchased and accompanied by payment in full of the purchase price
therefor. An Option holder shall have none of the rights of a stockholder
until the Shares are paid for in full and issued to him or her. The
purchase price may be paid in whole or in part with Shares having a Fair
Market Value on the exercise date equal to the cash amount for which such
Shares are substituted; provided, however, that in no event may any portion
of the purchase price be paid with Shares acquired upon exercise of an
Option granted under this Plan unless the Shares are acquired more than 30
days before the applicable date of exercise.
A-3
(e) Nontransferability. The Options granted hereunder shall be
transferable only to the extent allowed under Rule 16b-3.
(f) Adjustments. In the event that subsequent to the Effective Date any
dividend in Shares, recapitalization, Share split, reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase,
or share exchange, or other such change, affects the Shares such that they
are increased or decreased or changed into or exchanged for a different
number or kind of shares, other securities of the Company or of another
corporation, or other consideration, then in order to maintain the
proportionate interest of the Directors and preserve the value of the
Director's Options, (i) there shall automatically be substituted for each
Share subject to an unexercised Option and each Share to be issued under
this Section 5 subsequent to such event the number and kind of shares,
other securities or consideration into which each outstanding Share shall
be changed or for which each such Share shall be exchanged, (ii) the
exercise price shall be increased or decreased proportionately so that the
aggregate purchase price for the Shares subject to any unexercised Option
shall remain the same as immediately prior to such event, and (iii) the
number and kind of Shares available for issuance under the Plan shall be
equitably adjusted in order to take into account such transaction or other
change.
(g) Nonqualified Options. All Options granted under the Plan shall be
nonqualified options, not entitled to special tax treatment under Section
422 of the Code.
6. General Provisions.
(a) Compliance with Legal and Trading Requirements. The Plan shall be
subject to all applicable laws, rules and regulations, including, but not
limited to, federal and state laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may be required. The
Company, in its discretion, may postpone the issuance or delivery of Shares
under the Plan and under any Option until completion of such stock exchange
or market system listing or registration or qualification of such Shares or
other required action under any state or federal law, rule or regulation or
under laws, rules or regulations of other jurisdictions as the Company may
consider appropriate, and may require any Participant to make such
representations and furnish such information as it may consider appropriate
in connection with the issuance or delivery of Shares in compliance with
applicable laws, rules and regulations. No provisions of the Plan shall be
interpreted or construed to obligate the Company to register any Shares
under federal or state law or under the laws of other jurisdictions.
(b) No Right to Continued Service. Neither the Plan nor any action taken
thereunder shall be construed as giving any Director the right to be
retained in the service of the Company.
(c) Taxes. The Company is authorized to withhold from any Shares
delivered under this Plan on exercise of an Option, any amounts of
withholding and other taxes due in connection therewith, and to take such
other action as the Company may deem advisable to enable the Company and a
Participant to satisfy obligations for the payment of any withholding taxes
and
A-4
other tax obligations relating thereto. This authority shall include
authority to withhold or receive Shares or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax
obligations.
(d) Amendment. The Board may amend, alter, suspend, discontinue, or
terminate the Plan without the consent of shareholders of the Company or
Participants, except that any such amendment, alteration, suspension,
discontinuation, or termination shall be subject to the approval of the
Company's shareholders if such shareholder approval is required by any
federal law or regulation (including Rule 16b-3, if applicable); provided,
however, that, without the consent of an affected Participant, no
amendment, alteration, suspension, discontinuation, or termination of the
Plan may impair the rights or, in any other manner, adversely affect the
rights of such Participant under any Option theretofore granted to him or
her hereunder. Notwithstanding the other provisions of this paragraph, the
Plan may not be amended more than once every six months other than to
comport with changes in the Code or the rules thereunder.
(e) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other compensation arrangements as it may deem desirable,
including, without limitation, the granting of options on Shares and other
awards otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
(f) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option. Cash shall be paid in lieu of
such fractional Shares.
(g) Governing Law. The validity, construction, and effect of the Plan and
any Option shall be determined in accordance with the laws of the State of
New York without giving effect to principles of conflict of laws.
(h) Effective Date; Plan Termination. The Plan shall become effective as
of May 4, 1995, (the "Effective Date") upon approval by the affirmative
votes of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote thereon at a meeting duly
held. The Plan shall terminate as to future awards on the date which is ten
(10) years after the Effective Date.
(i) Titles and Headings. The titles and headings of the Sections in the
Plan are for convenience of reference only. In the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
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EXHIBIT B
ENGELHARD CORPORATION
STOCK OPTION PLAN OF 1991*
1. Purposes. This Stock Option Plan (the "Plan") of Engelhard Corporation
(the "Company") is established so that the Company may make available to
essential executives the opportunity to acquire ownership of Company stock
pursuant to options constituting incentive or non-qualified stock options
under the Internal Revenue Code. It is anticipated that such stock options
will materially assist the Company in providing incentives to essential
executives for future performance.
2. Administration. The Plan shall be administered by a committee (the
"Committee") which shall be appointed, from time to time, by the Board of
Directors of the Company (the "Board of Directors"), and shall consist of not
less than three directors of the Company who are not eligible to receive
options under the Plan and who otherwise constitute "disinterested persons"
under Rule 16b-3 issued by the Securities and Exchange Commission. The
Committee shall have full power and authority, subject to the terms and
conditions of the Plan, to determine the essential executives to whom awards
may be made under the Plan, the number of such shares to be awarded to each of
such essential executives, the applicable terms and conditions of such awards
and all other matters which may arise in the administration of the Plan. The
determination of the Committee concerning any matter arising under or with
respect to the Plan or any awards granted hereunder shall be final, binding
and conclusive on all interested persons. Awards shall be made only in
accordance with the recommendation of the Committee and with the approval of
the Board of Directors. The Committee may as to all questions of accounting
rely conclusively upon any determinations made by the independent auditors of
the Company.
3. Stock Available for Options. There shall be available for option under
the Plan 5,000,000/1/ shares of the Company's Common Stock (the "Stock"),
subject to any adjustments which may be made pursuant to Section 5(f) hereof.
Shares of Stock used for purposes of the Plan may be either authorized and
unissued shares or treasury shares or both. Stock covered by options which
have terminated or expired prior to exercise or have been surrendered and
cancelled as contemplated by Section 7(b) hereof shall be available for
further option hereunder. Subject to any adjustments which may be made
pursuant to Section 5(f) hereof, the maximum number of shares of Stock with
respect to which options may be granted during a calendar year to any employee
under this Plan shall be 1,000,000 shares.
4. Eligibility. Essential managers and other key employees, including
officers and directors of the Company, and of any subsidiary corporation, as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code"), of the Company ("Subsidiary"), shall be eligible
--------
*Proposed amendments are underlined and proposed deletions are in brackets.
/1After/giving effect to stock splits, there are currently 11,250,000 shares
authorized under the Plan.
B-1
to receive options under the Plan, provided that no option may be granted to
any director who is not also an employee of the Company or a Subsidiary.
5. Terms and Conditions of Options. Each option granted hereunder shall be in
writing, shall specify its type (incentive stock option or non-qualified stock
option) and shall contain such terms and conditions as the Committee may
determine, which terms and conditions need not be the same in each case or
within each type, subject to the following:
(a) Option Price. The price at which each share of Stock covered by an
option granted hereunder may be purchased shall not be less than the
greater of the par value of the Stock or the fair market value thereof at
the time of grant, as determined by the Board of Directors.
(b) Option Period. The period for exercise of an option shall not exceed
ten years from the date the option is granted. Options may be made
exercisable in installments during the option period. Any shares not
purchased on any applicable installment date, if so provided in the related
options, may be purchased thereafter at any time prior to the expiration of
the option period. Any option exercisable in installments shall become
immediately exercisable in full in the event of an "acquisition of a
control interest" in the Company. For purposes of this Plan, an
"acquisition of a control interest" shall occur if: (A) twenty-five percent
(25%) or more of the Company's outstanding securities entitled to vote in
elections of directors ("voting securities") shall be beneficially owned,
directly or indirectly (including options, conversion rights, warrants, and
the like, considered as if exercised), by any person or group of persons,
other than the group owning the same (including their affiliates and
associates) on March 7, 1991; or (B) the majority of the Board of Directors
ceases to consist of the existing membership or successors nominated by the
existing membership or their similar successors. Any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting or disposing
of voting securities owned by other holders shall, for the purposes of the
foregoing definition of "acquisition of a control interest," be deemed to
constitute each party to such agreement, arrangement or understanding as
the owner of such securities.
(c) Exercise of Options. Unless the Committee determines otherwise, no
option shall be exercisable until the expiration of at least one year from
the date the option is granted; provided, however, that an option shall
become immediately exercisable in full in the event of an "acquisition of a
control interest" in the Company (as such term is defined in Section 5(b)
hereof), whether or not such "acquisition of a control interest" in the
Company occurs prior to the expiration of one year after the date the
option is granted. To exercise an option, the holder thereof shall give
written notice to the Company specifying the number of shares to be
purchased and accompanied by payment in full of the purchase price
therefor. An option holder shall have none of the rights of a stockholder
until the shares are paid for in full and issued to him. The purchase price
may be paid in whole or in part with shares of Stock having a fair market
value on the exercise date equal to the cash amount for which such shares
are substituted; provided, however, that in no event may any portion of the
purchase price be paid with shares of Stock acquired upon exercise of a
stock option granted under this Plan unless
B-2
such shares were acquired more than thirty days before the applicable date
of exercise. Notwithstanding any provision of this Plan to the contrary,
the Committee shall have the authority at any time to accelerate the
exercisability of all or any portion of any option granted under the Plan.
(d) Effect of Termination of Employment or Death. No option may be
exercised after the termination of employment of an optionee, except that:
(i) if such termination is by reason of disability or retirement, at
normal, deferred or early retirement age, under any retirement plan
maintained by the Company or any Subsidiary, or for any other reason
specifically approved in advance by the Committee [Board of Directors], any
options held by the optionee which were granted more than one year before
such termination shall thereupon become exercisable in full, and (x) in the
case of options granted before February 2, 1995, may be exercised by the
optionee for a period of three months after such termination, and (y) in
the case of options granted on or after February 2, 1995, may be exercised
by the optionee during the period ending on the tenth anniversary of the
date of grant of the option; (ii) if such termination is by action of the
Company or a Subsidiary other than as provided in (i) above and other than
discharge by reason of willful violation of the rules of the Company or
instructions of superior(s), any options held by the optionee which are
exercisable at the time his employment terminates may be exercised by him
for a period of three months after such termination; (iii) in the event of
the death of an optionee [within three months] after the termination of his
employment pursuant to (i) or (ii) above, the person or persons to whom the
optionee's rights are transferred by will or the laws of descent and
distribution [shall have a period of three months from the date of
termination of the optionee's employment to] may exercise any options which
the optionee could have exercised at the time of his death for the
remainder of the period under (i) or (ii) above during which the optionee
could have exercised the option if he had survived [during such period];
and (iv) in the event of the death of an optionee while employed, any
options then held by the optionee which were granted more than one year
before his death, shall thereupon become exercisable in full, and the
person or persons to whom the optionee's rights are transferred by will or
the laws of descent and distribution shall have (x) in the case of options
granted before February 2, 1995, a period of one year thereafter to
exercise such options, and (y) in the case of options granted on or after
February 2, 1995, a period ending on the tenth anniversary of the date of
grant of the option to exercise such options. In no event, however, shall
any option be exercisable more than ten years from the date of grant
thereof.
Notwithstanding any provision of this Plan to the contrary, the Committee
shall have the authority (which may be exercised at any time) to extend the
period during which any option granted under the Plan may be exercised;
provided, however, that no option may be exercisable for more than ten
years from the date of grant thereof.
Nothing contained in the Plan or any option granted hereunder shall
confer on any employee any right to continue his employment or interfere in
any way with the right of his employer to terminate his employment at any
time.
B-3
(e) Nontransferability of the Options. During an optionee's lifetime his
option shall be exercisable only by him. No option shall be transferable
other than by will or the laws of descent and distribution.
(f) Adjustment for Change in Stock Subject to Plan. In the event of a
stock split, stock dividend, combination of shares, recapitalization,
reorganization, merger, consolidation, rights offering, or any other change
in the corporate structure or shares of the Company, the Board of Directors
shall make such adjustments, if any, as it deems appropriate for purposes
hereof in the number and kind of shares subject to the Plan, in the number
and kind of shares covered by outstanding options, or in the option prices.
(g) Registration, Listing and Qualification of Shares. Each option shall
be subject to the requirement that if at any time the Board of Directors
shall determine that the registration, listing or qualification of the
shares covered thereby upon any securities exchange or under any federal or
state law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the
granting of such option or the purchase of shares thereunder, no such
option may be exercised unless and until such registration, listing,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Board of Directors. Any person
exercising an option shall make such representations and agreements and
furnish such information as the Board of Directors may request to assure
compliance with the foregoing or any other applicable legal requirements.
(h) Incentive Stock Options. Unless otherwise designated by the
Committee, options granted under the Plan shall be deemed to be options not
intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Code. However, the Committee may designate options
granted to an employee as Incentive Stock Options to the extent that such
options and all other incentive stock options (as defined in Section 422 of
the Code) held by the employee and exercisable for the first time by such
employee during any calendar year (under all plans of the Company and its
parent and subsidiary corporations (as hereinafter defined)), cover shares
of the Company having an aggregate fair market value (determined by the
Committee as of the time the option is granted in such manner as will
constitute an attempt in good faith to meet the applicable requirements of
Section 422(b) of the Code) of not more than $100,000. Options deemed to be
Incentive Stock Options hereunder shall comply with the following
requirements in addition to the terms and conditions previously set forth
in this Plan. Incentive Stock Options and other stock options granted under
this Plan shall be clearly identified as such. (The terms "parent" or
"subsidiary" corporation as used in this Section 5(h) shall have the
respective meanings set forth in Section 424(e) and (f) of the Code.)
The additional requirements referred to are the following:
(A) Notwithstanding the provisions of this Plan for exercise of stock
options after the death of the optionee or any other provision of this
Plan, an Incentive Stock Option may
B-4
not in any event be exercised after the expiration of ten years from
the date that Incentive Stock Option is granted. Each stock option
agreement shall so provide with respect to any and all Incentive Stock
Options covered by that agreement.
(B) No Incentive Stock Option shall be granted to an individual who,
at the time the Incentive Stock Option is granted, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than
ten percent of the total combined voting power of all classes of stock
of the Company or of its parent or subsidiary corporation, if any (a
"10-percent shareholder"), unless, at the time the Incentive Stock
Option is granted, the option price is at least 110 percent of the fair
market value of the shares subject to the Incentive Stock Option and
the Incentive Stock Option by its terms is not exercisable after the
expiration of five years from the date the Incentive Stock Option is
granted to such 10-percent shareholder.
(i) Tax Withholding. The Committee may establish such rules and
procedures as it considers desirable in order to satisfy any obligation of
the Company or any Subsidiary to withhold Federal income taxes or other
taxes with respect to the exercise of an option (other than an Incentive
Stock Option) under the Plan, including without limitation rules and
procedures permitting an optionee to elect that the Company withhold shares
of Stock otherwise issuable upon exercise of such option in order to
satisfy such withholding obligation.
6. Duration. Unless sooner terminated by the Board of Directors, the Plan
shall terminate on, and no option shall be granted hereunder after June 30,
2001.
7. (a) Amendment. The Board of Directors may amend or terminate the Plan at
any time; provided, however, that any such [no] amendment or termination shall
be subject to the approval of the Company's shareholders to the extent such
shareholder approval is required (i) in order to insure that options granted
under the Plan are exempt under Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 or (ii) under Section 422 of the Internal Revenue Code of
1986, as amended [unless approved by the stockholders of the Company, shall
materially: (i) increase the maximum number of shares for which options may be
granted under the Plan or increase the maximum number of shares which may be
subject to a specified type of option; (ii) reduce the minimum option price
provided herein; or (iii) extend the period during which options may be granted
or exercised, except that]; provided, further, however, that, without the
consent of an affected optionee, no amendment or termination of the Plan may
impair the rights or, in any other manner, adversely affect the rights of such
optionee under any option theretofore granted to him. Notwithstanding the
foregoing, the Committee [Board of Directors] shall have the right to accept
the surrender of and cancel options issued under the Plan and reissue those
options and to amend the terms of outstanding options under the terms and
conditions set forth herein.
(b) Surrender, Cancellation and Reissue of Options. The Committee [Board of
Directors], upon invitation by it during the term of this Plan to any holder(s)
of options under the Plan to do so,
B-5
may accept the surrender of outstanding options, cancel such options and issue
in exchange therefor new options under this Plan, provided:
(1) the tender of options for surrender is in accordance with such
conditions as the Committee [Board of Directors] may set forth in its
invitation for that surrender;
(2) the number of shares covered by an option issued in exchange for a
surrendered and cancelled option shall not exceed the number of shares
covered by the option surrendered and cancelled;
(3) the exercise price and all other terms of each option issued in
exchange shall comply with the requirements of this Plan for the issuance
of options; and
(4) no such invitation for surrender of options shall be made by the
Committee [Board of Directors] unless it first shall have determined
[received a recommendation of the Committee] that it is in the interest of
the Company to provide an opportunity for the surrender and cancellation of
outstanding options and the issue of new options in exchange therefor upon
more appropriate terms and conditions, including exercise price.
(c) Amendments of Outstanding Options. In the event that any options issued
under this Plan shall remain outstanding after June 30, 2001, and if the
Committee shall [recommend and the Board of Directors shall] determine that it
is in the interest of the Company to amend the terms and conditions, including
exercise price or prices, of such options, the Committee [Board of Directors]
shall have the right, by written notice to the holders thereof, to amend the
terms and conditions of such options including exercise price or prices;
provided, however, that (i) no such amendment shall be adverse to the holders
of the options, and (ii) [no such amendment shall extend the period for
exercise of an option or increase the number of shares issuable upon exercise
thereof; and (iii)] the amended terms of an option, including exercise price or
prices, would have been permitted under this Plan had the Plan been outstanding
at the time of such amendment.
8. Effectiveness of the Plan. This Plan will not be made effective unless
approved by the holders of not less than a majority of the outstanding shares
of voting stock of the Company represented and entitled to vote thereon at a
meeting thereof duly called and held for such purpose, and no option granted
hereunder shall be exercisable prior to such approval.
9. Other Actions. This Plan shall not restrict the authority of the Board of
Directors, for proper corporate purposes, to grant or assume stock options,
other than under the Plan, to or with respect to any employee or other person.
10. Name. This Plan shall be known as the Engelhard Corporation Stock Option
Plan of 1991.
B-6
ENGELHARD
NOTICE OF
ANNUAL MEETING
OF
SHAREHOLDERS
AND PROXY
STATEMENT
May 4, 1995
ENGELHARD CORPORATION
101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF SHAREHOLDERS--MAY 4, 1995
PROXY
The undersigned hereby constitutes and appoints Orin R. Smith, Reuben F.
Richards and Arthur A. Dornbusch, II, and each of them, his true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of ENGELHARD CORPORATION to be
held at One Chase Manhattan Plaza, Ground Floor, on Thursday, May 4, 1995 at
10:00 A.M. New York City Time and at any adjournments thereof, on all matters
coming before said meeting.
(Change of Address/Comments)
ELECTION OF DIRECTORS, NOMINEES:
Linda G. Alvarado, James V. Napier and
Norma T. Pace ----------------------------
----------------------------
----------------------------
----------------------------
You are encouraged to specify your choices by marking the appropriate boxes.
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxy Committee
cannot vote your shares unless you sign and return this card.
[SEE REVERSE
SIDE]
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder(s). If no direction is made, this proxy will be
voted FOR Proposals 1,2,3,4 and 5.
I plan to attend
the meeting
[_]
1. Election of Directors (see reverse) (To withhold vote for any individual
nominee write that name below.)
FOR WITHHELD -------------------------------------
[_] [_]
2. Approval of the adoption of the 3. Approval of the Amendments to
Directors Stock Option Plan. the Stock Option Plan of 1991.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[_] [_] [_] [_] [_] [_]
4. Approval of the Amendments to the 5. Ratification of appointment of
Stock Option Plan of 1981. Coopers & Lybrand as independent
public accountants.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[_] [_] [_] [_] [_] [_]
6. In their discretion, upon other matters
as they may properly come before
the meeting. Please mark, sign and return
promptly using the enclosed
envelope. Executors,
administrators, trustees, etc.
should give full titles as such.
If the signer is a corporation,
please sign full corporate name
by duly authorized officer.
--------------------------------
, 1995
--------------------------
SIGNATURE(S) DATED
["PLEASE MARK INSIDE BLUE BOXES SO THAT
DATA PROCESSING EQUIPMENT WILL RECORD
YOUR VOTES"]
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
Dear Shareholder(s):
Enclosed you will find material relative to the Company's 1995 Annual Meeting of
shareholders. The notice of the annual meeting and proxy statement describe the
formal business to be transacted at the meeting, as summarized on the attached
proxy card.
Whether or not you expect to attend the Annual Meeting, please complete and
return promptly the attached proxy card in the accompanying envelope, which
requires no postage if mailed in the United States. As a shareholder, please
remember that your vote is important to us.
ENGELHARD CORPORATION