<PAGE>
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 Section240.14a-11(c) or
Section240.14a-12
ENGELHARD CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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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:
-----------------------------------------------------------------------
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
<TABLE>
<S> <C>
[LOGO] 101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
</TABLE>
ORIN R. SMITH
Chairman and
Chief Executive Officer
March 31, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders,
which will be held at 9 a.m., Eastern Daylight Savings Time, on Thursday,
May 4, 2000, at The Sheraton at Woodbridge Place, 515 Route 1 South, Iselin,
N.J. 08830.
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,
[LOGO]
-
<PAGE>
ENGELHARD CORPORATION
101 WOOD AVENUE
ISELIN, NEW JERSEY 08830
------------------------
NOTICE OF THE 2000 ANNUAL MEETING OF SHAREHOLDERS
------------------------
To our Shareholders: March 31, 2000
The Annual Meeting of Shareholders of Engelhard Corporation, a Delaware
corporation, will be held on Thursday, May 4, 2000 at 9 a.m., Eastern Daylight
Savings Time, at The Sheraton at Woodbridge Place, 515 Route 1 South, Iselin,
N.J. 08830 for the following purposes:
(1) To elect three Directors;
(2) To ratify the appointment of Arthur Andersen LLP as independent public
accountants; and
(3) 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 close of business on March 15,
2000.
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 our Transfer Agent and Registrar, ChaseMellon 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
<PAGE>
ENGELHARD CORPORATION
101 WOOD AVENUE
ISELIN, NEW JERSEY 08830
------------------------
PROXY STATEMENT FOR THE 2000
ANNUAL MEETING OF SHAREHOLDERS
------------------------
ABOUT THE MEETING
WHY AM I RECEIVING THESE MATERIALS?
The Board of Directors of Engelhard Corporation (sometimes referred to as
"Engelhard" or "we" or "our") is providing these proxy materials for you in
connection with our Annual Meeting of Shareholders which will take place on
Thursday, May 4, 2000. You are invited to attend the Annual Meeting and are
requested to vote on the proposals described in this proxy statement.
WHO IS ENTITLED TO VOTE?
Holders of Common Stock as of the close of business on March 15, 2000 will
be entitled to vote. On such date there were outstanding and entitled to vote
127,590,728 shares of Common Stock of Engelhard, each of which is entitled to
one vote with respect to each matter to be voted on at the Meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the Annual 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 shareholders 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.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to Engelhard, it will be voted as you direct. If you are a registered
shareholder and attend the meeting, you may deliver your completed proxy card in
person. "Street name" shareholders who wish to vote at the meeting will need to
obtain a proxy form from the institution that holds their shares.
1
<PAGE>
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by submitting either a notice of
revocation or a duly executed proxy bearing a later date.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors. The Board's recommendation is set forth together with
the description of each item in this proxy statement. In summary, the Board
recommends a vote:
- for election of the nominated slate of directors (see page 4); and
- for ratification of the appointment of Arthur Andersen LLP as Engelhard's
independent auditors (see page 26).
With respect to any other matter that properly comes before the meeting, the
proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
Each item to be voted on at the Annual Meeting requires the affirmative vote
of the holders of a majority of the shares represented in person or by proxy and
entitled to vote on the item for approval. A properly executed proxy marked
"ABSTAIN" with respect to any such matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum. Accordingly, an
abstention will have the effect of a negative vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such "broker non-votes" will, however, be
counted in determining whether there is a quorum.
WHO WILL BEAR THE EXPENSE OF SOLICITING PROXIES?
The cost of soliciting proxies in the form enclosed will be borne by
Engelhard. In addition to the solicitation by mail, proxies may be solicited
personally, or by telephone, by our employees. We have also engaged D.F. King &
Co., Inc., 77 Water Street, New York, New York, to assist in such solicitation
at an estimated fee of $14,000 plus disbursements. Engelhard 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.
2
<PAGE>
INFORMATION AS TO CERTAIN SHAREHOLDERS
WHO ARE THE LARGEST OWNERS OF ENGELHARD'S COMMON STOCK?
Set forth below is certain information with respect to the only persons
known to us who owned beneficially more than five percent of our voting
securities as of March 2, 2000.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF
OWNED CLASS
------------ ----------
<S> <C> <C>
Wellington Management Company, LLP (1)(5)................... 15,175,898 11.90%
75 State Street
Boston, Massachusetts 02109
Vanguard Windsor Funds--Vanguard Windsor Fund (2)(5)........ 9,654,200 7.57%
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
PRIMECAP Management Company (3)............................. 8,250,750 6.47%
225 South Lake Avenue #400
Pasadena, California 91101-3005
FMR Corp. (4)............................................... 7,858,215 6.16%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- ------------------------
(1) As reported by Wellington Management Company, LLP on Schedule 13G filed with
the Securities and Exchange Commission on February 11, 2000.
(2) As reported by Vanguard Windsor Funds--Vanguard Windsor Fund on
Schedule 13G filed with the Securities and Exchange Commission on
February 8, 2000.
(3) As reported by PRIMECAP Management Company on Schedule 13G filed with the
Securities and Exchange Commission on February 25, 2000.
(4) As reported by FMR Corp. on Schedule 13G filed with the Securities and
Exchange Commission on February 11, 2000.
(5) Wellington Management Company, LLP reports that, as investment adviser, it
shares beneficial ownership with one of its clients, Vanguard Windsor Funds.
Consequently, the same shares may be shown as beneficially owned by both
Wellington Management Company, LLP and Vanguard Windsor Funds.
3
<PAGE>
1. ELECTION OF DIRECTORS
Our Board of Directors consists of three classes, Class I, Class II and
Class III, each class serving for a full three-year term. Messrs. Antonini,
Slack and Watson, all of whom are Class I Directors, are nominees for reelection
as Class I Directors at the Annual Meeting. If elected, they will serve until
2003. The Class II Directors will be considered for reelection at our 2001
Annual Meeting. The Class III Directors will be considered for reelection at our
2002 Annual Meeting.
Mr. Smith has been a member of the Board of Directors since 1981,
Mr. Richards since 1983, Mr. Antonini since 1985, Mr. Napier since 1986,
Mrs. Pace since 1987, Mr. Watson since 1991, Ms. Alvarado since 1995,
Mr. Loomis since 1996, Mr. Perry since 1997. Mr. Slack joined the Board of
Directors in 1981, resigned on May 21, 1999 in connection with the Minorco
transaction described on page 11 and, on severing all ties with Minorco, was
re-elected to the Board of Directors as a Class I Director on June 3, 1999.
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 intend to vote,
unless you instruct otherwise in your proxy, FOR the election of
Messrs. Antonini, Slack and Watson as Class I Directors.
4
<PAGE>
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
Engelhard and his or her principal occupation during the last five years.
NOMINEES FOR REELECTION AT THIS MEETING,
AGES, PRINCIPAL BUSINESS EXPERIENCE DURING THE
PAST FIVE YEARS, BOARD MEMBERSHIPS (CLASS I)
MARION H. ANTONINI
Age 69. Principal of Kohlberg & Co., a private merchant banking firm, since
March 1998. Chairman and Chief Executive Officer of Welbilt Corporation from
prior to 1995 to 1998.
Mr. Antonini is also a director of Vulcan Materials Company,
Scientific-Atlanta, Inc., Color Spot Nurseries, Inc., Holley Performance
Products, Inc. and Turbochef Technologies, Inc.
HENRY R. SLACK
Age 50. Chairman of Task (USA) Inc., a private investment company, since
June 1999. Chief Executive of Minorco from prior to 1995 to June 1999.
Mr. Slack is also a director of Terra Industries Inc. and South African
Breweries plc.
DOUGLAS G. WATSON
Age 55. Management consultant since June 1999. President, CEO and Director of
Novartis Corporation, a life sciences company, from January 1997 to
May 1999. President of the Pharmaceuticals Division of CIBA-GEIGY
Corporation from prior to 1995 to January 1997.
Mr. Watson is also a director of Summit Bancorp.
5
<PAGE>
DIRECTORS WITH TERMS EXPIRING MAY 2001,
AGES, PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST
FIVE YEARS, BOARD MEMBERSHIPS (CLASS II)
LINDA G. ALVARADO
Age 47. President and Chief Executive Officer of Alvarado Construction, Inc.,
from prior to 1995.
Ms. Alvarado is also a director of The Pepsi Bottling Group, Inc., Pitney
Bowes, Inc. and US West Communications Inc.
WILLIAM R. LOOMIS, JR.
Age 51. Deputy Chief Executive of Lazard Freres & Co. LLC, an investment bank,
since September 1999; Managing Director of Lazard Freres & Co. LLC from
prior to 1995; Chairman of the Board of Terra Industries Inc. since
April 1996.
JAMES V. NAPIER
Age 63. Chairman of Scientific-Atlanta, Inc., a communications manufacturing
company, from prior to 1995.
Mr. Napier is also a director of Intelligent Systems Corporation, Vulcan
Materials Company, McKesson HBOC, Inc., Personnel Group of America, Inc. and
Westinghouse Air Brake Company.
NORMA T. PACE
Age 78. Partner, Paper Analytics Associates, a planning and consulting
company, since January 1995.
Mrs. Pace is also a director of Hasbro, Inc.
6
<PAGE>
DIRECTORS WITH TERMS EXPIRING MAY 2002,
AGES, PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST
FIVE YEARS, BOARD MEMBERSHIPS (CLASS III)
BARRY W. PERRY
Age 53. President and Chief Operating Officer of Engelhard since 1997;
previously Group Vice President and General Manager of the Pigments and
Additives Group from prior to 1995 to 1997.
Mr. Perry is also a director of Arrow Electronics, Inc.
REUBEN F. RICHARDS
Age 70. Retired Chairman of the Board of Terra Industries, Inc.; Retired
Chairman of the Board of Minorco (U.S.A.); Retired Non-Executive Chairman of
the Board of Engelhard; Chairman of the Board of Terra Industries Inc. from
prior to 1995 until April 1996.
Mr. Richards is also a director of Santa Fe Energy Resources, Inc., Ecolab,
Grupo Financiero Banorte and Potlatch Corporation.
ORIN R. SMITH
Age 64. Chairman and Chief Executive Officer of Engelhard since January 1995.
Mr. Smith is also a director of Ingersoll-Rand Company, PE Biosystems--Celera,
Summit Bancorp, and Vulcan Materials Company.
7
<PAGE>
SHARE OWNERSHIP OF DIRECTORS AND OFFICERS
HOW MUCH COMMON STOCK DO ENGELHARD'S DIRECTORS AND EXECUTIVE OFFICERS OWN?
Set forth in the following table is the beneficial ownership of Common Stock
as of March 2, 2000 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) other
than Mr. Smith, who owns 2.4%. All Directors and Executive Officers as a group
own approximately 3.8% of the total outstanding shares (including exercisable
options).
<TABLE>
<CAPTION>
NAME SHARES
- ---- ---------
<S> <C>
Linda G. Alvarado........................................... 18,909(1)
Marion H. Antonini.......................................... 70,504(1)
Arthur A. Dornbusch, II..................................... 397,265(2)
Thomas P. Fitzpatrick....................................... 217,165(2)
John C. Hess................................................ 85,361(2)
William R. Loomis, Jr....................................... 29,630(1)
James V. Napier............................................. 40,784(1)
Norma T. Pace............................................... 49,925(1)
Barry W. Perry.............................................. 454,274(2)
Reuben F. Richards.......................................... 51,513(1)
Henry R. Slack.............................................. 10,123
Orin R. Smith............................................... 3,053,514(2)
Douglas G. Watson........................................... 53,163(1)
All Directors and Executive Officers as a group............. 4,786,180(2)
</TABLE>
- ------------------------
(1) Includes 7,500 shares of Common Stock subject to options granted to
Messrs. Antonini, Napier, Richards and Watson and Mses. Alvarado and Pace
and 4,500 shares of Common Stock subject to options granted to Mr. Loomis
under our Directors Stock Option Plan, which options may be exercised within
60 days from March 2, 2000.
(2) Includes 2,106,403, 391,904, 139,236, 265,600, 66,527 and 3,161,161 shares
of Common Stock subject to options granted to Messrs. Smith, Perry,
Fitzpatrick, Dornbusch, Hess, and all Directors and Executive Officers as a
group, respectively, under our Stock Option Plan of 1991 (the "Stock Option
Plan") and the Directors Stock Option Plan, which options may be exercised
within 60 days from March 2, 2000, and also includes 1,157 shares owned by
family members in which persons in the group disclaim any beneficial
interest.
8
<PAGE>
BOARD OF DIRECTORS' MEETINGS, COMMITTEES AND FEES
HOW OFTEN DID THE BOARD OF DIRECTORS MEET DURING 1999?
Our Board of Directors held a total of 8 meetings during 1999. During 1999
all of our Directors attended more than 90% of the meetings of the Board and
meetings of committees of the Board on which they served, except for
Ms. Alvarado, who attended less than 75% of the meetings of the Board and
meetings of committees of the Board on which she served.
WHAT COMMITTEES DOES THE BOARD OF DIRECTORS HAVE?
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.
AUDIT COMMITTEE
The members of the Audit Committee are Mr. Loomis (Chairman), Ms. Alvarado,
Messrs. Antonini and Slack and Mrs. Pace, all of whom are Nonemployee Directors.
The Audit Committee periodically reviews our accounting policies, internal
accounting controls and the scope and results of the independent accountants'
audit of our financial statements. The Audit Committee held 1 meeting during
1999.
COMPENSATION COMMITTEE
The members of the Compensation Committee are Messrs. Antonini (Chairman),
Napier, Richards and Watson and Mrs. Pace, all of whom are Nonemployee
Directors. The Compensation Committee determines the appropriate level of
compensation for the Officers and employees of Engelhard. The Compensation
Committee held 6 meetings during 1999.
STOCK OPTION/STOCK BONUS COMMITTEE
The members of the Stock Option/Stock Bonus Committee are Messrs. Antonini
(Chairman), Napier, Richards and Watson and Mrs. Pace, all of whom are
Nonemployee Directors. The Stock Option/Stock Bonus Committee administers our
stock option and stock bonus plans and determines the terms and conditions for
the issuance of stock options and stock bonus awards to our Officers and
employees. The members of the Committee are not eligible to participate in such
plans. The Stock Option/Stock Bonus Committee held 5 meetings during 1999.
HOW ARE DIRECTORS COMPENSATED?
Directors who are not our employees each received a retainer at the annual
rate of $35,000 in 1999. In addition, Nonemployee Directors received a $1,350
fee for each Board meeting attended
9
<PAGE>
in 1999. During 1999, Nonemployee Directors also received a $1,350 fee for each
committee meeting attended; a $5,000 annual retainer for each committee on which
they served; and each chairman of a committee received an additional $5,000
annual retainer. Directors who are employed by us do not receive any Directors'
fees or retainers.
Pursuant to our Deferred Stock Plan For Nonemployee Directors (the "Deferred
Stock Plan"), each Nonemployee Director is credited with deferred stock units,
each of which evidences the right to receive a share of Common Stock of
Engelhard upon the Director's termination of service. Deferred stock units were
credited to the accounts of the Nonemployee Directors on May 6, 1999, and will
be credited annually on each May 31 with an amount of deferred stock units
calculated by dividing an amount equal to 40% of the annual retainer payable to
such Nonemployee Director then in effect by the average daily closing price per
share of Common Stock of Engelhard for the 20 trading days prior to such date.
When a regular cash dividend is paid on the Common Stock, the account of each
eligible Nonemployee Director will be credited with additional deferred stock
units corresponding to the cash dividend paid on the number of shares of Common
Stock evidenced by the deferred stock units credited to the account of such
Nonemployee Director. The entire balance of a Nonemployee Director's account
under the Deferred Stock Plan will be paid to the Nonemployee Director, in
either a lump sum or installments at the election of such Nonemployee Director,
in shares of our Common Stock upon the Nonemployee Director's termination of
service. If a "change in control" occurs and the Nonemployee Director ceases to
be a Director or the Deferred Stock Plan is terminated, the entire balance of
the account will be payable in a lump sum within 30 days.
Pursuant to our Stock Bonus Plan for Nonemployee Directors (the "Directors
Stock Bonus Plan"), each person who becomes a Nonemployee Director prior to
June 30, 2006 shall be awarded 7,593 shares of our Common Stock effective as of
such person's election to our Board of Directors. Such shares will tentatively
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 Nonemployee 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." If receipt of shares is accelerated due to a
change in control, an additional payment will be made to compensate for the loss
of the tax deferral.
Pursuant to our Directors Stock Option Plan each Nonemployee 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 the fair market value of such shares 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
10
<PAGE>
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 our Deferred Compensation Plan for Directors, Nonemployee
Directors may elect to defer payment of all or a designated portion of their
compensation for services as a Director. Under our Deferred Compensation Plan
for Directors, deferred amounts will be paid at time of a "change in control" if
the participant has made an advance election to that effect. In the event
distribution of deferred amounts is so accelerated, an additional payment will
be made in order to compensate for the loss of tax deferral resulting from the
accelerated payment.
CERTAIN TRANSACTIONS
In May 1999 we purchased approximately 18 million of our shares owned by
Minorco for $18.72 per share. The 18 million shares represented approximately
13% of Engelhard's total shares outstanding. Additional shares representing the
remainder of Minorco's stake were sold in a secondary public offering. Minorco
also compensated Engelhard in the amount of approximately $41.9 million for
costs and other expenses related to the secondary offering and the purchase of
the shares. In connection with the above transactions we paid Minorco $196,685
in full satisfaction of all rights of Messrs. Slack and Lea (a former director
of the company) and Minorco in respect of options and deferred shares granted
under directors compensation plans, which amount was computed using the same
$18.72 price per share.
Lazard Freres & Co. LLC, an investment bank of which Mr. Loomis is Deputy
Chief Executive, has provided financial advisory services to Engelhard from time
to time. All fees paid in 1999 in connection with these services were reimbursed
by Minorco in connection with the transactions described above.
Among other businesses, we market, fabricate and process various metals,
minerals and ores acquired from numerous domestic and foreign suppliers. We make
and will continue to make purchases, sales and leases of such materials, in the
ordinary course of our business, from and to entities in which we believe that
Anglo American plc ("Anglo American"), a successor by merger to Minorco, has a
material interest. Such purchases, sales and leases are on terms which are no
less favorable to us than those obtainable from other sources. Our purchases and
sales of such materials from all sources during 1999 was $3.1 billion and
$3.2 billion, respectively, including purchases of $145.4 million from, and no
sales to, entities in which we are informed Anglo American has a material
interest. We also entered into metal leases of $5.3 million with such entities.
11
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our Executive
Officers and Directors and persons who own more than 10% of a registered class
of Engelhard's equity securities to file initial reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
New York Stock Exchange. Such Executive Officers, Directors and shareholders are
required by SEC regulations to furnish us with copies of all Section 16(a) forms
they file. Based solely on a review of the copies of such forms furnished to us
and written representations from our Executive Officers and Directors, all
persons subject to the reporting requirements of Section 16(a) filed the
required reports on a timely basis for 1999.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the compensation paid by us for services
rendered in all capacities during each of the last three fiscal years to our
Chief Executive Officer and our other four most highly compensated Executive
Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS(1)(2)
-------------------------------- ---------------------------
RESTRICTED ALL OTHER
STOCK COMPENSATION
YEAR SALARY($) BONUS($) AWARD(S)($)(3) OPTIONS(#) ($)(5)
-------- --------- --------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Orin R. Smith, Director,..... 1999 950,000 1,852,500 609,496 715,920 --
Chairman and Chief 1998 864,996 1,750,000 554,093 608,279 --
Executive Officer 1997 814,992 916,805 379,996 520,667 --
Barry W. Perry, Director,.... 1999 428,660 687,600 289,716 334,236 --
President and Chief 1998 372,744 630,000 250,380 279,519 --
Operating Officer 1997 349,991 338,320 172,002 231,348 --
Thomas P. Fitzpatrick,.......
Senior Vice President 1999 353,100 472,100 182,078 201,358 --
and Chief Financial 1998 314,000 523,500 188,858 249,825 --
Officer(4) 1997 200,000 274,885 135,811 153,560 --
Arthur A. Dornbusch, II,..... 1999 284,936 277,100 149,812 127,822 6,624
Vice President, General 1998 276,636 275,000 141,668 106,351 5,656
Counsel and Secretary 1997 265,992 126,870 90,522 90,073 4,812
John C. Hess,................ 1999 205,878 168,300 84,857 66,894 --
Vice President, 1998 194,350 165,000 80,048 58,057 --
Human Resources 1997 164,701 126,870 57,939 48,282 --
</TABLE>
- ------------------------
(1) Our Key Employees Stock Bonus Plan and our Stock Option Plan provide for
acceleration of vesting in the event of a "change in control." For
information on what constitutes a "change in
12
<PAGE>
control," see "Employment Contracts, Termination of Employment and Change in
Control Arrangements" on page 17.
(2) Currently, we have 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) As of December 31, 1999, Messrs. Smith, Perry, Fitzpatrick, Dornbusch and
Hess held 66,589, 26,386, 15,680, 15,194 and 7,746 unvested shares,
respectively, of stock which were awarded pursuant to our Key Employees
Stock Bonus Plan having a market value of $1,256,875, $498,036, $295,964,
$286,791 and $146,200, respectively. The foregoing amounts do not include
the reported grants, which were made in February 2000 for services rendered
during 1999. Restricted stock awards of Engelhard's Common Stock granted
under the Key Employees Stock Bonus Plan vest in five equal annual
installments commencing on February 1 in the year following the grant.
Vesting will be accelerated upon the occurrence of a "change in control." We
pay dividends on restricted stock, if and to the extent paid on Common Stock
generally, but pay no dividends on stock options. For information on what
constitutes a "change in control," see "Employment Contracts, Termination of
Employment and Change in Control Arrangements" on page 17.
(4) Mr. Fitzpatrick joined Engelhard on May 1, 1997 and retired from Engelhard
on February 18, 2000.
(5) Represents interest accrued during 1997, 1998 and 1999 in excess of 120% of
the applicable federal interest rate with respect to salary deferrals.
13
<PAGE>
The following table sets forth information concerning individual grants of
stock options made under the Stock Option Plan in December 1999 and
February 2000 for services rendered during 1999 by each of the named Executive
Officers.
OPTION GRANTS FOR SERVICES RENDERED DURING 1999
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- --------------------------------------------------------------------------------------------- -------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES FOR EXERCISE OR GRANT DATE
OPTIONS SERVICES RENDERED BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#)(1) DURING 1999 ($/SH) DATE ($)(2)
- ------------------------------ -------------- ----------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Orin R. Smith................. 500,000 16% 17.81 12/16/09 2,565,000
215,920 7% 16.84 02/03/10 1,042,894
Barry W. Perry................ 231,600 7% 17.81 12/16/09 1,188,108
102,636 3% 16.84 02/03/10 495,732
Thomas P. Fitzpatrick......... 136,850 4% 17.81 12/16/09 702,041
64,508 2% 16.84 02/03/10 311,574
Arthur A. Dornbusch, II....... 74,750 2% 17.81 12/16/09 383,468
53,072 2% 16.84 02/03/10 256,338
John C. Hess.................. 36,850 1% 17.81 12/16/09 189,041
30,044 1% 16.84 02/03/10 145,113
</TABLE>
- ------------------------
(1) Options have a ten-year term and vest in four equal annual installments
beginning 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 17.
(2) The Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options set forth in this table. Our use of this model
should not be construed as an endorsement of its accuracy at valuing
options. All stock option valuation models, including the Black-Scholes
model, require a prediction about the future movement of the stock price.
The real value of the options in this table depends upon the actual changes
in the market price of the Common Shares during the applicable period. The
model assumes:
(a) an option term of 4 years, which represents anticipated exercise trends
for the named Executive Officers;
(b) an interest rate of 6% that represents the current yield curves as of
the grant dates;
(c) an average volatility of approximately 33% calculated using average
weekly stock prices for the four years prior to the grant date; and
(d) a dividend yield of approximately 2.3% (the current dividend yield).
14
<PAGE>
The following table sets forth information concerning each exercise of stock
options during 1999 by each of the named Executive Officers and the value of
unexercised options at December 31, 1999.
AGGREGATE OPTION EXERCISES IN 1999 AND VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 1999 (#) DECEMBER 31, 1999 ($)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Orin R. Smith........... 0 0 1,963,327 1,447,869 3,208,562 654,004
Barry W. Perry.......... 0 0 341,282 627,785 231,319 301,643
Thomas P. Fitzpatrick... 0 0 113,471 426,764 31,592 189,273
Arthur A. Dornbusch,
II.................... 0 0 235,076 242,148 306,207 108,667
John C. Hess............ 0 0 53,021 120,180 45,930 57,870
</TABLE>
15
<PAGE>
PENSION PLANS
The following table shows estimated annual pension benefits payable to a
covered participant at normal retirement age under our qualified defined benefit
pension plan, as well as the non-qualified supplemental pension plan. This
non-qualified plan provides benefits that would otherwise be denied participants
by reason of certain Internal Revenue Code limitations on qualified plan
benefits and provides enhanced benefits for certain named key executives,
including the individuals named in the Summary Compensation Table, based on
remuneration that is covered under the plans and years of service with Engelhard
and its subsidiaries.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------
FINAL AVERAGE PAY 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ----------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$200,000.................... 63,762 87,762 111,762 135,762 135,762
400,000..................... 135,762 183,762 231,762 279,762 279,762
600,000..................... 207,762 279,762 351,762 423,762 423,762
800,000..................... 279,762 375,762 471,762 567,762 567,762
1,000,000.................... 351,762 471,762 591,762 711,762 711,762
1,200,000.................... 423,762 567,762 711,762 855,762 855,762
1,400,000.................... 495,762 663,762 831,762 999,762 999,762
1,600,000.................... 567,762 759,762 951,762 1,143,762 1,143,762
1,800,000.................... 639,762 855,762 1,071,762 1,287,762 1,287,762
2,000,000.................... 711,762 951,762 1,191,762 1,431,762 1,431,762
2,200,000.................... 783,762 1,047,762 1,311,762 1,575,762 1,575,762
2,400,000.................... 855,762 1,143,762 1,431,762 1,719,762 1,719,762
2,600,000.................... 927,762 1,239,762 1,551,762 1,863,762 1,863,762
2,800,000.................... 999,762 1,335,762 1,671,762 2,007,762 2,007,762
3,000,000.................... 1,071,762 1,431,762 1,791,762 2,151,762 2,151,762
3,200,000.................... 1,143,762 1,527,762 1,911,762 2,295,762 2,295,762
3,400,000.................... 1,215,762 1,623,762 2,031,762 2,436,762 2,436,762
</TABLE>
A participant's remuneration covered by our 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), 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 12, credited years of service
under the plans as of December 31, 1999 are as follows: Mr. Smith, 28 years;
Mr. Perry, 6 years; Mr. Dornbusch, 23 years; and Mr. Hess, 15 years.
Mr. Fitzpatrick retired as of February 18, 2000 without sufficient service to
vest in benefits under Engelhard's pension plans. 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.
16
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
We entered into a three-year employment agreement with Mr. Smith commencing
May 21, 1996. On May 20,1998, Mr. Smith's agreement was extended to
December 31, 2000. The agreement provides for an annual salary of not less than
$775,000, an annual cash bonus of at least $216,645 and an award of at least
22,500 shares of our Common Stock; provided, however, that an annual cash bonus
of at least $581,250, equity pool share awards with a value of at least $484,375
and stock option awards with a value of at least $1,162,500 will be awarded to
Mr. Smith if our performance for any year is greater than or equal to a
predictable level of performance for such year, as determined by the
Compensation Committee. In addition, Mr. Smith is entitled to participate in our
benefit plans.
Pursuant to our Change In Control Agreements, we will provide severance
benefits in the event of a termination of an Executive (as defined), except a
termination:
(1) because of death,
(2) because of "Disability,"
(3) by Engelhard for "Cause," or
(4) 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" (as defined below) and ending on the third anniversary of the date on
which a "change in control" occurs. The severance benefits include:
(1) the payment of salary to the Executive through the date of termination
of employment together with salary in lieu of vacation accrued;
(2) an amount equal to a pro-rated incentive pool award under our Incentive
Compensation Plan, determined as set forth in the Agreement;
(3) an amount equal to two times the sum of the highest annual salary and
incentive pool award in effect during any of the preceding 36 months,
determined as set forth in the Agreement;
(4) continued coverage under our life, disability, health, dental and other
employee welfare benefit plans for up to two years;
(5) continued participation and benefit accruals under our Supplemental
Retirement Program for two years following the date of termination; and
17
<PAGE>
(6) 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, Perry, Dornbusch and Hess is defined as an Executive.
For purposes of our Change In Control Agreement, a "change in control" is
triggered if one of the following occurs:
(1) twenty-five percent or more of our 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
(2) a majority of our Board of Directors ceases to consist of the existing
membership or successors approved by the existing membership or their
similar successors, or
(3) shareholders approve a reorganization or merger with respect to which
the persons who were the beneficial owners of our outstanding voting
securities immediately prior thereto do not, following the reorganization
or merger, beneficially own more than 60% of the outstanding voting
securities of the corporation resulting from the reorganization or merger
in substantially the same proportions as their ownership of our voting
securities immediately prior thereto, or
(4) shareholder approval of either:
(a) a complete liquidation or dissolution of Engelhard or
(b) a sale or other disposition of all or substantially all of the assets
of Engelhard, other than to a corporation, with respect to which
following such sale or other disposition, more than 60% of
Engelhard'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.
Our Key Employees Stock Bonus Plan and our 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. If
vesting of awards under the Key Employees Stock Bonus Plan is accelerated, an
additional payment will be made to compensate for the loss of tax deferral. For
purposes of the stock option and stock bonus awards granted before March 7, 1996
under these Stock Option Plans and the Key Employees Stock Bonus Plan, an
accelerated vesting is triggered if either (1) or (2) 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
18
<PAGE>
percent, rather than twenty-five percent, beneficial ownership of Engelhard'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.
Unless a contrary advance election is made, amounts deferred under our
Deferred Compensation Plan for Key Employees will be paid in a lump sum upon an
"acquisition of a control interest" (defined as described above for purposes of
awards made prior to March 7, 1996 under our Key Employees Stock Bonus Plan). If
payments are so accelerated, an additional payment will be made in order to
compensate for the loss of tax deferral. Under our Directors and Executives
Deferred Compensation Plans, which provided for elective deferrals of
compensation earned for years from 1986 through 1993, deferred amounts will be
paid at the time of an "acquisition of a control interest" if the participant
has made an advance election to that effect. In the event distribution of
deferred amounts is so accelerated, an additional payment will be made in order
to compensate for the loss of tax deferral resulting from the accelerated
payment. In addition, certain supplemental retirement benefits under our
Supplemental Retirement Program will vest upon a "change in control" (defined as
described above in the case of the Change in Control Agreements).
We have entered into a Supplemental Retirement Trust Agreement in order to
assist us in paying benefits under the Supplemental Retirement Program, each of
our deferred compensation plans and our Retirement Plan for Directors. We are
required to deposit funds in the trust sufficient to fund unpaid benefits under
each of such plans at the time of a "change in control" (defined as described
above for purposes of the Change in Control Agreements). The assets of the trust
will be subject to the claims of our creditors in the event of our bankruptcy or
insolvency.
19
<PAGE>
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
our Stock Option Plans and Stock Bonus Plan approved by our shareholders, we
have developed and implemented compensation programs designed to:
- Attract and retain key employees 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 Nonemployee 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 21 other
senior managers worldwide; and
- Aggregate cash incentive awards for Engelhard and specific individual cash
awards under the annual plan for the Chief Executive Officer and
approximately 21 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 Plans and restricted stock awards
under the Key Employees Stock Bonus Plan to the Chief Executive Officer
and approximately 365 employees worldwide.
20
<PAGE>
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. Our current competitive target is to pay somewhat above the median for
positions of comparable level. This target is being achieved on average for the
professional, technical, and managerial salaried work force. Salary structures
are set each year based on our target and its actual competitive position. There
was a 3.5% structure increase for 1999 for the U.S. professional, technical and
managerial group and no adjustment for 2000. Likewise merit budgets are
established based on a competitive target, actual competitive position, and our
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 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 is
evaluated and the higher the position in range, the lower the percentage base
salary increase.
Mr. Smith's salary was increased 5.3% for 2000 based on competitive practice
and business results, which included earnings results while funding 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 our emphasis on
non-fixed compensation which varies with Engelhard performance and on other
equity vehicles which are closely aligned with shareholder interests.
2. ANNUAL CASH AND LONG TERM EQUITY INCENTIVE COMPENSATION
Our Management Incentive Plan integrates all incentive compensation vehicles
(including cash bonus award, restricted stock and stock options) to link total
compensation for the participant with both competitive practice and the
performance of Engelhard and/or the applicable business unit and the individual.
The plan facilitates clarity of performance expectations 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 a formula based on competitive total compensation for
comparable performance; desired compensation mix
21
<PAGE>
among cash, restricted stock and options; and on the actual performance of
Engelhard 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 1999. Individual awards are determined based on performance
against specific objectives within the limits of the pools.
Our overall results increased, against the results which served as the basis
for 1998's incentive awards, by more than 14.6%. As provided under the plan, the
level of the pool generated for Engelhard overall and each business group
depends upon that group's actual performance against targets established at the
beginning of 1999. Once each group's pool has been established, 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 365 employees
worldwide received awards under our program.
For 1999, actual cash payouts were 92% of the competitively defined pool as
factored for performance.
For the year 1999, Mr. Smith received a cash incentive award of $1,852,500
compared with $1,750,000 for 1998. This was consistent with the plan design
considering performance and targets and the payout for Engelhard overall.
Total cash compensation paid to eligible participants reflects competitive
practice for results achieved and is projected to be around the 60th percentile
of competitive practice--higher in lower level positions and lower in higher
level Positions.
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 Engelhard. Approximately 381 employees are eligible to participate
in our plan worldwide. Eligible employees are reviewed annually for award grants
determined in the manner previously described.
The total equity shares awarded for 1999 was slightly under the plan
generated pool. The Committee grants a number of equity shares which are then
converted to a combination of restricted stock and stock options. Approximately
two-thirds of the value of the equity shares, using present value methodologies,
awarded for 1999 were in the form of stock options. This resulted in 233,890
restricted shares awarded compared with 222,145 for 1998.
22
<PAGE>
For the year 1999, Mr. Smith received a grant of 35,985 shares plus options
noted below. This compares with 28,415 shares in 1998 and 20,968 shares in 1997.
c. STOCK OPTIONS
Our Stock Option Plans have 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, approximately two-thirds of
the compensation value of equity shares was paid in the form of options.
Utilizing actuarial and financial Black-Scholes models, the value of an option
was calculated to be approximately one-third of the value of a restricted share
award.
In addition, approximately 381 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 1999 totaled 3,195,003 which was within the pool
generated. This compares with 2,950,471 granted for 1998.
For the year 1999, Mr. Smith was awarded 500,000 options plus an additional
215,920 options representing value paid in the form of options instead of
restricted stock. The options awarded are consistent with the plan design and
the overall awards for Engelhard.
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. Although there is some overlap in the compensation
comparison groups with The Standard & Poor's Chemical Composite Index used in
the Performance Graph below, for the most part they are different companies.
There are two key reasons for the divergence in samples: (1) we generally
utilize 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
Standard & Poor's Chemical Composite Index do not participate in the standard
surveys purchased); (2) the predominant labor markets in which Engelhard
competes for people differ from The Standard & Poor's Chemical Composite Index
in that they also include firms in other business line industries, e.g.,
petroleum and in geographic concentrations, e.g., New Jersey.
The Committees are satisfied that relevant competitive data and achievements
of Engelhard against its targets in the context of the economic and competitive
environment in which Engelhard has operated, support the objectives of
attracting and retaining key talent, providing incentives for superior
performance, and aligning employee and shareholder interests. Nevertheless, the
Committees may reevaluate the current compensation program design as part of
their ongoing process of oversight on such matters.
23
<PAGE>
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 Engelhard) to no more than $1 million. Considering the
current structure of executive officer compensation and the availability of
deferral opportunities, the Committee believes that we will not be denied any
significant tax deductions for 1999. The Committee will continue to review tax
consequences as well as other relevant considerations in connection with
compensation decisions.
24
<PAGE>
COMPENSATION COMMITTEE
STOCK OPTION/STOCK BONUS COMMITTEE
<TABLE>
<S> <C> <C>
Marion H. Antonini James V. Napier Norma T. Pace
Reuben F. Richards Douglas G. Watson
</TABLE>
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG ENGELHARD CORPORATION, S&P 500 INDEX,
S&P CHEMICAL COMPOSITE AND ALL S&P CHEMICALS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ENGELHARD CORPORATION S&P 500 S&P CHEMICALCOMPOSITE ALL S&P CHEMICALS
<S> <C> <C> <C> <C>
1994 100 100 100 100
1995 149.66 137.58 130.63 128.49
1996 133.77 169.17 172.58 157.08
1997 123.85 225.6 212.11 190.43
1998 141.94 290.08 193.19 175.24
1999 140.31 351.12 252.7 196.93
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Engelhard Corporation...................... 100.00 149.66 133.77 123.85 141.94 140.31
S&P 500.................................... 100.00 137.58 169.17 225.60 290.08 351.12
S&P Chemical Composite..................... 100.00 130.63 172.58 212.11 193.19 252.70
All S&P Chemicals.......................... 100.00 128.49 157.08 190.43 175.24 196.93
</TABLE>
- ------------------------
* Assumes $100 invested on December 31, 1994 in each referenced group with
reinvestment of dividends.
25
<PAGE>
We have decided to include the All S&P Chemicals index in the performance
graph because the S&P Chemical Composite index does not adequately measure the
performance of our common stock in that it does not include Engelhard or other
comparable companies. The All S&P Chemicals index, however, covers a larger peer
group and includes all 42 chemical, specialty chemical and diversified chemical
companies (including Engelhard) from three S&P indices.
2. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
On February 14, 2000, the Audit Committee and the Board of Directors
determined that PricewaterhouseCoopers LLP ("PWC") should be dismissed as our
independent accountants as soon as a new accounting firm was engaged.
The report of PWC on our financial statements for the fiscal year ended
December 31, 1998 contained no adverse opinion or disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or accounting
principle. During our fiscal years ended December 31, 1998 and December 31,
1999, and during the subsequent interim period, there were no disagreements with
PWC on matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of PWC, would have caused PWC to make reference to the matter in
their report. During our fiscal years ended December 31, 1998 and 1999, and
during the subsequent interim period, there have been no reportable events (as
defined in Regulation S-K Item 304(a)(1)(v)) except for the following:
Our Chief Financial Officer (the "CFO"), who retired from Engelhard on
February 18, 2000, was formerly a partner in the firm of Coopers & Lybrand, LLP
("Coopers") and served in a number of senior positions within Coopers, including
as a member of its Executive Committee. The CFO retired from Coopers on
April 30, 1997, prior to Coopers' merger with Price Waterhouse, LLP, and, as a
result of his service at Coopers, was entitled to certain retirement benefits
from PWC. The CFO joined Engelhard as our chief financial officer on May 1,
1997.
On February 3, 2000, PWC advised the Audit Committee that issues existed
which PWC believed affected PWC's independence. The issues related to the
structure of the CFO's retirement benefits from PWC and a disagreement between
PWC and the CFO relating to whether the CFO was entitled to certain additional
retirement payments pursuant to a 1998 program of PWC to benefit certain
Coopers' partners who had retired prior to the merger of Coopers and Price
Waterhouse, LLP.
On February 9, 2000, PWC advised us that, as a result of discussions between
the CFO and representatives of PWC regarding the CFO's entitlement to the
additional retirement benefits, PWC believed that, in addition to the issues
concerning the independence of PWC, information had come to its attention which
had led PWC to no longer be able to rely on the representations of the CFO.
26
<PAGE>
On February 14, 2000, the Audit Committee and the Board of Directors
determined that, in order to address any potential independence or other
concerns resulting from or arising out of the structure and amount of the CFO's
retirement benefits from PWC and related communications between PWC and the CFO,
and to avoid the delay and uncertainty which PWC advised would be involved in
seeking to resolve the issues in order to enable PWC to continue as our
independent auditors, PWC should be dismissed as our certifying accountant as
soon as a new accounting firm was engaged to audit our financial statements for
the fiscal year ended December 31, 1999. We have authorized PWC to respond fully
to the new accountant regarding any matters relating to PWC's audit of our
financial statements, the disagreement and communications with the CFO, or any
other matter.
The Board of Directors, based on the recommendation of the Audit Committee,
voted to engage Arthur Andersen LLP ("AA") as our new independent accountants on
February 22, 2000. During the two most recent fiscal years and the subsequent
interim period preceding the engagement of AA, neither we nor anyone on our
behalf has consulted AA regarding: (i) the application of accounting principles
to a specific completed or proposed transaction, or the type of audit opinion
that might be rendered on our financial statements, which consultation resulted
in the providing of a written report or oral advice concerning the same to us
that AA concluded was an important factor considered by us in reaching a
decision as to the accounting, auditing or financial reporting issue; or
(ii) any matter that was either the subject of a disagreement (as defined in
Rule 304(a)(1)(iv) of Regulation S-K promulgated under the Securities Act of
1933, as amended) or a reportable event (as defined in Rule 304(a)(1)(v) of
Regulation S-K).
AA 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 Engelhard and its
shareholders.
The Board of Directors recommends that you vote FOR the ratification of the
appointment of Arthur Andersen LLP as our independent public accountants for the
year 2000.
FUTURE SHAREHOLDER PROPOSALS
HOW DO I MAKE A PROPOSAL FOR THE 2001 ANNUAL MEETING?
The deadline for you to submit a proposal pursuant to Rule 14a-8 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") for inclusion
in our proxy statement and form of proxy for the 2001 Annual Meeting of
Shareholders (the "2001 Annual Meeting") is December 1, 2000. The date after
which notice of a shareholder proposal submitted outside of the processes of
Rule 14a-8 of the Exchange Act is considered untimely is February 14, 2001. If
notice of a
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shareholder proposal submitted outside of the processes of Rule 14a-8 of the
Exchange Act is received by us after February 14, 2001, then our proxy for the
2001 Annual Meeting may confer discretionary authority to vote on such matter
without any discussion of such matter in the proxy statement for the 2001 Annual
Meeting.
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 Engelhard.
By Order of the Board of
Directors
ARTHUR A. DORNBUSCH, II
VICE PRESIDENT, GENERAL
COUNSEL
AND SECRETARY
March 31, 2000
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[LOGO]
NOTICE OF
ANNUAL MEETING
OF
SHAREHOLDERS
AND PROXY
STATEMENT
May 4, 2000
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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, 2000
P
The undersigned hereby constitutes and appoints Orin R. Smith, Reuben F.
R 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
O undersigned at the Annual Meeting of Shareholders of ENGELHARD CORPORATION to
be held at The Sheraton at Woodbridge Place, 515 Route 1 South, Iselin, NJ
X 08830 on Thursday, May 4, 2000 at 9:00 A.M. Eastern Daylight Savings Time
and at any adjournments thereof, on all matters coming before said meeting.
Y
(Change of Address/Comments)
ELECTION OF DIRECTORS. NOMINEES:
Marion H. Antonini, Henry R. Slack
and Douglas G. Watson _________________________________
_________________________________
_________________________________
_________________________________
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 *
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED PLEASE MARK
SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. YOUR VOTES AS / X /
INDICATED IN
THIS EXAMPLE
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<S> <C>
1. Election of Directors (see reverse) (To withhold vote for any individual nominee write that name below.)
FOR WITHHELD ________________________________________________________________________
/ / / /
2. Ratification of appointment of Arthur Andersen LLP 3. In their discretion, upon other matters as they
as independent public accountants. may properly come before the meeting.
FOR AGAINST ABSTAIN I PLAN TO ATTEND
/ / / / / / THE MEETING. / /
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.
_________________________________________________________
____________________________________________________, 2000
SIGNATURE(S) DATED
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Dear Shareholder(s):
Enclosed you will find material relative to the Company's 2000 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. Please remember that your
vote is important to us.
ENGELHARD CORPORATION
