SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ENGELHARD CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ENGELHARD CORPORATION
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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Notes:
101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
[LOGO] ENGELHARD
ORIN R. SMITH
Chairman and
Chief Executive Officer
March 29, 1996
Dear Shareholder:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders,
which will be held at 10:00 a.m. on Thursday, May 2, 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.
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 1996 ANNUAL MEETING OF SHAREHOLDERS
-----------------
To our Shareholders: March 29, 1996
The Annual Meeting of Shareholders of Engelhard Corporation, a Delaware
corporation, will be held on Thursday, May 2, 1996, 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 five Directors;
(2) To consider and vote upon amendments to the Key Employees Stock
Bonus Plan;
(3) To consider and vote upon amendments to the Stock Bonus Plan for
Non-Employee Directors;
(4) To consider and vote upon an amendment to the Restated Certificate
of Incorporation increasing the number of authorized shares of
Common Stock from 200,000,000 shares to 350,000,000 shares;
(5) To ratify the appointment of Coopers & Lybrand L.L.P. 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,
1996.
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, Chemical Mellon
Shareholder Services, L.L.C., 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 1996
ANNUAL MEETING OF SHAREHOLDERS
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SOLICITATION AND REVOCATION OF PROXIES
The accompanying proxy, being mailed to shareholders on or about March 29,
1996, 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 2, 1996. 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, 1996 will be
entitled to vote. On such date there were outstanding and entitled to vote
143,684,177 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 7, 1996:
AMOUNT PERCENT
BENEFICIALLY OF
OWNED CLASS
------------ -------
Minorco.................................................. 45,958,680 32.0%(1)
9 rue Sainte Zithe, L-2763 Luxembourg City,
Grand Duchy of Luxembourg
State Farm Mutual Automobile Insurance Company........... 9,670,893 6.7%(2)
One State Farm Plaza,
Bloomington, Illinois 61710
- --------
(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 45,958,680 shares of
Common Stock of the Company, representing approximately 32.0% 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 46%, directly or through subsidiaries, by Anglo American
Corporation of South Africa Limited ("Anglo American"), a publicly held
mining and finance company, and approximately 22%, directly or through
subsidiaries, by De Beers Centenary AG ("Centenary"), a publicly held Swiss
diamond mining and investment company. Approximately 38% 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.
Mr. Nicholas F. Oppenheimer, Deputy Chairman and a director of Anglo
American, Centenary and De Beers and a director of Minorco, and Mr. Slack,
a director of the Company and Minorco (U.S.A.) Inc., 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 and approximately 8% of the outstanding shares of Anglo American.
2
Mr.Loomis is Chairman of the Board, President and Chief Executive Officer
of Minorco (U.S.A.) Inc. and a director of Minorco. Mr. Lea is a director
of Minorco and Minorco (U.S.A.) Inc. Mr. Richards and Mr. Smith, directors
of Minorco, each beneficially owns 1,000 Minorco Ordinary Shares,
constituting less than one percent of the outstanding shares of Minorco.
(2) 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 20, 1996.
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. Mr.
LaTorre, Mr. Richards, Mr. Slack and Mr. Smith all of whom are incumbent Class
III Directors are nominees for election as Class III Directors at the Annual
Meeting. If elected, the Class III Directors will serve three-year terms
expiring in 1999. Mr. Loomis is a nominee for election as a Class II Director.
The Class II Directors will be considered for reelection at the 1998 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. Mr. Loomis will join the Board
following the Annual Meeting if elected.
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 Mr. LaTorre, Mr. Richards, Mr.
Slack and Mr. Smith as Class III Directors and for Mr. Loomis as a Class II
Director.
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 1996 AND NOMINEES,
AGES, PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST
FIVE YEARS, BOARD MEMBERSHIPS (CLASS III)
L. DONALD LATORRE
Age 58. President and Chief Operating Officer of the Company since January
1995; Senior Vice President and Chief Operating Officer of the Company prior
thereto.
REUBEN F. RICHARDS
Age 66. Chairman of the Board, Terra Industries Inc., agribusiness, since
prior to 1991; Chief Executive Officer and President thereof from prior to
1991 to May 1991; Chairman of the Board of Minorco (U.S.A.) Inc. from prior
to 1991 to March 1996 and Chief Executive Officer and President thereof from
February 1994 to March 1996. Mr. Richards has retired as Chairman, President
and Chief Executive Officer of Minorco (U.S.A.) Inc. and has announced his
retirement as Chairman of Terra Industries Inc. effective April 30, 1996.
Mr. Richards is also a director of Santa Fe Energy Resources, Inc., Ecolab
Inc., Minorco and Potlatch Corporation.
HENRY R. SLACK
Age 46. Chief Executive of Minorco since December 1992; President and a
director thereof since prior to 1991; director of Anglo American Corporation
of South Africa Limited since prior to 1991.
Mr. Slack is also a director of Terra Industries Inc.
ORIN R. SMITH
Age 60. 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 Ingersoll-Rand Company, The Louisiana Land and
Exploration Company, Minorco, Perkin-Elmer Corporation, Summit Bancorp, and
Vulcan Materials Company.
4
DIRECTORS WITH TERMS EXPIRING MAY 1997, AGES,
PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST
FIVE YEARS, BOARD MEMBERSHIPS (CLASS I)
MARION H. ANTONINI
Age 65. President and Chief Executive Officer of Welbilt Corporation, a food
service equipment and consumer products company, since prior to 1991.
Mr. Antonini is also a director of Vulcan Materials Company, Scientific-
Atlanta, Inc. and Berisford PLC.
ANTHONY W. LEA
Age 47. Executive Director and Member of the Executive Committee of Minorco
since prior to 1991; Joint Managing Director thereof from prior to 1991 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 51. President of the Pharmaceuticals Division and Director of CIBA-GEIGY
Corporation since prior to 1991.
Mr. Watson is also a director of Summit Bancorp.
5
DIRECTORS WITH TERMS EXPIRING MAY 1998 AND NOMINEE, AGES,
PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST
FIVE YEARS, BOARD MEMBERSHIPS (CLASS II)
LINDA G. ALVARADO
Age 43. President and Chief Executive Officer of Alvarado Construction, Inc.,
since prior to 1991.
Ms. Alvarado is also a director of Cyprus Amax Minerals Company and Pitney
Bowes, Inc.
WILLIAM R. LOOMIS, JR.
Age 47. Managing Director, Lazard Freres & Co. LLC, an investment bank, since
prior to 1991.
Mr. Loomis is also a director of Minorco and Terra Industries Inc.
JAMES V. NAPIER
Age 59. 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., Personnel Group of America,
Inc. and Westinghouse Air Brake Company.
NORMA T. PACE
Age 74. Partner, Paper Analytics Associates, a planning and consulting company
since 1995; Senior Advisor and Director of WEFA Group, Inc., economic
consultants and forecasters since 1992; President of Economic Consulting and
Planning Inc. prior thereto.
Mrs. Pace is also a director of Hasbro, Inc.
6
SHARE OWNERSHIP OF DIRECTORS AND OFFICERS
Set forth in the following table is the beneficial ownership of Common Stock
as of March 7, 1996 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 2.3% of the total
outstanding shares (including exercisable options).
NAME SHARES
---- ---------
Linda G. Alvarado.................................................. 7,593
Marion H. Antonini................................................. 20,006
Arthur A. Dornbusch, II............................................ 183,883(1)
L. Donald LaTorre.................................................. 800,372(1)
Anthony W. Lea..................................................... 750
William R. Loomis, Jr.............................................. 15,000
James V. Napier.................................................... 13,164
William E. Nettles................................................. 180,874(1)
Norma T. Pace...................................................... 22,937
Reuben F. Richards................................................. 25,123
Robert J. Schaffhauser............................................. 208,658(1)
Henry R. Slack..................................................... 2,530(2)
Orin R. Smith...................................................... 1,393,899(1)
Douglas G. Watson.................................................. 25,434
All Directors and Executive Officers as a group.................... 3,290,976(1)
- --------
(1) Includes 548,155, 358,875, 91,875, 100,912, 54,657 and 1,290,514 shares of
Common Stock subject to options granted to Messrs. Smith, LaTorre,
Schaffhauser, Nettles, 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 7, 1996, and also includes 16,580 shares owned by family members in
which persons in the group disclaim any beneficial interest.
(2) Excludes 410,433 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 ten meetings during
1995. 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 five meetings during 1995.
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 1995.
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 1995.
During 1995 all of the Directors of the Company attended more than 75% of the
meetings of the Board and meetings of committees of the Board on which they
served, except for Messrs. Lea, Slack and Watson.
Directors who are not employees of the Company each received a retainer at
the annual rate of $30,000 in 1995. In addition, non-employee Directors
received a $1,350 attendance fee for each Board meeting attended in 1995.
During 1995, 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 benefits will be an annual amount equal to the annual Board retainer
fee (excluding meeting and
8
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"), taking into effect the proposed amendments, each
person who becomes such a non-employee Director prior to June 30, 2006 shall be
awarded 7,593 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 a "change in control."
Pursuant to the Company's Directors Stock Option Plan each non-employee
Director in office on the date of the regular meeting of the Board in December
of each year will automatically be granted an option to purchase 3,000 shares
of Common Stock with an exercise price equal to 100 percent of the fair market
value at the date of grant. Each option becomes exercisable in four equal
installments, commencing on the first anniversary of the date of grant and
annually thereafter. Each option terminates on the tenth anniversary of the
date of grant. 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; options may become exercisable
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. Mr. Slack holds the positions with Minorco described in "Information
as to Certain Shareholders" on page 2. Messrs. Richards and Smith are directors
of Minorco. 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.
Among other businesses, 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, sales and
leases of such materials, in the ordinary course of its business, from and to
entities in which it is informed Anglo American and/or Minorco have a material
interest, upon terms which are no less favorable to the Company than those
obtainable from other sources. The Company's purchases and sales of such
materials from all sources during 1995 approximated $1.7 billion and $1.8
billion, respectively, including purchases of approximately $367 million from
and sales of approximately $204 million to entities in which the Company is
informed Anglo American has a material interest; the Company also entered into
metal leases of approximately $32 million with such entities.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Executive Officers and Directors and persons who own more than 10% of a
registered class of the Company's equity securities to file initial reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC") and the New York Stock Exchange. Such Officers, Directors and
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on a review of the copies of
such forms furnished to the Company and written representations from the
Company's Executive Officers and Directors, all persons subject to the
reporting requirements of Section 16(a) filed the required reports on a timely
basis for 1995.
10
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the compensation paid by the Company for
services rendered in all capacities during each of the last three fiscal years
to the Chief Executive Officer and the other four most highly compensated
Executive Officers. All share and per share data have been restated to give
effect to all relevant stock splits, the last of which occurred in June, 1995.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS (1)(2)(3)
------------------------------------------ -----------------------
RESTRICTED ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) AWARD(S) ($)(4) (#) ($)(5)
- ------------------ ---- ---------- --------- ---------------- --------------- ------- ------------
Orin R. Smith, Director, 1995 735,000 925,000 -- 412,250 368,000 --
Chairman and Chief 1994 699,996 630,000 -- 422,925 436,875 --
Executive Officer 1993 670,034 585,000 686 1,323,000 286,875 --
L. Donald LaTorre, 1995 417,411 430,000 -- 282,925 225,000 3,695
Director, President and 1994 394,146 300,000 -- 304,500 280,500 3,329
Chief Operating Officer 1993 376,269 250,000 3,985 945,000 172,500 2,697
Robert J. Schaffhauser, 1995 289,993 180,000 -- 129,325 83,000 --
Vice President, 1994 262,656 125,000 -- 126,875 112,500 --
Technology and 1993 249,696 110,000 2,785 378,000 60,000 --
Corporate Development
William E. Nettles, 1995 234,996 175,000 -- 97,000 86,500 --
Vice President 1994 199,920 65,000 -- 50,750 40,500 --
and Chief Financial 1993 186,928 85,000 1,784 179,200 22,950 --
Officer
Arthur A. Dornbusch, II, 1995 246,000 125,000 -- 80,825 51,250 2,956
Vice President, General 1994 242,460 75,000 -- 42,300 45,000 2,663
Counsel and Secretary 1993 233,711 100,000 2,409 329,000 39,000 2,158
- --------
(1) The Company's Key Employees 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
and 1995 compared with 1993 represents a shift in compensation policy which
is discussed in greater detail in Section 2 of the Report on Executive
Compensation on page 19.
11
(4) As of December 31, 1995, Messrs. Smith, LaTorre, Schaffhauser, Nettles and
Dornbusch held 193,075, 136,800, 55,425, 26,070 and 44,275 unvested shares,
respectively, of stock which were awarded pursuant to the Company's Key
Employees Stock Bonus Plan having a market value of $4,199,381, $2,975,400,
$1,205,494, $567,023 and $962,981, respectively. The foregoing amounts do
not include the reported grants, which were made in February 1996 for
services rendered during 1995. Restricted stock awards of the Company's
Common Stock granted under the Key Employees Stock Bonus Plan vest in five
equal annual installments commencing on the first anniversary of the date
of the grant. Vesting will be accelerated upon the occurrence of a "change
in control." The Company pays dividends on restricted stock, if and to the
extent paid on Common Stock generally. For information on what constitutes
a "change in control," see "Employment Contracts, Termination of Employment
and Change in Control Arrangements" on page 16.
(5) Represents interest accrued during 1993, 1994 and 1995 in excess of 120% of
the applicable federal interest rate with respect to salary deferrals.
12
The following table sets forth information concerning individual grants of
stock options made under the Stock Option Plan in December 1995 and February
1996 for services rendered during 1995 by each of the named Executive Officers.
OPTION GRANTS FOR SERVICES RENDERED DURING 1995
GRANT DATE
INDIVIDUAL GRANTS VALUE
- --------------------------------------------------------------------- ------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS FOR SERVICES OR BASE GRANT DATE
GRANTED RENDERED PRICE EXPIRATION PRESENT
NAME (#)(1) DURING 1995 ($/SH) DATE VALUE ($)(2)
- ---- ---------- ------------ -------- ---------- ------------
Orin R. Smith........... 200,000 10% 22.38 12/15/2005 1,252,000
168,000 9% 23.88 02/01/2006 1,098,720
L. Donald LaTorre....... 120,000 6% 22.38 12/15/2005 751,200
105,000 5% 23.88 02/01/2006 686,700
Robert J. Schaffhauser.. 40,000 2% 22.38 12/15/2005 250,400
43,000 2% 23.88 02/01/2006 281,220
William E. Nettles...... 50,000 3% 22.38 12/15/2005 313,000
36,500 2% 23.88 02/01/2006 238,710
Arthur A. Dornbusch, II. 25,000 1% 22.38 12/15/2005 156,500
26,250 1% 23.88 02/01/2006 171,675
- --------
(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 4.4 years, which represents historic exercise trends for the named
Executive Officers; (b) an interest rate range of 4.8% to 5.5% that
represents the current yield curves as of the grant dates; (c) an average
volatility of approximately 29% calculated using average weekly stock
prices for the four years prior to the grant date; and (d) dividends at the
rate of $.36 per share (the current annual dividend rate) with an upward
adjustment during the term which represents historic trends. The Company
does not believe that the values estimated by the model will necessarily be
indicative of the values to be realized by an executive.
13
The following table sets forth information concerning each exercise of stock
options during 1995 by each of the named Executive Officers and the value of
unexercised options at December 31, 1995.
AGGREGATE OPTION EXERCISES IN 1995
AND VALUES AT DECEMBER 31, 1995
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1995(#) AT DECEMBER 31, 1995($)
------------------------- -------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------
Orin R. Smith........... 324,845 5,966,802 480,936 864,687 3,579,074 3,724,021
L. Donald LaTorre....... 185,625 3,472,985 288,750 537,375 2,148,516 2,326,120
Robert J. Schaffhauser.. 63,282 983,681 65,625 197,500 521,794 883,378
William E. Nettles...... 38,726 872,013 90,674 108,837 1,069,388 324,872
Arthur A. Dornbusch, II. 45,282 810,104 41,156 103,000 337,727, 427,442
14
PENSION PLANS
The following table shows estimated annual 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
-----------------------------------------
15 20 25 30
ANNUAL REMUNERATION YEARS YEARS YEARS YEARS 35 YEARS
------------------- ------- ------- ------- ------- ---------
$ 200,000....................... 43,834 58,445 73,056 87,667 102,278
300,000....................... 66,334 88,445 110,556 132,667 154,778
400,000....................... 88,834 118,445 148,056 177,667 207,278
500,000....................... 111,334 148,445 185,556 222,667 259,778
600,000....................... 133,834 178,445 223,056 267,667 312,278
700,000....................... 156,334 208,445 260,556 312,667 364,778
800,000....................... 178,834 238,445 298,056 357,667 417,278
900,000....................... 201,334 268,445 335,556 402,667 469,778
1,000,000....................... 223,834 298,445 373,056 447,667 522,278
1,200,000....................... 268,834 358,445 448,056 537,667 627,278
1,400,000....................... 313,834 418,445 523,056 627,667 732,278
1,600,000....................... 358,834 478,445 598,056 717,667 837,278
1,800,000....................... 403,834 538,445 673,056 807,667 942,278
2,000,000....................... 448,834 598,445 748,056 897,667 1,047,278
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, 1995 are
as follows: Mr. Smith, 24 years; Mr. LaTorre, 11 years; Mr. Schaffhauser, 6
years; Mr. Nettles, 13 years; and Mr. Dornbusch, 19 years. Messrs. Smith,
LaTorre, Schaffhauser, Nettles and Dornbusch had $1,660,000, $847,411,
$469,993, $409,996 and $371,000, respectively, of annual remuneration covered
by the plans during 1995. 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 22,500 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.
Robert L. Guyett, formerly a Director, Senior Vice President and Chief
Financial Officer, received salary, along with a bonus of $65,000, for his
period of active employment which ended on May 4, 1995. Pursuant to a letter
agreement regarding Mr. Guyett's retirement, dated April 28, 1995, Mr. Guyett
retained his previously granted stock options, stock bonus awards and medical
and certain other benefits and is eligible to receive the value of his pension
for a period of service ending December 1, 1996. Since his active employment
ended on May 4, 1995, he has received a monthly payment of $31,190.00 and will
continue to receive such monthly payment until December 1, 1996 or such earlier
date as he dies or certain other circumstances occur. He also earned $50,000
for consulting services rendered to the Company.
Pursuant to the Company's Change In Control Agreements, the Company provides
severance benefits in the event of a termination of an Executive (as defined),
except a termination (i) because of death, (ii) because of "Disability," (iii)
by the Company for "Cause," or (iv) by the Executive other than for "Good
Reason," within the period beginning on the date of a "Potential Change in
Control" (as such terms are defined in the Change In Control Agreement) or
"Change in Control" and ending on the third anniversary of the date on which a
"change in control" (as defined below) occurs. The severance benefits include:
(i) an amount equal to a pro-rated incentive pool award under the Company's
Incentive Compensation Plan, determined as set forth in the Agreement; (ii) an
amount equal to the highest annual salary and incentive pool award in effect
during any of the preceding 36 months, determined as set forth in the
Agreement; (iii) continued coverage under the Company's life, disability,
health, dental and other employee welfare benefit plans; (iv) continued
participation and benefit accruals under the Company's Supplemental Retirement
Program for one year following the date of termination; and (v) an amount
sufficient, after taxes, to reimburse the Executive for any excise tax under
Section 4999 of the Internal Revenue Code of 1986, as amended. Each of Messrs.
Smith, LaTorre, Schaffhauser, Nettles and Dornbusch is defined as an Executive.
16
For purposes of the Company's Change In Control Agreement, a "change in
control" is triggered if one of the following occurs: (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, or (c) all or substantially all of the
individuals and entities who were the beneficial owners of the Company's
outstanding securities entitled to vote do not own more than 60% of such
securities in substantially the same proportions following a shareholder
approved reorganization, merger, or consolidation, or (d) shareholder approval
of either (i) a complete liquidation or dissolution of the Company or (ii) a
sale or other disposition of all or substantially all of the assets of the
Company, other than to the Company, with respect to which following such sale
or other disposition, more than 60% of the Company's outstanding securities
entitled to vote generally in the election of directors are thereafter
beneficially owned, in substantially the same proportions, by all or
substantially all of the individuals and entities who were the beneficial
owners of such securities prior to such sale or other disposition.
The Company's Key Employees 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 an acquisition of a
control interest. For purposes of the stock option and stock bonus awards
granted before March 7, 1996 under the Company's Stock Option Plan and the Key
Employees Stock Bonus Plan, an accelerated vesting is triggered if either (a)
or (b) in the above definition of "change in control" occurs. For awards made
on or after March 7, 1996, a participant under these plans will, subject to
such other conditions, if any, as the Committee may impose, receive accelerated
vesting of awards granted in the event of a "change in control," as defined
above, except that a "change in control" is triggered by twenty percent, rather
than twenty five percent, beneficial ownership of the Company's outstanding
securities entitled to vote in the election of directors, directly or
indirectly, by any person or group of persons, other than the groups presently
owning the same.
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 incentive to achieve high levels of company, business, and
individual performance; and
. Maintain and enhance alignment of employee and shareholder interests.
The Compensation and Stock Option Plan/Stock Bonus Committees are composed
entirely of non-employee Directors individually noted as signatories to this
report.
17
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 Employees Stock Bonus Plan to the Chief Executive
Officer and approximately 310 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
The Compensation Committee reviews salaries 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. This
target is being achieved for the entire professional, technical, and
managerial salaried work force on average 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 a 3% structure
increase for 1995 for the United States professional, technical and
managerial group and an equivalent adjustment for 1996. 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 United States, structure adjustments and
merit budgets are determined based on local market conditions.
Individual merit adjustments are based upon the managers' quantitative
and qualitative evaluation of individual performance, including
feedback from customers served, against business objectives such as
earnings, return on capital, market share, new customers, and
development of new commercial products. Performance is also considered
in the context
18
of expectations for behavior and the individuals' positions in their
respective salary ranges. The better the performance and the lower the
position in range, the greater the percentage base salary increase.
Conversely, the lower the performance and the higher the position in
range, the lower the percentage base salary increase.
Mr. Smith's salary was increased 5.4% for 1996 based on excellent
business results, which included substantial earnings growth while
funding significant investments in capital expansion, 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 and Long Term Equity Incentive Compensation
In 1995, the Company created a new Management Incentive Plan which
integrated its incentive compensation vehicles (including cash bonus
award, restricted stock and stock options) to better link total
compensation for the participant with the performance of the Company
and/or applicable business unit and the individual. The plan also
provides for greater clarity of expected performance and encourages the
identification and commitment to "breakthrough" results. Overall
incentive pools are established for cash, restricted stock equity, and
stock options. The pools are determined by formula based on competitive
total compensation for comparable performance; desired compensation mix
among cash, restricted stock and options; and on the actual performance
of the Company and its business units against specific predetermined
levels of earnings targets. A threshold level is established below
which incentives will not normally be paid. The Committees may adjust
these pools up or down based on the economic climate or other special
circumstances, but did not factor any pools up or down for 1995.
Individual awards are determined based on performance against specific
objectives within the limits of the pools.
The Company as a whole exceeded its 1995 target growing earnings by 17%
over 1994, and certain of its businesses achieved a still higher level
of earnings results. Certain other business groups did not achieve the
threshold level of performance against target required to pay cash or
long term incentives for 1995. These results generated the overall
pools within which the individual performance based awards were made as
described below.
a. Annual Cash Incentive Program
This program is designed to provide focus on expected annual results
and recognition of accomplishment for the year. Approximately 310
employees worldwide are eligible to participate in the Company's
program.
In 1995, actual cash payouts were 97% of the competitively defined
pool as factored for performance.
19
For the year 1995, Mr. Smith received a cash incentive award of
$925,000, compared with $630,000 in 1994. This was consistent with
the plan design for exceeding the 1995 target and the payout for the
overall Company. Exceeding the target required significant earnings
growth at a time when the Company was funding higher than usual
outlays associated with new business developments expected to be
positive factors in the future.
Total cash compensation paid to eligible participants reflects
excellent results achieved and is projected to be around the 75th
percentile of competitive practice.
b. Restricted Stock
Providing for vesting of shares in equal amounts over a period of
five years, the Key Employees Stock Bonus Plan is designed to align
key employee and shareholder long term interests by providing
designated employees an equity interest in the Company.
Approximately 310 employees participate in the Company's plan
worldwide. Eligible employees are reviewed annually for award grants
determined in the manner previously described.
The total equity shares awarded for 1995 was slightly under the plan
generated pool. The Committee approved modifying the form of payout
to decrease the number of shares approved for grant by two-thirds
and provide an equivalent value (as determined by actuarial and
financial models) in the form of stock options. The intent of this
shift toward options 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 175,904 shares awarded compared with
232,833 in 1994 and was approximately one-fourth of those awarded
for 1993 (adjusted for stock splits).
For the year 1995, Mr. Smith received a grant of 17,000 shares plus
options noted below. This compares with 25,000 shares in 1994, and
70,875 shares in 1993 (adjusted for stock splits). Mr. Smith's
equity share award, prior to splitting the form of grant into share
awards and options as described earlier, was 51,000 which was
consistent with the plan for exceeding target and the overall awards
for the Company.
c. 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, over two-thirds of the
compensation value of restricted stock equity was paid in the form
of options. Utilizing actuarial and financial models, the value of
an option was calculated to be approximately one-third of the
20
value of a restricted share award. Prior to 1994, restricted stock
equity had been provided totally in the form of stock awards to the
approximately 310 participants in the restricted stock plan.
In addition, approximately 60 senior managers worldwide are reviewed
for annual stock option grants determined in the manner previously
described. Options vest in equal increments over four years and
normally have a ten-year life.
Options granted for 1995 (excluding 913,022 options from the
conversion of restricted stock as noted above) totalled 927,025
which was within the pool generated. This compares with 925,275
(adjusted for stock splits) granted for 1994.
For the year 1995, Mr. Smith was awarded 266,000 options plus an
additional 102,000 options representing value paid in the form of
options instead of restricted stock. The 266,000 is consistent with
the plan design for exceeding target and the overall awards for the
Company.
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 below. 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.
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.
Section 162(m) of the Internal Revenue Code generally limits the deductible
amount of annual compensation paid to certain individual executive officers
(i.e., the chief executive officer and the four other most highly compensated
executive officers of the Company) to no more than $1 million. However,
qualifying performance-based compensation will be excluded from the $1 million
cap on deductibility, and the Committee believes, based on information
currently available, that the Company's stock options issued to its executive
officers qualify for this exclusion. Considering the current structure of
executive officer compensation and the availability of deferral opportunities,
the Committee believes that the Company will not be denied any significant tax
deductions for 1996. The Committee will continue to review tax consequences as
well as other relevant considerations in connection with compensation
decisions.
21
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
[CHART APPEARS HERE]
DECEMBER 31,
-----------------------------------------
1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------
Engelhard Corporation................. 100.00 176.47 285.49 308.60 285.25 426.91
S&P 500............................... 100.00 130.47 140.41 154.56 156.60 215.45
Dow Jones (Chemical).................. 100.00 133.98 146.22 161.83 176.27 230.80
- --------
* Assumes $100 invested on December 31, 1990 in each referenced group with
reinvestment of dividends.
22
2. APPROVAL OF THE AMENDMENTS TO THE KEY EMPLOYEES STOCK BONUS PLAN
The Company's Key Employees Stock Bonus Plan ("Stock Bonus Plan"), approved
by shareholders in 1986, will terminate by its terms on June 30, 1996. On March
7, 1996, the Board of Directors amended the Stock Bonus Plan, subject to
approval by the shareholders, to provide a definition of "change in control,"
for purposes of accelerating vesting of awards made on or after March 7, 1996,
that substantially conforms to the definition in the new Change In Control
Agreements, as described on page 16, to modify the amendment provisions to
provide shareholder approval only when required under Rule 16b-3, to grant the
Committee authority to accelerate the vesting of awards at any time, and to
extend the term of the Stock Bonus Plan for an additional ten years, through
June 30, 2006. There are currently 6,752,129 shares available for award prior
to the amendments. No additional shares are authorized in the proposed
amendments.
Adoption of the amendments to the Stock Bonus Plan will require the
affirmative vote of the holders of a majority of the outstanding shares of the
Company's Common Stock present or represented by proxy at the Annual Meeting.
The Board of Directors recommends that you vote FOR adoption of the
amendments to the Stock Bonus Plan.
SUMMARY DESCRIPTION OF THE KEY EMPLOYEES STOCK BONUS PLAN
The Stock Bonus Plan authorizes the Stock Option/Stock Bonus Committee (the
"Committee") (which consists of certain Non-Employee Directors) to provide for
the issuance and delivery of shares of the Company's Common Stock to key
employees as compensation for their services to the Company to incent future
performance. Twenty percent of the shares covered by any award vest at the end
of the first year following the date of the award and 20% at the end of each
succeeding year, provided that the key employee is in the service of the
Company or one of its subsidiaries on the vesting date. The Stock Bonus Plan
provides for full vesting of any stock awards made before March 7, 1996
pursuant to the Stock Bonus Plan in the event of an "acquisition of a control
interest" of the Company. For awards made after March 7, 1996, the Committee
shall have the authority to provide for the acceleration of vesting of such
shares at the time of or after a "change in control" of the Company as
described below. No payment for shares awarded under the Company's Stock Bonus
Plan is required of such key employees. 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.
Directors of the Company who are not officers or employees of the Company or
its subsidiaries are not eligible to participate. Awards under the Stock Bonus
Plan may be in addition to, or in lieu of, other forms of compensation. The
total number of shares of Common Stock which may be awarded under the Stock
Bonus Plan in each calendar year may not exceed 1,518,750 shares on a
cumulative basis.
The Committee has discretion to determine the key employees who shall
participate in the Stock Bonus Plan, the number of shares of Common Stock to be
awarded to each, the terms and
23
conditions, if any, upon which such shares may be awarded, and all other
matters arising in the administration of the Stock Bonus Plan. Key employees
are entitled to receive cash dividends on and to vote shares which are the
subject of an award pending the vesting of such shares. Key employees do not
have the right to sell or otherwise dispose of shares covered by the awards
until such shares have vested. Upon the termination of service of the key
employee, any award previously made to such key employee shall be automatically
cancelled and terminated as of the date of termination of such service to the
extent of any unvested shares, except under certain circumstances where such
termination of service is due to retirement, permanent disability or death.
The shares of Common Stock covered by the Stock Bonus Plan are subject to
adjustment in the event of a stock split, stock dividend or other change in
Common Stock.
The Stock Bonus Plan may be amended by the Board of Directors at any time,
except that any amendment or discontinuance shall be subject to approval by the
shareholders to the extent that such approval is required in order to insure
that awards made under the Plan are exempt under Rule 16b-3.
For awards made prior to March 7, 1996, a key employee will receive
accelerated vesting of awards granted (regardless of whether the service of
such key employee terminates) in the event of an "acquisition of a control
interest." For awards made on or after March 7, 1996, a key employee will,
subject to such other conditions as the Committee may impose, receive
accelerated vesting of awards granted in the event of a "change in control," as
defined on page 17, except that a "change in control" is triggered by twenty
percent, rather than twenty five percent, beneficial ownership of the Company's
outstanding securities entitled to vote in the election of directors, directly
or indirectly, by any person or group of persons, other than the groups
presently owning the same.
Key employees eligible to participate in the Deferred Compensation Plan for
Key Employees (the "Key Employees Deferred Compensation Plan") may elect to
defer payment of restricted stock awards in accordance with the Key Employees
Deferred Compensation Plan. The terms of the Key Employees Deferred
Compensation Plan will govern the vehicle in which the deferred stock awards
will be held, rights with respect to voting and dividends and the time when
such awards will be paid. The Key Employees Deferred Compensation Plan gives
the key employee the right to elect whether dividend equivalents on the
deferred stock awards will be paid to the key employee directly, applied to
credit additional deferred stock awards or added to an account being credited
with interest equivalents in accordance with the Key Employees Deferred
Compensation Plan.
Securities and Exchange Commission rules require tabular disclosure of
certain benefits under stock bonus plans. Since awards under the Stock Bonus
Plan are not determined by formula, the awards shown in the table below reflect
awards with respect to services performed in 1995.
24
NEW PLAN BENEFITS
KEY EMPLOYEES STOCK BONUS PLAN
NUMBER OF
RESTRICTED
GROUP SHARES
----- ----------
Executive Officers(1) (9 in number)............................ 50,967
Non-Employee Directors(2) (8 in number)........................ -0-
Non-Executive Officer Key Employees (300 in number)............ 124,937
- --------
(1) Specific grants relating to Messrs. Smith, LaTorre, Schaffhauser, Nettles
and Dornbusch are as listed under the Restricted Stock Award(s) column of
the Summary Compensation Table on page 11.
(2) Non-Employee Directors are not eligible to participate in the Stock Bonus
Plan.
3. APPROVAL OF THE AMENDMENTS TO THE
STOCK BONUS PLAN FOR NON-EMPLOYEE DIRECTORS
The Company's Stock Bonus Plan for Non-Employee Directors ("Directors Stock
Bonus Plan"), approved by shareholders in 1986, will terminate by its terms on
June 30, 1996. On March 7, 1996, the Board of Directors amended the Directors
Stock Bonus Plan, subject to approval by the shareholders, to provide a
definition of "change in control," for purposes of accelerating vesting of
awards made on or after March 7, 1996, that substantially conforms to the
definition in the new Change In Control Agreements, to modify the amendment
provisions to provide shareholder approval only when required under Rule 16b-3,
and to extend the term of the Directors Stock Bonus Plan for an additional ten
years, through June 30, 2006. There are currently 136,696 shares available for
award prior to the amendments. No additional shares are authorized in the
proposed amendments.
Adoption of the amendments to the Directors Stock Bonus Plan will require the
affirmative vote of the holders of a majority of the outstanding shares of the
Company's Common Stock present or represented by proxy at the Annual Meeting.
The Board of Directors recommends that you vote FOR adoption of the
amendments to the Directors Stock Bonus Plan.
SUMMARY DESCRIPTION OF THE STOCK BONUS PLAN FOR NON-EMPLOYEE DIRECTORS
The Directors Stock Bonus Plan provides for the award of 7,593 shares of the
Company's Common Stock to each non-employee who becomes a director of the
Company prior to June 30, 2006. There are currently 8 people eligible to
participate in the Directors Stock Bonus Plan. No
25
payment for shares awarded under the Directors Stock Bonus Plan shall be
required of the Directors. Any shares awarded under the Directors Stock Bonus
Plan which are forfeited will be available for future awards. Shares of the
Company's Common Stock used for purposes of the Directors Stock Bonus Plan may
be either authorized but unissued shares or treasury shares or both.
Shares awarded under the Directors Stock Bonus Plan shall be held by an
escrow agent until the Director becomes entitled to distribution pursuant to
the terms of the Directors Stock Bonus Plan or the shares are forfeited.
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.
Directors do not have the right to sell or otherwise dispose of shares which
are the subject of an award prior to distribution to the Director.
Shares awarded under the Directors Stock Bonus Plan shall tentatively vest at
the rate of 10% per year for each full year of the Director's service as a non-
employee Director (including service prior to the date of the award), except
that no shares shall tentatively vest prior to the expiration of six months
following the date of the award. Upon termination of the Director's service as
a non-employee Director, the Director (or, in the event of his death, his
beneficiary) shall be entitled to receive from the escrow agent the shares
awarded to such Director which have tentatively vested up to the date of such
termination of service; provided, however, that if the Director's termination
of service was for a reason other than permanent disability or death and there
has been no "change in control" (as defined below), the Director shall be
entitled to receive such tentatively vested shares only to the extent that a
majority of the Board of Directors of the Company (excluding the Director whose
service has terminated) determines that receipt of such shares by the Director
is warranted in light of the Director's services to the Company and the
circumstances of the Director's termination of service. Any shares which have
not so tentatively vested and, if a determination by the Board of Directors is
required, any shares as to which the Board does not determine that receipt is
warranted shall be forfeited as of the date of termination of service.
For awards made prior to March 7, 1996, a Director will receive accelerated
vesting of awards granted (regardless of whether the service of such Director
terminates) in the event of an "acquisition of a control interest." For awards
made on or after March 7, 1996, a Director will receive accelerated vesting of
awards granted (regardless of whether the service of such Director terminates)
in the event of a "change in control," as defined on page 17, except that a
"change in control" is triggered by twenty percent, rather than twenty five
percent, beneficial ownership of the Company's outstanding securities entitled
to vote in the election of directors, directly or indirectly, by any person or
group of persons, other than the groups presently owning the same.
The Directors Stock Bonus Plan shall be administered by a committee appointed
by the Board of Directors.
26
The shares of Common Stock covered by the Directors Stock Bonus Plan are
subject to adjustment in the event of a stock split, stock dividend or other
change in the Common Stock.
The Directors Stock Bonus Plan may be amended or discontinued by the Board of
Directors at any time, except that any amendment or discontinuance shall be
subject to approval by the shareholders to the extent that such approval is
required in order to insure that awards made under the Plan are exempt under
Rule 16b-3.
Directors receiving an award under the Directors Stock Bonus Plan may elect
to defer payment of the award in accordance with the Deferred Compensation Plan
for Directors (the "Deferred Compensation Plan"), in which event the terms of
the Deferred Compensation Plan will govern the vehicle in which the deferred
stock awards will be held, rights with respect to voting and dividends and the
time when such awards will be paid. The Deferred Compensation Plan gives the
Director the right to elect whether dividend equivalents on the deferred stock
awards will be paid to the Director directly, applied to credit additional
deferred stock awards or added to an account being credited with interest
equivalents in accordance with the Deferred Compensation Plan.
Securities and Exchange Commission rules require tabular disclosure of
certain benefits under directors stock bonus plans. The table below reflects
the number of shares issuable under the Directors Stock Bonus Plan.
NEW PLAN BENEFITS
STOCK BONUS PLAN FOR NON-EMPLOYEE DIRECTORS
NUMBER OF
GROUP SHARES
- ----- ---------
Current Non-Employee Directors as a Group (8 in number)(1)............ -0-
Each New Non-Employee Director(2)..................................... 7,593
- --------
(1) Each of the current non-employee directors received a one-time grant of
7,593 shares upon the later of joining the Board of Directors or adoption
of the Directors Stock Plan.
(2) After March 7, 1996, each new non-employee director will receive a one-time
grant of 7,593 shares upon joining the Board of Directors. Mr. Loomis will
receive this grant if elected.
27
4. PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
There will be submitted to the meeting a proposal to amend the first
paragraph of Article FOURTH of the Restated Certificate of Incorporation in
order to increase the number of shares of Common Stock, $1 par value, which the
Company is authorized to issue from 200,000,000 to 350,000,000. On March 7,
1996, the Board of Directors of the Company adopted resolutions declaring such
amendment advisable. The text of the first paragraph of Article FOURTH as it
will read if this proposal is adopted is set forth in Exhibit A hereto.
Adoption of this proposal to amend the Restated Certificate of Incorporation
requires the affirmative vote of the holders of a majority of the outstanding
shares of the Company's Common Stock present or represented by proxy at the
Annual Meeting.
Under the present Restated Articles of Incorporation, the total number of
shares of all classes of stock which the Company has authority to issue is
205,000,000 shares divided into 5,000,000 shares of Preferred Stock, without
par value, and 200,000,000 shares of Common Stock, $1 par value.
The purpose of the increase in authorized shares is to provide a sufficient
number of shares of Common Stock for potential future corporate requirements.
Of the 200,000,000 shares of Common Stock which are presently authorized,
143,684,177 shares of Common Stock were issued and outstanding as of March 14,
1996. Since it last increased the number of authorized shares by 120,000,000 in
May 1993, the Company has had two three-for-two stock splits resulting in the
issuance of 82,995,684 additional shares. Management believes the proposed
increase in authorized shares will provide the flexibility to meet future
requirements, including possible stock splits.
The holders of Common Stock do not have preemptive rights to purchase capital
stock of the Company. Any issuance of Common Stock or securities convertible
into Common Stock other than on a pro rata basis may dilute the percentage
ownership position of current shareholders.
The Board of Directors believes that it is desirable to have sufficient
authorized shares of Common Stock available for possible future stock splits or
dividends, financing and acquisition transactions and other general corporate
purposes. The additional authorized shares of Common Stock will allow the
Company to maintain the flexibility to issue Common Stock without the possible
expense and delay of a special shareholders' meeting. The additional shares of
Common Stock would be available for issuance without further action by the
shareholders unless such action is required by applicable law or the rules of
any stock exchange on which the Company's securities may be listed. The Company
has no present intent, understandings or arrangements for issuance of the
Common Stock for which authorization is sought.
28
Although the Company has no present intention to issue shares of Common Stock
in the future in order to make acquisition of control of the Company more
difficult, future issuances of Common Stock could have that effect. For
example, the acquisition of shares of the Company's Common Stock by an entity
in order to acquire control of the Company might be discouraged through the
public or private issuance of additional shares of Common Stock, since such
issuance would dilute the stock ownership of the acquiring entity. Common Stock
could also be issued to existing shareholders as a dividend or privately placed
with purchasers who might side with the Board in opposing a takeover bid, thus
discouraging such a bid.
The Board of Directors has unanimously approved the amendment and recommends
that you vote FOR the approval of the amendment to the Restated Certificate of
Incorporation to increase the number of shares of authorized Common Stock. If
approved at the Annual Meeting, the proposed amendment will become effective
when a Certificate of Amendment is filed in the office of the Secretary of
State of the State of Delaware.
5. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, based on the recommendation of the Audit Committee,
voted to retain Coopers & Lybrand L.L.P. to serve as independent public
accountants for the year 1996. Coopers & Lybrand L.L.P. 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 L.L.P. as the Company's independent public
accountants for the year 1996.
FUTURE SHAREHOLDER PROPOSALS
The Company will not consider any shareholder proposal for inclusion in the
1997 Annual Meeting of Shareholders' proxy material unless received by the
Company not later than November 30, 1996.
29
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 29, 1996
30
EXHIBIT A
PROPOSED ARTICLE FOURTH
RESTATED CERTIFICATE OF INCORPORATION
OF
ENGELHARD CORPORATION*
FOURTH: The total number of shares of capital stock that may be issued by the
Corporation is 355,000,000 [205,000,000], of which 5,000,000 shares, without
par value, shall be Preferred Stock (hereinafter in this Article FOURTH
referred to as "Preferred Stock"), and of which 350,000,000 [200,000,000]
shares, par value of $1 per share, shall be Common Stock. Shares of the stock
of any class of the Corporation may be issued by the Corporation from time to
time for such legally sufficient consideration as may be fixed from time to
time by the Board of Directors. Any and all shares so issued for which the
consideration is so fixed has been paid or delivered to the Corporation and
shall be deemed fully paid stock and shall not be liable to any further call or
assessment thereon, and the holders of said shares shall not be liable for any
further payments in respect of such shares.
- --------
*Proposed amendments are italicized and proposed deletions are in brackets.
A-1
[LOGO] ENGELHARD
NOTICE OF
ANNUAL MEETING
OF
SHAREHOLDERS
AND PROXY
STATEMENT
May 2, 1996
EXHIBIT 99.1
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 Amendments 3. Approval of the Amendments
to the Key Employees Stock to the Stock Bonus Plan for
Bonus Plan. Non-Employee Directors.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
4. Approval of Amendment 5. Ratification of appointment of
to Restated Certificate of Coopers & Lybrand L.L.P. as
Incorporation to increase independent public accountants.
authorized Common Stock to
350,000,000 shares
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
6. In their discretion, upon other
matters as they may properly
come before the meetings.
Please mark, sign and return promptly
using the enclosed envelope. Executors,
administrators, trustees, etc. should
give full title as such. If the signer
is a corporation, please sign full
corporate name by duly authorized
officer.
----------------------------------------
, 1996
----------------------------------
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 1996 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.
ENGLEHARD CORPORATION
ENGLEHARD 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 2, 1996
P
R The undersigned hereby constitutes and appoints Orin R. Smith, Reuben F.
O Richards and Arthur A. Dombusch, II, and each of them, his true and lawful
X agents and proxies with full power of substitution in each, to represent the
Y undersigned at the Annual Meeting of Shareholders of ENGLEHARD CORPORATION
to be held at One Chase Manhattan Plaza, Ground Floor, on Thursday, May 2,
1996 at 10:00 A.M. New York City Time and at any adjournments thereof, on
all matters coming before said meeting.
ELECTION OF DIRECTORS. NOMINEES: (Change of Address/Comments)
L. Donald LaTorre, William R. Loomis, Jr.,
Reuben F. Richards, Henry R. Slack and ____________________________
Orin R. Smith
____________________________
____________________________
____________________________
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+