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1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------------
For the fiscal year ended December 31, 1995
OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------------
For the transition period from to
Commission file number 1-8142
ENGELHARD CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-1586002
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 WOOD AVENUE, ISELIN, NJ 08830
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (908) 205-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ----------------------------------- ------------------------
Common Stock, par value $1 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
Number of shares of common stock outstanding as of March 1, 1996 - 143,710,312.
Aggregate market value of common stock held by non-affiliates as of March 1,
1996 - $1,992,610,167.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain information by reference to the Proxy Statement
for the 1996 Annual Meeting of Shareholders.
1
Table of Contents
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Page
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1995
Form Proxy
Item 10-K Statement
- ---- ---- ----------
Part I
1. Business
(a) General development of business 3 -
(b) Industry segment and geographic area data 3-10, 41-43 -
(c) Description of business 3-10 -
2. Properties 10 -
3. Legal Proceedings 11 -
4. Submission of Matters to a Vote of 11 -
Security Holders
Part II
5. Market for Registrant's 12 -
Common Equity and Related
Stockholder Matters
6. Selected Financial Data 12-13 -
7. Management's Discussion and 13-25 -
Analysis of Financial Condition
and Results of Operations
8. Financial Statements and -
Supplementary Data
(a) Financial Statements 26-48 -
(b) Selected Quarterly Financial Data 49 -
9. Changes in and Disagreements with 49 -
Accountants on Accounting and Financial
Disclosure
Part III
10. Directors and Executive Officers of 50-51 3-6
the Registrant
11. Executive Compensation 51 11-21
12. Security Ownership of Certain 51 2-3,7
Beneficial Owners and Management
13. Certain Relationships and Related 51 2-7,10
Transactions
Part IV
14. Exhibits, Financial Statement 52-183 -
Schedules, and Reports on Form 8-K
2
PART I
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Item 1. Business
- ------ --------
Engelhard Corporation and its Subsidiaries (collectively referred to as the
Company) are the successors to the businesses previously operated by Engelhard
Minerals & Chemicals Corporation (EMC). In 1981, the Company's Common Stock was
distributed to the shareholders of EMC, and the Company became a separate,
publicly-held corporation. The Company's principal executive offices are located
at 101 Wood Avenue, Iselin, NJ, 08830 (telephone number (908) 205-5000).
The Company develops, manufactures and markets technology-based specialty
chemical products and engineered materials for a wide spectrum of industrial
customers, and provides services to precious and base metals customers and
markets energy-related services.
In 1993 the Company provided for a plan to realign and consolidate
businesses, concentrate resources and better position itself to achieve its
strategic growth objectives. See Note 2 "Special Charge" of the Notes to
Consolidated Financial Statements on pages 31-32 of this 10-K. This plan
resulted in a special charge of $148.0 million ($91.8 million after tax or $.63
per share) in 1994 consisting of a $118.0 million pre-tax restructure provision
for asset writedowns related to product lines or sites being exited together
with provisions for facility shutdown, rundown and relocation and for employee
reassignment, severance and related benefits and a $30.0 million pretax
environmental reserve. See Note 15 "Environmental Costs" of the Notes to
Consolidated Financial Statements on pages 44-46 of this 10-K and the
"Environmental Matters" section below on pages 8-10 of this 10-K for a
discussion of environmental matters and the amount of the Company's
environmental reserve.
The Company employed approximately 5,100 people as of January 1, 1996 and
operates on a worldwide basis with corporate and operating headquarters and
principal manufacturing facilities and mineral reserves in the United States
with other operations conducted in the European Community, the Russian
Federation and the Asia-Pacific region.
The Company's businesses are organized into three segments - Catalysts and
Chemicals, Pigments and Additives, and Engineered Materials and Industrial
Commodities Management (formerly Precious Metals Management).
Information concerning the Company's net sales, operating earnings and
identifiable assets by industry segment and by geographic area; inter-area
transfers by geographic area; and export sales is included in Note 13 "Industry
Segment and Geographic Area Data" of the Notes to Consolidated Financial
Statements on pages 41-43 of this 10-K.
Catalysts and Chemicals
The Catalysts and Chemicals segment comprises three principal product
groups: the Environmental Technologies Group, consisting of Automotive Emission
Systems, Heavy Duty Power Systems and Process Emission Systems, serving the
automotive, light and heavy duty truck, aircraft, off-road vehicle, power
generation and process industries; the Petroleum Catalysts Group, serving the
petroleum refining industries; and the Chemical Catalysts Group, serving the
chemical, petrochemical, pharmaceutical and food processing industries.
3
Environmental technology catalysts are used in applications such as the
abatement of carbon monoxide, oxides of nitrogen and hydrocarbons from gasoline,
diesel and alternate fueled vehicle exhaust gases to meet emission control
standards. These catalysts are also used for the removal of odors, fumes and
pollutants generated by a variety of process industries including but not
limited to the painting of automobiles, appliances and other equipment; printing
processes; the manufacture of nitric acid and tires, in the curing of polymers;
and power generation sources. In 1994 and 1995, the Company purchased the assets
of General Plasma, Advanced Plasma and Jet-Com, suppliers of thermal spray
coating technology and services. These acquisitions, when combined with the
Company's catalyst technology, provide for a broader offering of emission
control systems. In the fourth quarter of 1995, the Company purchased the other
half of its Salem Engelhard joint venture formed in 1992 to produce and market
products and services to abate, by catalytic and non-catalytic methods,
emissions of volatile organic chemicals and other pollutants generated by a
variety of process industries.
The Company also participates in the manufacture and supply of automobile
exhaust emission control catalysts through affiliates serving the Asia-Pacific
region: N.E. Chemcat Corporation (Japan) - 38.8 percent owned; and Hankuk-
Engelhard (South Korea) - 49 percent owned, both of which also produce other
catalysts and products. In the first quarter of 1995, the Company formed a joint
venture with W.R. Grace to manufacture and market metallic substrate catalytic
converter systems to the automotive industry.
The petroleum refining catalyst products consist of a variety of catalysts
and processes used in the petroleum refining industry. The principal products
are zeolitic fluid cracking catalysts which are widely used to provide economies
in petroleum processing. The Company offers commercially a full line of fluid
cracking catalyst based on patented technology which can be used to control
selectivity and cracking activity virtually independently of one another. This
characteristic permits custom catalysts formulation for a large number of users.
The Company manufactures reforming, isomerization and hydrotreating
catalysts for a variety of petroleum refining processes. Catalysts are marketed
in North America and the Caribbean by Acreon Catalysts, a jointly owned
partnership formed by the Company and Procatalyse.
In March 1994, the Company completed its purchase of the assets of the
sorbents and moving bed catalysts businesses of Solvay Catalysts, GmbH, in
Nienburg Germany. This acquisition expanded the Company's moving bed catalysts
business and provided complementary product lines serving adsorbents
applications.
In November 1995, the Company and Procatalyse announced plans to expand the
production capacity of their joint venture, Acreon Catalysts. To serve market
needs more effectively, they plan to add alumina and hydrotreating catalyst
manufacturing capacity in North America.
The chemical catalysts products consist of catalysts and sorbents used in
the production of a variety of products or intermediates, including synthetic
fibers, fragrances, antibiotics, vitamins, polymers, plastics, detergents, fuels
and lube oils, solvents, oleochemicals and edible products. These catalysts are
generally used in both batch and continuous operations requiring special
catalysts for each application. Chemical catalysts are based on the Company's
proprietary technology and many times are developed in close cooperation with
specific customers. Sorbents are used to purify and decolorize naturally
occurring fats and oils for manufacture into shortenings, margarines and cooking
oils.
4
The products of the Catalysts and Chemicals segment compete in the
marketplace on the basis of product performance, technical service and price. No
single competitor is dominant in the markets in which the Company operates.
The manufacturing operations of the Catalysts and Chemicals segment are
carried out in 12 states in the United States. Wholly-owned foreign operations
are located in Germany, Italy, The Netherlands, South Africa and the United
Kingdom with equity investments located in the U.S., Japan and South Korea. The
products are sold principally through the Company's sales organizations or its
equity investments, supplemented by independent distributors and
representatives.
The principal raw materials used by the Catalysts and Chemicals segment
include precious metals, procured by the Engineered Materials and Industrial
Commodities Management segment; kaolin, supplied by the Pigments and Additives
segment; and a variety of minerals and chemicals which are generally readily
available. For more information about precious metal supply contracts, see the
"Engineered Materials and Industrial Commodities Management" section below on
pages 6-7 of this 10-K.
As of January 1, 1996 the Catalysts and Chemicals segment had approximately
2,350 employees worldwide, many of whom are hourly employees covered by
collective bargaining agreements. Employee relations have generally been good.
Pigments and Additives
The Pigments and Additives segment comprises two principal product groups:
the Paper Pigments and Chemicals Group, serving the paper industry and the
Specialty Minerals and Colors Group, serving the plastics, coatings, paint and
allied industries.
Paper pigments and chemicals products consist primarily of coating and
extender pigments. The coating pigments provide whiteness, opacity and improved
printing properties for high-quality paper and paperboard. Other products are
used as extenders and/or combined with fibers during the manufacture of paper or
paperboard. Products for the paper market include Luminex (registered trademark)
pigment, a high-brightness material for high-quality paper coating; Ansilex
(registered trademark) pigments that provide the desired opacity, brightness,
gloss and printability in paper products; Nuclay (registered trademark)
specialized coating pigment for lightweight publication papers; Exsilon
(registered trademark) structured pigment that improves the printability of
lightweight coated paper and carbonless forms; and Spectrafil (registered
trademark) pigments for the newsprint and groundwood specialties markets.
Specialty minerals and colors kaolin based products are used as pigments
and extenders for a variety of purposes in the manufacture of plastic, rubber,
ink, ceramic, adhesive products and in paint. Principal products include
Satintone (registered trademark) products, ASP (registered trademark) pigments
and Translink (registered trademark) surface modified reinforcements. Other
specialty minerals and colors products which serve essentially the same end
markets as the Company's kaolin-based pigments and extenders comprise a variety
of organic and inorganic color pigments. The Group also produces gellants and
sorbents for a wide range of applications.
5
The products of the Pigments and Additives segment compete with similar
products as well as products made from other materials on the basis of product
performance and price. No single competitor is dominant in the markets in which
the Company operates.
Pigments and Additives operations are carried out in four states in the
United States, and in Finland and Japan. The products are sold principally
through the Company's sales organization supplemented by independent
distributors and representatives.
The principal raw materials used by the Pigments and Additives segment
include kaolin and attapulgite from mineral reserves owned or leased by the
Company and a variety of minerals and chemicals which are generally readily
available.
As of January 1, 1996 the Pigments and Additives segment had approximately
1,750 employees worldwide, many of whom are hourly employees covered by
collective bargaining agreements. Employee relations have generally been good.
Engineered Materials and Industrial Commodities Management
The Engineered Materials and Industrial Commodities Management segment
includes the Engineered Materials Group, serving a broad spectrum of industries
and the Industrial Commodities Management Group, which is responsible for
precious and base metals sourcing and dealing, for managing the precious and
base metals requirements of the Company and its customers, and for power
marketing.
The products of the Engineered Materials Group consist primarily of
metal-based materials such as temperature-sensing devices, precious metals
coating and electroplating materials, conductive pastes and powders and brazing
alloys. These products are used in the manufacture of automotive components,
industrial devices, ceramics, chemicals, instruments, control devices, medical
supplies, hardware, furniture and air conditioners. The Group also provides gold
refining services to internal and external customers.
The products of the Engineered Materials Group compete with similar
products as well as products made from other materials on the basis of product
performance, technical service and price. No single competitor is dominant in
the markets in which the Company operates.
Engineered Materials manufacturing and refining operations are carried out
in four states in the United States and in facilities located in the United
Kingdom and France. The products are sold principally through the Company's
sales organization, supplemented by independent distributors and
representatives.
The principal raw materials used by these operations are precious metals
including those of the platinum group (platinum, palladium, rhodium, iridium and
ruthenium), silver and gold, all of which are generally available.
In June 1995 the Company formed a 50/50 joint venture with CLAL, a
Paris-based precious metal fabricator. (See Note 8 "Investments" of the Notes to
Consolidated Financial Statements on page 37 of this 10-K). The joint venture
combined most of the assets of the Engineered Materials business with CLAL. In
January 1993 the Company sold its 40 percent interest in M&T Harshaw, an
affiliate through which the Company had participated in the base metal plating
industry.
6
The Industrial Commodities Management Group is responsible for procuring
precious and base metals to meet the requirements of the Company's operations
and its customers. Supplies of newly mined platinum group metals are obtained
primarily from South Africa and the Russian Federation and to a lesser extent
from the United States and Canada, which four regions are the only known
significant sources. Most of these platinum group metals are obtained pursuant
to a number of contractual arrangements with different durations and terms. The
Company has reached an agreement in principle for the replacement of a precious
metals supply contract that expires December 31, 1996. The new contract offers
smaller quantities and less favorable terms, but management expects the impact
to be wholly or partially offset by other precious metals supply contracts and
arrangements and by new business programs already underway. Failure to achieve
such offsetting income could result in a material adverse impact. Management
believes that an adequate supply of these precious metals will be available to
meet growing needs. Gold and silver are purchased from various sources. In
addition, in the normal course of business, certain customers and suppliers
deposit significant quantities of precious metals with the Company under a
variety of arrangements. Equivalent quantities of precious metals are returnable
as product or in other forms.
The Industrial Commodities Management Group also engages in precious and
base metals dealing operations with industrial consumers, dealers, central
banks, miners and refiners. It also participates in refining of precious metals
and marketing of energy-related services. The group does not routinely speculate
in the precious and base metals market. For more information regarding precious
metals operations, see Note 12 "Financial Instruments and Precious Metals
Operations" of the Notes to Consolidated Financial Statements on pages 39-41 of
this 10-K. Offices are located in the United States, the United Kingdom,
Switzerland, Japan and the Russian Federation.
Engelhard Corporation, through its Industrial Commodities Management Group,
has for many years been a successful dealer in platinum, palladium, gold and
silver through its offices strategically located throughout the world. As a
natural adjunct to this activity and after intensive study, management decided
to enter into base metals dealing and brokering during 1995. Accordingly,
Engelhard International Ltd. was established in London and staffed by veterans
in this field. An associate broker membership on the London Metal Exchange and
Securities Futures Authority approval were obtained, and dealing in copper,
nickel, and zinc commenced. Engelhard Power Marketing, Inc. (ENGL) was formed in
1995 and received authorization from the Federal Energy Regulatory Commission to
take title to electric power for resale at market-based rates. ENGL engages in
short, medium and long-term wholesale energy and/or capacity transactions with
utilities located throughout the United States.
As of January 1, 1996 the Engineered Materials and Industrial Commodities
Management segment had approximately 575 employees throughout the world, some of
whom are hourly employees covered by collective bargaining agreements. Employee
relations have generally been good.
Other
In early 1994, the Company and ICC Technologies, Inc. formed Engelhard/ICC,
a jointly owned partnership, to develop and commercialize air conditioning and
air-treatment systems based on a proprietary new desiccant developed by
Engelhard.
7
Major Customer
Approximately 11 percent of the Company's net sales for the years ended
December 31, 1995 and 1994, respectively, was generated from the Ford Motor
Company, a customer of both the Catalysts and Chemicals and the Engineered
Materials and Industrial Commodities Management segments. Sales to the Ford
Motor Company included both fabricated products and precious metal and were
therefore significantly influenced by fluctuations in precious metal prices as
well as the quantity of metal purchased. In such cases, the market price
fluctuations and quantities purchased can result in material variations in sales
reported but do not usually have a direct or substantive effect on earnings.
Research and Patents
The Company currently employs approximately 400 scientists, technicians and
auxiliary personnel engaged in research and development in the field of
chemistry and metallurgy. These activities are conducted in the United States
and abroad. Research and development expense was $53.0 million in 1995, $49.0
million in 1994 and $46.9 million in 1993.
Research facilities include fully staffed instrument analysis laboratories,
which the Company maintains in order to achieve the high level of precision
necessary for its various businesses and to assist customers in understanding
the performance of Engelhard products in their specific application.
The Company owns or is licensed under numerous patents which have been
secured over a period of years. It is the policy of the Company to apply for
patents whenever it develops new products or processes considered to be
commercially viable and, in appropriate circumstances, to seek licenses when
such products or processes are developed by others. While the Company deems its
various patents and licenses to be important to certain aspects of its
operations, it does not consider any significant portion or its business as a
whole to be materially dependent on patent protection.
Environmental Matters
In the ordinary course of business, like most other industrial companies, the
Company is subject to extensive and changing federal, state, local and foreign
environmental laws and regulations, and has made provisions for the estimated
financial impact of environmental cleanup related costs.
The Company is currently preparing, has under review, or is implementing,
with the oversight of cognizant environmental agencies, environmental
investigations and cleanup plans at several currently or formerly owned and/or
operated sites, including Plainville, MA, Salt Lake City, UT, Attapulgus, GA,
and Newark, NJ. With respect to Plainville, in September 1993 the United States
Environmental Protection Agency (EPA) and the Company entered into a consent
order under which the Company is investigating contamination and will conduct
site stabilization measures. Plainville is also included on the Nuclear
Regulatory Commission (NRC) "Existing Site Decommissioning Management Plan
Sites" list and the Company is currently conducting further investigations of
the site pursuant to NRC approved plans. With respect to Salt Lake City, in
connection with obtaining an operating permit under the Utah Solid and Hazardous
Waste Act, the Company entered into an agreement in December 1993 with the Utah
Solid and Hazardous Waste Control Board under which the Company is continuing to
investigate the environmental status of the site. With respect to Attapulgus, in
January 1994 the Georgia Department of Natural Resources, Environmental
Protection Division and the Company entered into a consent order under which the
Company was to develop and implement a reclamation program. A reclamation
program has been approved and cleanup is underway. With respect to Newark, the
Company has substantially completed a cleanup plan in coordination with the New
Jersey Department of Environmental Protection.
8
In addition, 18 sites have been identified at which the Company believes
liability as a potentially responsible party (PRP) is probable under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or similar state laws (collectively referred to as Superfund) for
the cleanup of contamination resulting from the historic disposal of hazardous
substances allegedly generated by the Company, among others. Superfund requires
cleanup of certain sites from which there has been a release or threatened
release of hazardous substances and authorizes EPA or a state to take any
necessary action at such sites, including ordering PRPs to cleanup or contribute
to the cleanup of a site. Courts have interpreted Superfund to impose strict,
joint and several liability under certain circumstances. These claims are in
various stages of administrative or judicial proceedings, and include demands
for recovery of past costs and future investigative or cleanup action. In many
cases, the dollar amount of the claim is unspecified and claims have been
asserted against a number of other entities for the same relief sought from the
Company. Based on existing information, the Company believes that it is a de
minimis contributor of hazardous substances at most of the sites referenced
above. Subject to the reopening of existing settlement agreements for
extraordinary circumstances or natural resource damages, the Company has settled
a number of other cleanup proceedings. The Company has also responded to
information requests from EPA and state regulatory authorities in connection
with other Superfund sites.
The Company's policy is to accrue environmental cleanup related costs of a
noncapital nature when those costs are believed to be probable and can be
reasonably estimated. The quantification of environmental exposures requires an
assessment of many factors, including changing laws and regulations,
advancements in environmental technologies, the quality of information available
related to specific sites, the assessment stage of each site investigation,
preliminary findings, and the length of time involved in remediation or
settlement. For Superfund sites, the Company also assesses the financial
capability of other PRPs and, where allegations are based on tentative findings,
the reasonableness of the Company's apportionment. The Company has not
anticipated recoveries from insurance carriers or other potentially responsible
third parties in its accruals for environmental liabilities. The liabilities for
environmental cleanup related costs recorded in the consolidated balance sheets
at December 31, 1995 and 1994 were $54.6 million and $62.2 million,
respectively, including $10.0 million and $10.8 million, respectively, for the
Superfund sites. These amounts represent those costs which the Company believes
are probable and reasonably estimable. Based on currently available information
and analysis, the Company's accrual represents approximately 85% of what it
believes are reasonably possible environmental cleanup related costs of a
noncapital nature. The estimate of reasonably possible costs is less certain
than the probable estimate upon which the accrual is based.
During the past three-year period, cash payments for environmental cleanup
related matters were $7.6 million, $4.5 million and $.3 million for 1995, 1994
and 1993, respectively. In 1995 and 1994, the amounts accrued in connection with
environmental cleanup related matters were not significant. In 1993, $30.0
million was accrued as a result of developments during that year which caused
the Company to revise its estimates of environmental cleanup related costs at
sites being idled or affected by restructuring, where conditions had recently
changed, or where studies and cleanup plans had been approved and the assessment
of the likelihood or extent of remediation had changed.
For the past three-year period, environmental related capital projects have
averaged less than 10% of the Company's total capital expenditure programs and
the expense of environmental compliance (environmental testing, permits,
consultants and in-house staff) was not significant.
9
There can be no assurances that environmental laws and regulations will not
become more stringent in the future or that the Company will not incur
significant costs in the future to comply with such laws and regulations. Based
on existing information and currently enacted environmental laws and
regulations, cash payments for environmental cleanup related matters are
projected to approximate $10 million for 1996, all of which has already been
accrued. Further, the Company anticipates that the amounts of capitalized
environmental projects and the expense of environmental compliance will
approximate current levels. While it is not possible to predict with certainty,
management believes that environmental cleanup related reserves at December 31,
1995 are reasonable and adequate and that environmental matters are not expected
to have a material adverse effect on financial condition. These matters, if
resolved in a manner different from the estimates, could have a material adverse
effect on the operating results or cash flows when resolved in a future
reporting period.
Item 2. Properties
- ------ ----------
The Company owns approximately 22 acres of land and four buildings with a
combined area of approximately 440,000 square feet in Iselin, NJ. These
buildings serve as the principal executive and administrative offices of the
Company and its operating segments as well as the major research and development
facilities for the Company's operations. The Company also owns domestic research
facilities in Gordon, GA, Union, NJ and Beachwood, OH. In addition, the Company
owns a foreign research facility in DeMeern, The Netherlands.
The Catalysts and Chemicals segment owns and operates a complex of plants
in Georgia that manufactures petroleum cracking catalysts, and other domestic
plants located in Huntsville, AL; Phoenix, AR; East Windsor, CT; Mangonia Park,
FL; Wilmington, MA; South Lyon, MI; Jackson, MS; Union, NJ; Elyria, OH; Duncan
and Seneca, SC; and Salt Lake City, UT. Foreign manufacturing operations are
conducted at owned facilities in Germany, Italy, The Netherlands, South Africa
and the United Kingdom. In addition, the segment owns a mine in Mississippi and
leases a mine in Arizona.
The Pigments and Additives segment owns and operates five kaolin mines and
five milling facilities in Middle Georgia which serve an 85 mile network of
pipelines to three processing plants. It also owns land containing kaolin clay
and leases, on a long-term basis, kaolin mineral rights to additional acreage.
The segment also owns and operates an attapulgite processing plant in
Attapulgus, GA near the area containing its attapulgite reserves. Management
believes that the Company's crude kaolin and attapulgite reserves will be
sufficient to meet its needs for the foreseeable future. The segment also owns
and operates color pigments manufacturing facilities in Louisville, KY, Sylmar,
CA and Elyria, OH. Foreign operations are conducted at owned facilities in
Finland. In addition, the segment owns mines in Florida.
The Engineered Materials and Industrial Commodities Management segment owns
and operates manufacturing facilities in East Newark, NJ; Anaheim, CA; Lincoln
Park, MI; and Warwick, RI. Other manufacturing operations are conducted at owned
facilities in the United Kingdom and France.
The Company is currently restructuring its operations (see Note 2 "Special
Charge" of the Notes to Consolidated Financial Statements on pages 31-32 of this
10-K). Management believes that the Company's processing and refining
facilities, plants and mills are suitable and have sufficient capacity to meet
its normal operating requirments for the foreseeable future.
10
Item 3. Legal Proceedings
- ------ -----------------
The Company is a defendant in a number of lawsuits covering a wide range of
matters. In some of these pending lawsuits, the remedies sought or damages
claimed are substantial. The Company and certain of its officers and directors
were named as defendants in purported class action complaints filed in November
1995 in the U.S. District Court for the District of New Jersey on behalf of
persons who bought Engelhard Stock between April 1995 and November 1995. The
complaints claim that defendants made false statements and omissions and traded
on nonpublic information. The complaints are expected to be combined into a
Consolidated Amended Complaint. The Company believes the class actions to be
without merit and is vigorously defending against them. The Company is also
subject to a number of environmental contingencies (see Note 15 "Environmental
Costs"). While it is not possible to predict with certainty the ultimate outcome
of these lawsuits or the resolution of the environmental contingencies,
management believes, after consultation with counsel, that resolution of these
matters is not expected to have a material adverse effect on financial
condition. These matters, if resolved in a manner different from the estimates,
could have a material adverse effect on the operating results or cash flows when
resolved in a future reporting period.
In January 1995, the Company received and is responding to a civil
investigative demand to produce documents and answer interrogatories in
connection with an investigation by the Antitrust Division of the U.S.
Department of Justice into "price coordination and market allocation by kaolin
producers".
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
Not applicable.
11
PART II
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Market for Registrant's Common Equity
Item 5. and Related Stockholder Matters
- ------ -------------------------------------
As of March 1, 1996, there were 8,840 holders of record of the Company's
common stock, which is traded on the New York Stock Exchange (ticker symbol
"EC"), as well as on the London and Swiss stock exchanges.
The range of market prices and cash dividends paid for each quarterly
period were as follows:
NYSE Cash
market price dividends paid
High Low per share*
------- ------ --------------
1995
First quarter $19 3/4 $14 7/8 $.08
Second quarter 29 1/4 19 1/2 .09
Third quarter 32 1/2 23 1/8 .09
Fourth quarter 26 3/8 20 1/4 .09
1994
First quarter $21 $15 3/4 $.07
Second quarter 18 7/8 16 1/8 .07
Third quarter 19 14 3/8 .08
Fourth quarter 18 3/8 13 7/8 .08
* Reflects the three-for-two stock split as of June 30, 1995.
Item 6. Selected Financial Data
- ------ -----------------------
Selected Financial Data
($ in millions, except per
share amounts)**
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Net sales $2,840.1 $2,385.8 $2,150.9 $2,399.7 $2,436.4
Net earnings (a) 137.5 118.0 .7 10.6 87.9
Net earnings
per share(a) .96 .82 - .07 .58
Property, plant and
equipment, net $ 609.5 $ 540.4 $ 494.4 $ 514.4 $ 533.3
Total assets 1,645.6 1,440.8 1,279.1 1,287.7 1,279.4
Long-term debt 211.5 111.8 112.2 113.9 114.5
Shareholders' equity 737.7 614.7 531.3 647.2 756.6
Cash dividends paid
per share $.35 $ .30 $ .28 $ .25 $ .22
Return on average
shareholders'
equity(a) 20.3% 20.6% .1% 1.5% 12.0%
Current ratio 1.2 1.1 1.1 1.5 1.5
Net cash provided
by operating
activities $ 138.5 $ 114.8 $ 130.4 $ 169.5 $ 135.4
** Reflects the three-for-two stock splits as of June 30, 1995, September 30,
1993 and September 30, 1992.
12
(a) Results in 1994 include a special credit of $5.0 million after tax ($.03 per
share) representing the reversal of excess restructuring reserves; and an
after-tax net charge of $5.3 million ($.04 per share) for a change in the
Company's estimate of compensation expense relating to stock awards.
Results in 1993 include a special charge of $91.8 million after tax ($.63
per share) for realignment and consolidation of businesses and environmental
matters; an after-tax gain of $6.3 million ($.04 per share) from the sale of the
Company's interest in M&T Harshaw, a base-metal plating business; and an
after-tax charge for the cumulative effect of an accounting change of $16.0
million ($.11 per share) as a result of adopting the provisions of Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits".
Results in 1992 include an after-tax charge for the cumulative effect of
accounting changes of $89.5 million ($.59 per share) as a result of adopting the
provisions of Statements of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", and No. 109,
"Accounting for Income Taxes".
Management's Discussion and Analysis
Item 7. of Financial Condition and Results of Operations
- ------ ------------------------------------------------
Management's Discussion and Analysis of Financial Condition
and Results of Operations/Engelhard Corporation
Results of Operations
Sales: $2.8 billion in 1995, up 19% from $2.4 billion in 1994 which was up 11%
from $2.2 billion in 1993.
Net earnings: $138 million, or $.96 per share in 1995, compared with $118
million, or $.82 per share in 1994 and $.7 million in 1993 .
Net earnings in 1994 included a special credit (see "Special Charge") of
$5.0 million ($.03 per share) arising from the reversal of excess restructuring
reserves. Net earnings in 1994 also included a net charge of $5.3 million ($.04
per share) for a change in the Company's estimate of compensation expense
relating to stock awards (see "Selling, Administrative and Other Expenses").
Net earnings in 1993 included a special charge (see "Special Charge") of
$91.8 million ($.63 per share) and a gain on the sale of an investment (see
"Gain on Sale of Investment") of $6.3 million ($.04 per share). Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" was adopted in 1993. Impact: one-time, noncash charge
of $16.0 million or $.11 per share.
Catalysts and Chemicals
The Catalysts and Chemicals segment comprises three business groups:
Environmental Technologies, Petroleum Catalysts and Chemical Catalysts. These
businesses develop, manufacture and market a wide range of catalysts and related
products and processes for the automotive, off-road vehicle, aircraft, power
generation, petroleum refining, chemical, petrochemical, pharmaceutical and food
processing industries, among others. These products are used by customers to
improve quality and/or cost efficiency, achieve desired manufacturing yields and
reduce emissions.
1995 compared with 1994: Sales up 20%; operating earnings up 10%.
13
Discussion: Excellent sales and profit growth for environmental technologies and
chemical catalysts offset by lower profit from petroleum catalysts.
Environmental Technologies (formerly Environmental Catalysts)
The Environmental Technologies Group provides catalytic and other technologies
to reduce emissions from cars, trucks, buses, mining and construction vehicles,
wide-body jets, power-generating plants and industrial and other processing
facilities.
1995 performance: Higher sales and operating earnings.
Discussion: Auto catalyst volumes were up despite flat worldwide auto production
mainly because of the success of new product programs. European market share
grew. Engelhard now has the number-one market position worldwide. Technology
advances in diesel auto catalysts gained new customers in Europe, while diesel
truck catalyst income was lower than in 1994 due to lower prices.
A new auto catalyst manufacturing facility in South Africa opened in early
1995 and operated at full capacity throughout the year. Capacity was increased
in Huntsville, AL.
In October, Engelhard purchased the other half of its Salem Engelhard joint
venture, which makes catalytic and thermal systems to reduce air pollution from
industrial facilities. Higher volumes due to sales to the forest products
industry aided performance in 1995.
Sales of systems to abate pollution at power-generation plants were lower,
largely because deregulation in the electric power industry is reducing the need
for new cogeneration facilities. This market is slow to develop in the United
States, where new emission-control regulations are not anticipated before the
turn of the century. Markets are developing in Europe and Asia, and the Group is
focusing product and market development efforts on these opportunities.
Looking ahead: The Group completed two acquisitions and an alliance that advance
the Company's plan to become the leading supplier of emission systems technology
for cars, trucks and buses. Building on the 1994 acquisition of General Plasma
thermal spray coatings, the Group purchased the assets and business of two
additional advanced-coating technology companies. The new acquisitions expand
Engelhard's capabilities in engine coatings, which have demonstrated positive
effects on emissions, fuel economy and engine wear.
Metreon, the joint venture Engelhard formed with W.R. Grace in February
1995, is developing technology to address new automotive emission standards that
will be implemented in California and Europe after 1998. Metreon products are
being sampled by several automakers.
Full ownership of Salem Engelhard will enable the Company to use its
existing sales, manufacturing and distribution infrastructure to make this a
global business. New air pollution standards for stationary source emissions in
Europe and Asia Pacific are anticipated in the next two years and are expected
to be among the world's strictest.
In the short term, worldwide auto sales are expected to remain flat in
1996, but the Environmental Technologies Group expects a continued strong
performance due to its advanced technologies, close customer relationships and
stricter automotive emission legislation in Europe.
14
Petroleum Catalysts
The Petroleum Catalysts Group offers fluid catalytic cracking and moving-bed
catalysts, additives and hydroprocessing catalysts to produce gasolines, other
transportation fuels and heating oils.
1995 performance: Sales flat, operating earnings down.
Discussion: Cost differential between heavy and light crude oils narrowed,
making it economical for refiners to use the light crudes and less catalyst.
Refinery shutdowns in North America and Europe continued as oil companies sought
to enhance profitability. As a result, petroleum catalysts volumes declined, and
the product mix of fluid cracking catalysts (Engelhard's major product line) was
unfavorable.
Volumes of moving-bed catalysts, used in older refineries, also declined.
The decline was partially offset by improved pricing.
By contrast, in the emerging Asia-Pacific market, Engelhard's sales
advanced significantly. New catalysts designed especially for this market were
principally responsible.
Unlike competitors, Engelhard has two process technologies that the Company
is combining to provide a broader spectrum of products with improved
performance. Ultrium catalyst, introduced in 1995, is the first of these
combination products and is in trials at several refineries.
Acreon, Engelhard's hydroprocessing joint venture with Procatalyse,
contributed higher equity earnings in 1995 (see "Equity Earnings" on page 35).
Currently a small supplier in this petroleum catalysts market, Acreon's
competitiveness will be aided by an alumina manufacturing plant the two partners
are building at Engelhard's existing Savannah, GA facility. This plant will
reduce Acreon's raw material costs and boost flexibility.
A small adsorbent business, located in Germany, was redesigned and
delivered significantly higher operating earnings.
Looking ahead: Market conditions in the U.S. oil refining industry are expected
to continue as in 1995 for the next few years. Engelhard is responding with an
aggressive program to reduce costs.
The Group also is pursuing growth opportunities in the Asia-Pacific region,
where plans call for expansion of sales, laboratory and distribution facilities,
and with large worldwide customers who are interested in advanced technology and
suppliers with global capabilities.
Chemical Catalysts
The Chemical Catalysts Group produces catalysts, sorbents and separation
products to manufacture plastics, fibers, paints and coatings, pharmaceuticals,
edible oils, soaps, margarine, jet fuel and lube oils, among other products.
1995 performance: Sales and operating earnings up significantly.
Discussion: Better economic conditions in the chemical industry and success in
growth programs led to growth in sales and profit. Volumes were higher for
almost all product lines, but especially for base metal catalysts in North
America and precious metal catalysts worldwide. These catalysts are sold to
manufacturers of petrochemicals, polymers, nylon, fertilizers and edible oils.
15
Contributing to the growth was success in "decaptivating" or taking over
production of catalysts from chemical and consumer product companies that
formerly made their own. These companies are narrowing their focus to their core
businesses and need suppliers with custom-catalysts capabilities.
In mineral sorbents and separation products, sales were about even with
1994. Technology advances in 1995 are expected to lead to improved sales and
profits beginning in 1996. Sales of a product that removes lead from drinking
water escalated sharply in 1995. Although still a small contributor, continued
growth is anticipated for this product line.
Plants were debottlenecked and capacity was increased by up to 30% to
respond to increased demand.
Looking ahead: The positive economic trend in the chemical industry is expected
to continue through 1996. Marketing alliances are offering additional
opportunities. An improved method of ammonia production developed by M.W.
Kellogg relies on Engelhard catalysts. Two retrofit orders received by Kellogg
in 1995 will lead to catalyst sales for Engelhard beginning in 1996.
A new alliance with Geon, a leading producer and compounder of PVC plastic,
will allow Engelhard to sell catalysts directly to plastics producers who use
Geon technology.
Prior Year Comparisons
1994 compared with 1993: Operating earnings in the Catalysts and Chemicals
segment increased 18%, while sales rose 11% over the prior year. Favorable
factors included strong volume gains for automotive and diesel truck catalysts
and for some petroleum refining catalysts. Lower manufacturing costs in the
Chemical Catalysts Group also contributed to the increase.
1993 compared with 1992: Operating earnings increased 16% in 1993. Sales rose
6%. Significantly higher earnings from the Petroleum and Chemical Catalysts
Groups more than offset lower earnings from the Environmental Technologies
Group. Strong demand for FCC catalysts produced significantly higher results in
the Petroleum Catalysts Group. The Chemical Catalysts Group benefitted from
substantial reductions in manufacturing costs. The decline in the Environmental
Technologies Group earnings was due to an increase in new product development
expenses and lower nonautomotive volumes.
Pigments and Additives
The Pigments and Additives segment develops, manufactures and markets coating
and extender pigments for the paper industry and color pigments and specialty
minerals for a variety of industries. Engelhard's paper pigments are used
principally to make coated and uncoated papers. Its color pigments are used
primarily in paints and coatings, plastics, rubber and printing inks. Specialty
mineral products are sold to the plastics, rubber, wire and cable, coatings,
inks and adhesives industries.
Most of the minerals used by this segment are mined by Engelhard from reserves
it owns or has under long-term leases. Engelhard has sufficient mineral reserves
for its operations.
1995 compared with 1994: Sales up 7%; operating earnings up 26%.
16
Discussion: Significant productivity improvements and a higher margin product
mix contributed to the earnings growth. A sales decline in the last quarter
reflected an inventory correction in the paper industry that is expected to
continue through the first quarter of 1996.
Early in 1995, the Paper Pigments and Chemicals Group and the Specialty
Minerals and Colors Group were combined under one management. This consolidation
is generating cost and productivity benefits in purchasing, manufacturing and
administration. Separate sales, marketing and technical service functions
continue to respond to different customer requirements for these product lines.
In February 1995, a major expansion at Engelhard's paper pigments
manufacturing facility was completed, enabling the Company to respond to growth
in demand for calcined paper pigments. Several new products were introduced to
replace more expensive paper additives. The first sales were achieved for one of
these products, and another is in trial at several paper mills. A pigment
introduced in 1995, called Miragloss, has increased Engelhard's competitiveness
in the Asia-Pacific market.
In specialty minerals and colors, sales prices were favorable for all
product lines. Higher volumes of high-performance, surface-treated mineral
products were partially offset by lower volumes of attapulgite and color
products.
Especially successful were Translink products used as reinforcements for
plastics and rubber. Engelhard also increased market share for organic
traffic-grade paint pigments. The Company debottlenecked existing manufacturing
facilities and also added new capacity at an organic color pigments plant to
meet the demand.
The planned acquisition of certain assets of the Floridin Company has been
delayed pending a federal court decision. This acquisition will enable Engelhard
to manufacture its attapulgite products more economically. A resolution is
expected shortly.
Looking ahead: The current paper industry inventory correction is expected to
ease up in the early part of 1996, but pricing pressures are anticipated
throughout the year. The volume outlook appears positive. Pricing of specialty
minerals and colors is expected to remain strong in 1996, as is demand for
high-performance, surface-treated products. Additional manufacturing capacity
expansions are planned for specialty minerals and colors.
The Pigments and Additives business will continue to focus on tight cost
control, customer value and technology improvements in order to sustain growth.
Prior Year Comparisons
1994 compared with 1993: Operating earnings increased 31% while sales increased
2%. Increased sales of the profitable calcined paper pigments, tighter cost
controls, and paper pigments facilities consolidations helped. A favorable
product mix of specialty minerals and colors and lower manufacturing costs aided
profits.
1993 compared with 1992: Operating earnings for the Pigments and Additives
segment decreased 3%, while sales increased 2%. Lower pricing and higher
manufacturing and operating costs for paper pigments, and unfavorable
attapulgite volumes and higher manufacturing costs in the minerals business were
the main factors.
17
Engineered Materials and Industrial Commodities Management
The Engineered Materials and Industrial Commodities Management segment
develops, manufactures and markets fabricated products and coatings based on
precious metals for a broad spectrum of industries. This segment also engages in
precious metals management for other Engelhard businesses and for customers who
use these metals. In addition, the segment participates in precious metals
refining, base metals management and in the marketing of energy-related
services.
1995 compared with 1994: Sales up 22%; operating earnings up 32%.
(Segment results exclude sales and earnings from the businesses placed in the
Engelhard-CLAL joint venture in June 1995. Earnings related to the venture are
reported as equity earnings.)
Discussion: In June 1995, Engelhard formed a 50/50 joint venture with
Paris-based CLAL for manufacturing, marketing and refining precious metal
containing products. Engelhard's engineered materials operations in Europe and
Asia Pacific and in Carteret, NJ and Fremont, CA were placed in the joint
venture. Precious metals businesses retained by Engelhard include platinum
refining and certain gold refining operations, and plating, coating,
electrometallic and metal-joining products. These businesses achieved operating
efficiencies and higher sales in the United States. Profits from industrial
commodities management services were up sharply.
Precious metals are included in the segment's sales figures if the metal
has been supplied by Engelhard. In these cases, precious metal market price
fluctuations can result in material variations in sales. Often, customers supply
the precious metals for the manufactured product. In those cases, precious
metals values are not included in sales numbers. The mix of such arrangements
and the extent of market price fluctuations can significantly affect the level
of reported sales but do not usually have a material effect on earnings. The
purchase of metal for customers' products are normally hedged. (See Note 12,
"Financial Instruments and Precious Metals Operations", of Notes to Consolidated
Financial Statements for further information about hedging activities.)
Engineered Materials
The Engineered Materials Group provides fabricated precious metal products used
to make a wide range of products in the glass, automotive, electronics,
air-conditioning and appliance industries, among others.
1995 performance: Sales down, operating earnings flat.
Discussion: Varying economic trends in customer industries resulted in mixed
sales results. The appliance industry, the principal market for Engelhard's
metal-joining products, was down compared with 1994, while the electronics
industry was up. Automotive sales slowed during the second half of 1995. The
electronics and automotive industries are users of Engelhard's conductive
powders, pastes and inks and plating chemicals.
In the metal-joining business, market share gains and important
productivity improvements were achieved. Significant cost reduction was
undertaken in both the plating chemicals and precious metal coatings segments in
1995, with new product development efforts expected to generate sales in 1996.
Looking ahead: Growth is anticipated in the United States and the Asia-Pacific
region. A joint venture in flexible conductive inks, formed in early 1996, opens
a new area of business for Engelhard and offers a highly innovative technology
to the electronics, toy, clothing and other industries.
18
Industrial Commodities Management (formerly Precious Metals Management)
The Industrial Commodities Management Group offers strategic metals management
services on behalf of Engelhard and customers. It also engages in energy-related
services.
1995 performance: Higher sales and operating earnings.
Discussion: Improvement related to a higher level of business activity involving
a broader base of customers and services and to favorable market conditions.
Industrial Commodities Management works with all of the Company's other
business groups and many customers who require commodities expertise.
Building on these strong customer relationships, a small base metals
management business was started in 1995 and is expected to be an earnings
contributor in 1996. Another new business, power marketing, began operating in
response to changing regulations.
The Company realized improved efficiency from the transfer of
responsibility for platinum group metals refining and salts and solutions to
Industrial Commodities Management from another Engelhard business group. These
products are now offered as part of a "full-loop" metals package to customers.
Looking ahead: Continued growth is expected by maintaining close customer
relationships and offering creative services. Increased business in the
Asia-Pacific region should also contribute.
Prior Year Comparisons
1994 compared with 1993: Operating earnings were up 19%, while sales increased
13%. Higher earnings from the Engineered Materials Group more than offset
slightly lower earnings from Industrial Commodities Management. Higher sales in
the U.S. and Asia Pacific, combined with lower manufacturing costs, produced the
increased earnings in Engineered Materials. The Industrial Commodities
Management Group was adversely affected by weak market conditions worldwide.
1993 compared with 1992: Operating earnings decreased 26%, and sales declined
19%. Drop in sales was primarily due to lower volumes and pricing for certain
platinum group metals. Lower earnings from the Industrial Commodities Management
Group more than offset higher earnings from the Engineered Materials Group.
Engineered Materials achieved cost savings and sales increases in the U.S.
Special Charge
A plan was adopted in 1993 to realign and consolidate a number of businesses,
concentrate resources and better position Engelhard to achieve strategic growth
objectives.
The plan resulted in a 1993 special charge of $148 million pretax, or $91.8
million or $.63 per share, after tax. The charge consisted of:
- $118 million pretax restructuring provision for (1) asset writedowns
together with provisions for facilities shutdown, rundown and
relocation, and (2) employee reassignment, severance and related
benefits, and
- $30 million pretax environmental provision (see Note 15, "Environmental
Costs", of Notes to Consolidated Financial Statements for a discussion
of environmental matters and the amount of Engelhard's environmental
reserve).
19
The restructuring reserve at December 31, 1993 consisted of:
- The $118 million 1993 special charge, plus
- $32.4 million of previously established provisions associated with
idled sites. Rundown costs continued to be incurred at these sites,
while they await the completion of environmental cleanup and/or the
consummation of sales.
The following table sets forth the components of the Company's restructuring
reserve and related activity for the past two years:
Restructuring Reserve Employee Asset
(in millions) separations writedowns Other Total
Balance at December 31, 1993 $35.9 $72.2 $42.3 $150.4
Asset writeoffs/writedowns - (66.6) - (66.6)
Cash spending (8.8) - (8.4) (17.2)
Cash proceeds - 1.7 - 1.7
Reclassification - 7.5 (7.5) -
Reversal - - (8.0) (8.0)
---- ---- ---- -----
Balance at December 31, 1994 27.1 14.8 18.4 60.3
Asset writeoffs/writedowns - (7.7) - (7.7)
Cash spending (9.5) - (8.6) (18.1)
Engelhard-CLAL (3.9) 1.0 9.0 6.1
---- ---- ---- -----
Balance at December 31, 1995 $13.7 $ 8.1 $18.8 $ 40.6
In the fourth quarter of 1994, $8 million of restructuring reserve was reversed
because an idle Canadian facility was sold earlier and at more favorable terms
than originally estimated. Also, a new, less costly approach was adopted for the
cleanup and disposal of its idle Newark, NJ site.
Also in 1994, the Company:
- Reconfigured certain production processes of the Middle Georgia
facility of the Pigments and Additives Group, which resulted in a
writeoff of the associated assets.
- Kept open two sites originally identified for closure. One of these
facilities, a part of the Engineered Materials Group, is continuing to
operate because of improved economics and lack of synergy in
relocating the manufacturing process. The other facility, a part of
the Chemical Catalysts Group, is continuing to operate because the
product lines are complementary to the Company's other businesses. The
impairment of this facility as opposed to the originally planned
shutdown and relocation, resulted in a reclassification of shutdown
and relocation costs to asset writedowns.
In 1995, the Company completed the formation of Engelhard-CLAL, a Paris-based
precious metal fabrication joint venture. This transaction increased the reserve
as a result of previously anticipated precious metal and other asset gains,
partially offset by a decrease in the reserve for restructuring activities to be
performed by the joint venture. In addition, the Company continued to incur
costs for severance and related benefits as well as rundown costs at idle sites.
Asset writeoffs in 1995 were related to inventory and fixed assets associated
with rationalization actions.
20
Most of the restructuring actions have been taken. Major actions expected
to be completed in 1996 include:
- Sale of a separation products facility (scheduled for the first half
of 1996).
- Continuing rationalization of the Petroleum Catalysts Group.
- Continuing rationalization of an environmental technologies facility.
- Completion of the Floridin acquisition (pending a court decision).
The remaining provision for employee separations provides for severance and
related benefit payments for former employees and for employees who have
generally been notified of severance in connection with pending actions. These
amounts will be paid over several years. The remaining provision for asset
writedowns primarily relates to pending actions. The remaining provision in
"other" relates to rundown costs. Net cash outflows for rundown costs will be
charged against the reserve until the related sites are sold.
By the end of 1996 the Company anticipates annual cost savings of about $20
to $25 million as a result of lower manufacturing and operating expenses, with
annual cash savings of about $15 million. To date most of these savings have
been realized.
Gain on Sale of Investment
In the first quarter of 1993, Engelhard sold its share of M&T Harshaw, a base
metal plating business formed in 1990, to its partner, Elf Atochem North
America, Inc., for $40 million in cash. The buyer assumed all assets and
liabilities. An after-tax gain of $6.3 million or $.04 per share was realized in
the transaction.
21
Acquisitions and Partnerships (Formerly called "Investments" and
"Current Developments")
Other Party Business Arrangement Transaction Date Business Opportunity
- ----------- -------------------- ---------------- --------------------
Salem Industries Acquired remaining 50 percent October 1995 Markets products and services to abate
of joint venture formed in emissions of volatile organic chemicals and
1992 other pollutants.
Jet-Com, Inc. Acquired assets and business August 1995 Supplements existing line of thermal spray
of thermal spray coating and coatings and adds shot peening services.
shot peening company
CLAL Formed Paris-based, 50/50 June 1995 Refines, manufactures and markets certain
joint venture precious metal containing products.
W.R. Grace & Co. Formed 50/50 joint venture February 1995 Manufactures and markets metallic
called Metreon substrate catalytic converters for cars.
Advanced Plasma, Inc. Acquired assets and business January 1995 Broadens existing line of thermal spray
of thermal spray coating coatings to include metallic-ceramic
company technology.
General Plasma, Inc. Acquired assets and business July 1994 Developing complete vehicle emission
of thermal spray coating control systems.
company
Solvay Catalysts, GmbH, Acquired assets of sorbents March 1994 Expands Engelhard's moving-bed catalysts
(Nienburg, Germany) and moving-bed catalysts business, making the Company the world
businesses leader; provides complementary product lines
serving adsorbents applications.
ICC Technologies, Inc. FormedEngelhard/ICC, February 1994 Developing and commercializing air-
50/50 partnership conditioning and air treatment systems based
on proprietary desiccant developed by
Engelhard.
Selling, Administrative and Other Expenses
Selling, administrative and other expenses in 1995 of $244.7 million were
basically flat with 1994 and up from $213.0 million in 1993. In 1994, based on a
study of incentive compensation and in response to changing demographics, the
Company revised its estimate of current compensation expense relating to stock
awards to include the cost of shares where risk of forfeiture by the employee
has been removed. Impact: Net charge to 1994 earnings of $8.6 million ($5.3
million after taxes--$.04 per share). See Note 14, "Stock Option and Bonus
Plans," of Notes to Consolidated Financial Statements.
Equity Earnings
In 1995, Engelhard's income from equity investments was $0.7 million, compared
with $0.6 million in 1994 and $3.4 million in 1993. The decrease in 1994 was
primarily due to the start-up losses of a new joint venture (Engelhard/ICC), and
lower volumes at Acreon Catalysts.
22
In June 1995, the Company announced the formation of a 50/50 joint venture
with Paris-based CLAL (Groupe FIMALAC) for manufacturing, marketing and refining
precious metal containing products. The new venture, Engelhard-CLAL, combines
most of the assets of CLAL and certain assets and liabilities of the Company's
Engineered Materials Group in Europe and the Asia-Pacific region, and the
engineered materials business currently conducted in Carteret, NJ and Fremont,
CA. Engelhard-CLAL is headquartered in Paris and has annual revenues of more
than $1.0 billion. In exchange for its 50% interest, the Company contributed
approximately $110.0 million of net assets, including approximately $25.0
million in cash. The joint venture is expected to be a positive contributor to
equity earnings in 1996, primarily due to the achievement of synergy.
Interest
Net interest expense was $31.3 million in 1995, compared with $22.0 million
in 1994 and $13.7 million in 1993. Gross interest expense and offsetting
contango income--components of net interest expense--reflect the extent of
precious metals financed by spot and forward transactions each year. Higher net
interest expense in 1995 and 1994 was primarily due to higher interest rates and
average debt balances as a result of acquisitions, business investments and
common stock purchases.
Lower net interest expense in 1993 was due primarily to expiration of an
unfavorable interest rate swap agreement in 1992 and initiation of then
favorable interest rate swap agreement in 1993. See Note 12, "Financial
Instruments and Precious Metals Operations", of Notes to Consolidated Financial
Statements for further information about interest rate swap agreements.
Interest income, included as a component of net sales, was $2.2 million in 1995,
$1.1 million in 1994, and $2.0 million in 1993.
Taxes
Income tax provision came to $47.8 million in 1995, $39.3 million in 1994,
and a benefit of $21.4 million in 1993 (primarily as a result of the special
charge). The effective income tax expense rate, excluding the impact of the
special charge, was 25.8% in 1995, 25.0% in 1994, and 24.3% in 1993. Lower rate
in 1993 was due primarily to U.S. tax legislation that year that reinstated the
research and development credit and increased the income tax rate, creating a
favorable impact on Engelhard's net deferred tax asset.
At year-end 1995, the net deferred tax asset was $97.3 million, primarily
for accrued postretirement and postemployment benefit obligations, the
restructuring reserve, the environmental cleanup reserve, and other accruals.
Management believes Engelhard will generate sufficient taxable earnings and tax
planning opportunities to ensure deferred tax benefits are realized.
Financial Condition and Liquidity
Working capital was $107 million at 1995 year-end, including $40 million of
cash. Year-end market value of Engelhard's precious metals exceeded carrying
cost by $36 million. The current ratio (current assets to current liabilities)
at year end was 1.2, slightly above last year.
Short-term bank and commercial paper borrowings increased by $4 million to $183
million at 1995 year-end. The Company issued $100 million of debt instruments in
the third quarter of 1995. These noncallable notes bear interest at rates
ranging from 6.37% to 6.64% and mature at various dates in 2000. Some of the
proceeds were used to reduce short-term borrowings.
23
The ratio of total debt to total capital increased to 35% at year-end 1995
from 32% at year-end 1994, as a result of the higher long-term borrowings.
Engelhard currently has $600 million in committed revolving credit facilities
available. The Company also has authorization from its Board of Directors to
issue up to $350 million in commercial paper ($94 million outstanding at
year-end 1995). Engelhard also has uncommitted lines of short-term credit
exceeding $650 million. In 1996, management expects to call the $5.5 million
7.91% industrial revenue bonds and the $100 million 10% notes, and to refinance
them with comparable long-term debt. Management believes that Engelhard will
continue to have adequate access to short-term and long-term credit and capital
markets to meet its needs for the foreseeable future.
Operating activities provided net cash of $138.5 million in 1995, compared with
$114.8 million in 1994 and $130.4 million in 1993. For the past three years,
cash and internally generated funds were adequate to fund working capital
requirements, support capital projects and sustain increased dividend payments.
For 1996, management anticipates that cash and cash flows will again be adequate
to fund operational and capital requirements.
Capital Expenditures, Commitments and Contingencies
Capital projects are designed to maintain capacity, expand operations, improve
efficiency or protect the environment. These amounted to $147.7 in 1995,
compared with $97.5 million in 1994 and $107.1 million in 1993. Higher capital
expenditures in 1995 reflected the Company's purchase, for $57 million, of the
land and a building that serve as the principal executive and administrative
offices of the Company and its operating businesses. Capital expenditures in
1996 are projected to approximate $100 million. See also Note 15, "Environmental
Costs", and Note 16, "Litigation and Contingencies", of Notes to Consolidated
Financial Statements for further information about commitments and
contingencies.
Effect of Foreign Currency Transactions and Translation
Currency transactions: Engelhard generally does not speculate in foreign
currency, but enters into foreign currency transactions in the normal course of
business and has investments in a number of different currencies. The Company is
therefore subject to transaction and translation exposure from fluctuations in
foreign currency exchange rates. Engelhard uses a variety of strategies,
including foreign currency forward contracts and internal hedging to minimize or
eliminate foreign currency exchange rate risk associated with substantially all
of its foreign currency transactions. In selected circumstances, Engelhard
enters into foreign currency forward contracts to hedge the U.S. dollar value of
its foreign investments. See Note 12, "Financial Instruments and Precious Metals
Operations", of Notes to Consolidated Financial Statements for further
information about foreign currency hedging activities.
Precious metals inventories are generally not impacted by foreign currency
rate fluctuations because they are denominated in U.S. dollars.
Dividends and Capital Stock
Dividend increase of 12%: The Board of Directors approved for common stock in
the second quarter of 1995, raising the level to $.09 effective at June 30,
1995. The annualized common stock dividend rate at the end of 1995 was $.36 per
share.
Three-for-two split: The Board of Directors authorized this split of common
stock effective June 30, 1995. Directors authorized an earlier three-for-two
split of common stock effective September 30, 1993.
24
Stock purchases: In the fourth quarter of 1993, the Board of Directors voted to
retire 5.3 million shares of stock previously held in treasury and approved a
plan to purchase up to 3.6 million shares of common stock for delivery under its
stock incentive and employee benefit plans. At 1994 year-end, 1.6 million shares
had been purchased under this plan, which is now closed. In the second quarter
of 1992, the Board of Directors approved two separate plans to purchase up to
12.5 million shares of common stock. At December 31, 1995, 11.5 million shares
had been purchased under these plans.
Other Matters
In March 1995, the Financial Accounting Standards Board issued Statement No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of". The Company anticipates no material impact on financial
condition or the results of operations from adoption on January 1, 1996. In
October 1995, the Financial Accounting Standards Board issued Statement No. 123
"Accounting for Stock-Based Compensation". The Company will adopt the disclosure
only alternative on January 1, 1996.
The Company has reached an agreement in principle for the replacement of a
precious metals supply contract that expires December 31, 1996. The new contract
offers smaller quantities and less favorable terms, but management expects the
impact to be wholly or partially offset by other precious metals supply
contracts and arrangements and by new business programs already underway.
Failure to achieve such offsetting income could result in a material adverse
impact. Management believes that an adequate supply of these precious metals
will be available to meet growing needs.
25
Item 8. Financial Statements and Supplementary Data
- ------ -------------------------------------------
Consolidated Statements of Earnings
Engelhard Corporation
Year ended December 31, 1995 1994 1993
---- ---- ----
(in thousands, except per share amounts)
Net sales $2,840,077 $2,385,802 $2,150,865
Cost of sales 2,379,474 1,970,563 1,794,438
---------- ---------- ----------
Gross profit 460,603 415,239 356,427
Selling, administrative and other expenses 244,660 244,611 213,018
Special charge (credit) - (8,000) 148,000
---------- ---------- ----------
Earnings (loss) from operations 215,943 178,628 (4,591)
Gain on sale of investment - - 10,145
Equity in earnings of affiliates 695 632 3,433
---------- ---------- ----------
Interest expense, net of capitalized amounts 35,066 23,010 17,292
Less contango on futures and forward contracts (3,740) (1,056) (3,596)
---------- ---------- ----------
Net interest expense 31,326 21,954 13,696
---------- ---------- ----------
Earnings (loss) before income taxes and cumulative
effect of an accounting change 185,312 157,306 (4,709)
Income tax expense (benefit) 47,791 39,326 (21,381)
---------- ---------- ----------
Net earnings before cumulative effect of an
accounting change 137,521 117,980 16,672
Cumulative effect of an accounting change - - (16,000)
---------- ---------- ----------
Net earnings $ 137,521 $ 117,980 $ 672
========== ========== ==========
Net earnings per share of common stock
Before cumulative effect of an accounting change $.96 $.82 $.11
Cumulative effect of an accounting change - - (.11)
---------- ---------- ----------
Net earnings per share $.96 $.82 $ -
========== ========== ==========
Average number of shares outstanding 143,619 144,100 145,188
See accompanying Notes to Consolidated Financial Statements.
26
Consolidated Balance Sheets
Engelhard Corporation
December 31, 1995 1994
(in thousands) ---- ----
Assets
Cash $ 40,023 $ 26,404
Receivables 268,578 265,639
Inventories 238,002 243,439
Other current assets 54,440 38,155
---------- ----------
Total current assets 601,043 573,637
Investments 224,721 112,855
Property, plant and equipment, less accumulated
depreciation, depletion and amortization 609,540 540,361
Other noncurrent assets 210,271 213,906
---------- ----------
Total assets $1,645,575 $1,440,759
========== ==========
Liabilities and Shareholders' Equity
Short-term bank borrowings $ 89,233 $ 52,342
Commercial paper 94,000 127,325
Current maturities of long-term debt 337 489
Accounts payable 101,064 86,230
Accrued liabilities 209,875 233,313
---------- ----------
Total current liabilities 494,509 499,699
Long-term debt 211,533 111,762
Other noncurrent liabilities 201,791 214,563
---------- ----------
Total liabilities 907,833 826,024
---------- ----------
Commitments and contingent liabilities
Preferred stock, no par value, 5,000 shares authorized and unissued - -
Common stock, $1 par value, 200,000 shares authorized
and 147,295 shares issued 147,295 98,197
Retained earnings 625,787 582,520
Treasury stock, at cost, 3,579 and 4,649 shares, respectively (57,173) (74,054)
Cumulative translation adjustment 21,833 8,072
---------- ----------
Total shareholders' equity 737,742 614,735
---------- ----------
Total liabilities and shareholders' equity $1,645,575 $1,440,759
========== ==========
See accompanying Notes to Consolidated Financial Statements.
27
Consolidated Statements of Cash Flows
Engelhard Corporation
Year ended December 31, 1995 1994 1993
(in thousands) ---- ---- ----
Cash flows from operating activities
Net earnings $ 137,521 $117,980 $ 672
Adjustments to reconcile net earnings
to net cash provided by operating activities
Depreciation, depletion and amortization 65,450 69,104 68,177
Special charge (credit) - (8,000) 148,000
Gain on sale of investment - - (10,145)
Cumulative effect of an accounting change - - 16,000
Equity earnings, net of dividends 2,716 3,201 (854)
Net change in assets and liabilities (67,168) (67,497) (91,488)
--------- --------- --------
Net cash provided by operating activities 138,519 114,788 130,362
Cash flows from investing activities
Capital expenditures, net of disposals (147,704) (97,531) (107,088)
Acquisition of businesses and investments (42,502) (44,298) -
Proceeds from sale of investment - - 39,787
Other 2,035 (1,036) (2,749)
--------- --------- --------
Net cash used in investing activities (188,171) (142,865) (70,050)
Cash flows from financing activities
Increase (decrease) in short-term borrowings (10,237) 79,585 49,305
Proceeds from issuance of long-term debt 100,125 - -
Repayment of long-term debt (994) (429) (1,935)
Purchase of treasury stock (7,235) (41,280) (90,648)
Stock bonus and option plan transactions 29,273 33,672 19,030
Dividends paid (50,313) (44,178) (40,631)
--------- --------- -----------
Net cash provided by (used in) financing activities 60,619 27,370 (64,879)
Effect of exchange rate changes on cash 2,652 1,498 (1,146)
--------- --------- -----------
Net increase (decrease) in cash 13,619 791 (5,713)
Cash at beginning of year 26,404 25,613 31,326
--------- --------- -----------
Cash at end of year $ 40,023 $ 26,404 $ 25,613
========= ========= ===========
See accompanying Notes to Consolidated Financial Statements.
28
Consolidated Statements of Shareholders' Equity
Engelhard Corporation
Additional Cumulative Total
Common paid-in Retained Treasury translation shareholders'
stock capital earnings stock adjustment equity
------- ---------- -------- -------- ----------- ------------
(in thousands, except per share amounts)
Balance at December 31, 1992 67,800 37,324 606,176 (59,254) (4,842) 647,204
Net earnings - - 672 - - 672
Dividends ($.28 per share) - - (40,631) - - (40,631)
Three-for-two stock split 33,897 (33,897) - - - -
Foreign currency translation adjustment - - - - (4,309) (4,309)
Treasury stock acquired - - - (90,648) - (90,648)
Stock bonus and option plan transactions - (3,427) (1,989) 24,446 - 19,030
Retirement of treasury stock (3,500) - (66,738) 70,238 - -
------- -------- -------- -------- -------- --------
Balance at December 31, 1993 98,197 - 497,490 (55,218) (9,151) 531,318
Net earnings - - 117,980 - - 117,980
Dividends ($.30 per share) - - (44,178) - - (44,178)
Foreign currency translation adjustment - - - - 17,223 17,223
Treasury stock acquired - - - (41,280) - (41,280)
Stock bonus and option plan transactions - - 11,228 22,444 - 33,672
------- -------- -------- -------- -------- --------
Balance at December 31, 1994 98,197 - 582,520 (74,054) 8,072 614,735
Net earnings - - 137,521 - - 137,521
Dividends ($.35 per share) - - (50,313) - - (50,313)
Three-for-two stock split 49,098 - (49,098) - - -
Foreign currency translation adjustment - - - - 13,761 13,761
Treasury stock acquired - - - (7,235) - (7,235)
Stock bonus and option plan transactions - - 5,157 24,116 - 29,273
------- -------- -------- -------- -------- --------
Balance at December 31, 1995 $147,295 $ - $625,787 $(57,173) $21,833 $737,742
======= ======== ======== ======== ======== ========
See accompanying Notes to Consolidated Financial Statements.
29
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Engelhard Corporation and its wholly-owned subsidiaries (collectively referred
to as the Company). All significant intercompany transactions and balances have
been eliminated in consolidation. Certain prior year amounts have been
reclassified to conform with the current year presentation. All share and per
share data have been retroactively restated to give effect to the three-for-two
stock split as of June 30, 1995.
The preparation of financial statements in conformity with generally
accepted account- ing principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cost of Sales and Inventories
Inventories are stated at the lower of cost or market. The elements of cost
include direct labor and materials, variable overhead and the full absorption of
fixed manufacturing overhead. The cost of precious metals inventories is
determined using the last-in, first-out (LIFO) method of inventory valuation.
The cost of other inventories is principally determined using either the average
cost or first-in, first-out (FIFO) method.
The Company routinely enters into a variety of arrangements for the
sourcing and supply of precious metals. These arrangements are spread among a
number of counter-parties, which are generally major industrial companies or
highly rated financial institutions. The conduct of this business is closely
monitored and appropriate reserves for potential losses are maintained.
Depreciation, Depletion and Amortization
Additions to property, plant and equipment are stated at cost. Depreciation and
amortization of plant and equipment are provided primarily on a straight-line
basis over the estimated useful lives of the assets. Depletion of mineral
deposits and mine development are provided under the unit of production method.
When assets are sold or retired, the cost and related accumulated
depreciation or amortization are removed from the accounts and any gain or loss
is included in earnings.
Amortization and Intangible Assets
Goodwill and other acquired intangible assets are recorded at cost and
amortization is provided on a straight-line basis over the estimated useful
lives of the assets, but not in excess of 40 years.
Accounting Change
Effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits". This standard requires the accrual method of
accounting for certain benefits provided to former or inactive employees after
employment but before retirement. As of January 1, 1993, the Company recognized
the full actuarially calculated amount of its estimated accumulated
30
postemployment benefit obligation. The charge to 1993 earnings was $26.0 million
($16.0 million after tax--$.11 per share). The after-tax amount has been
reflected in 1993 as a cumulative effect of an accounting change.
2. Special Charge
In 1993, the Company provided for a plan to realign and consolidate businesses,
concentrate resources and better position itself to achieve its strategic growth
objectives. That plan resulted in a special charge of $148.0 million ($91.8
million after tax--$.63 per share) in 1993, consisting of a $118.0 million
pretax restructure provision for asset writedowns related to product lines or
sites being exited together with provisions for facility shutdown, rundown and
relocation and for employee reassignment, severance and related benefits and a
$30.0 million pretax environmental reserve. See Note 15, "Environmental Costs",
for a discussion of environmental matters and the amount of the Company's
environmental reserve.
The Company's restructuring reserve at December 31, 1993, consisted of the
$118.0 million 1993 special charge and $32.4 million of previously established
provisions associated with idled sites, as rundown costs continue to be incurred
at these sites and their disposition is pending completion of environmental
cleanup and/or consummation of sales. During the fourth quarter of 1994, the
Company reversed $8.0 million of its restructuring reserve because its idle
Canadian facility was sold earlier and at more favorable terms than originally
estimated and because of a revised, and less costly, approach to the
cleanup/disposition of its idle Newark, NJ site.
The following table sets forth the components of the Company's
restructuring reserve and related activity for 1994 and 1995:
Restructuring Reserve Employee Asset
(in millions) separations writedowns Other Total
Balance at December 31, 1993 $35.9 $72.2 $42.3 $150.4
Asset writeoffs/writedowns - (66.6) - (66.6)
Cash spending (8.8) - (8.4) (17.2)
Cash proceeds - 1.7 - 1.7
Reclassification - 7.5 (7.5) -
Reversal - - (8.0) (8.0)
---- ---- ---- -----
Balance at December 31, 1994 27.1 14.8 18.4 60.3
Asset writeoffs/writedowns - (7.7) - (7.7)
Cash spending (9.5) - (8.6) (18.1)
Engelhard-CLAL (3.9) 1.0 9.0 6.1
---- ---- ---- -----
Balance at December 31, 1995 $13.7 $ 8.1 $18.8 $ 40.6
In 1994, the Company reconfigured certain production processes at the
Middle Georgia facility of the Paper Pigments and Chemicals Group, which
resulted in the writeoff of the associated assets. Two other Company-owned
sites, originally identified for closure, will remain open. One of these
facilities, a part of the Engineered Materials Group, will continue to operate
because of improved economics and the lack of synergy to be achieved from
relocating the manufacturing process. The other facility, a part of the Chemical
Catalysts Group, will continue to operate because the product lines are
complementary to the Company's other businesses. The impairment of this
facility, as opposed to the originally planned shutdown and relocation, resulted
in a reclassification of shutdown and relocation costs to asset writedowns.
31
In 1995, the Company completed the formation of Engelhard-CLAL, a
Paris-based precious metal fabrication joint venture. This transaction increased
the reserve as a result of previously anticipated precious metal and other asset
gains, partially offset by a decrease in the reserve for restructuring
activities to be performed by the joint venture. In addition, the Company
continued to incur costs for severance and related benefits as well as rundown
costs at idle sites. Asset writeoffs in 1995 were related to inventory and fixed
assets associated with rationalization actions.
Most of the restructuring actions have been taken. Major actions expected
to be completed this year include: the sale of a separation products facility
(scheduled for the first half of 1996); the continuing rationalization of the
Petroleum Catalysts Group and of a manufacturing facility of the Environmental
Technologies Group; and the completion of the Floridin acquisition (pending a
court decision).
The remaining provision for employee separations provides for severance and
related benefit payments for former employees and for employees who have
generally been notified of severance in connection with pending actions. These
amounts will be paid over several years. The remaining provision for asset
writedowns primarily relates to pending actions. The remaining provision in
"other" relates to rundown costs. Net cash outflows for rundown costs will be
charged against the reserve until the related sites are sold.
By the end of 1996 the Company anticipates annual cost savings of about $20
to $25 million as a result of lower manufacturing and operating expenses, with
annual cash savings of about $15 million. To date, most of these savings have
been realized.
3. Research and Development Costs
Research and development costs are charged to expense as incurred and were $53.0
million in 1995, $49.0 million in 1994 and $46.9 million in 1993.
4. Benefits
The Company has domestic and foreign pension plans covering substantially all
employees. Plans covering most salaried employees generally provide benefits
based on years of service and the employee's final average compensation. Plans
covering most hourly, bargaining unit members generally provide benefits of
stated amounts for each year of service. The Company makes contributions to the
plans to the extent such contributions are currently deductible for tax
purposes. Plan assets primarily consist of listed stocks and fixed income
securities.
The components of the net pension credit for all plans are shown in the
following table:
Net Pension Credit
(in millions) 1995 1994 1993
---- ---- ----
Service cost $ 8.3 $ 9.3 $ 8.1
Interest cost 20.4 19.1 18.8
Actual return on plan assets (40.9) (9.3) (26.9)
Net amortization and deferral 8.6 (21.0) (2.2)
------ ------ ------
Net pension credit $ (3.6) $ (1.9) $ (2.2)
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations for the pension plans are 7.0% to 8.5% and 3.0% to
6.0%, respectively. The expected long-term rate of return on assets is 7.5% to
10.5%.
32
The following table sets forth the plans' funded status:
Funded Status
(in millions) 1995 1994
---- ----
Actuarial present value of benefit obligations
Vested benefit obligation $222.5 $206.9
Accumulated benefit obligation $235.9 $217.8
Projected benefit obligation $267.9 $254.3
Plan assets at fair value $288.8 $283.6
Plan assets in excess of projected benefit obligation $ 20.9 $ 29.3
Unrecognized net loss 37.6 39.8
Unrecognized prior service cost 6.4 6.7
Unrecognized transition asset, net of amortization (8.8) (14.7)
Fourth quarter contribution .3 .1
------ ------
Prepaid pension expense $ 56.4 $ 61.2
In June 1995, in connection with the formation of the Engelhard-CLAL joint
venture, the Company transferred certain assets and liabilities of the plans to
the Engelhard-CLAL joint venture. This transaction reduced the Company's prepaid
pension expense by $10.1 million.
The Company also sponsors two savings plans covering certain salaried and
hourly paid employees. The Company's contributions, which may equal up to 50% of
certain employee contributions, were approximately $2 million in 1995, 1994 and
1993.
The Company also currently provides postretirement medical and life
insurance benefits to certain retirees (and their spouses), certain disabled
employees (and their families) and spouses of certain deceased employees.
Substantially all U.S. salaried employees and certain hourly paid employees are
eligible for these benefits, which are paid through the Company's general health
care and life insurance programs, except for certain medicare-eligible salaried
and hourly retirees who are provided a defined contribution towards the cost of
a partially insured health plan. In addition, the Company provides
postemployment benefits to former or inactive employees after employment but
before retirement. These benefits are substantially similar to the
postretirement benefits but cover a much smaller group of employees.
The components of the net expense for these postretirement and
postemployment benefits are shown in the following table:
Postretirement and Postemployment Benefit Expense
(in millions)
1995 1994 1993
---- ---- ----
Service cost $2.3 $ 2.3 $ 2.1
Interest cost 9.0 10.0 13.3
Net amortization (4.9) (4.5) (3.2)
----- ----- -----
Net benefit expense $6.4 $ 7.8 $12.2
Annual cash spending for postretirement and postemployment benefits
averaged approximately $7.3 million for the past three-year period.
33
The weighted-average discount rate used in determining the actuarial
present value of the accumulated postretirement and postemployment benefit
obligation is 7.8%. The average assumed health care cost trend rate used for
1995 is 10%, gradually decreasing to 5% by 2004. A 1% increase in the assumed
health care cost trend rate would increase aggregate service and interest cost
in 1995 by $.6 million and the accumulated postretirement and postemployment
benefit obligation as of December 31, 1995 by $5.6 million.
The following table sets forth the components of the accrued postretirement
and postemployment benefit obligation, all of which are unfunded:
Postretirement and Postemployment Benefit Obligation
(in millions) 1995 1994
---- ----
Accumulated benefit obligation
Retirees $ 74.8 $ 72.3
Fully eligible active participants 15.9 16.0
Other active participants 18.2 33.1
------ ------
108.9 121.4
Unrecognized prior service cost 46.5 39.4
Unrecognized net gain (loss) 4.8 7.1
Fourth quarter contribution (2.0) (2.3)
------ ------
Accrued benefit obligation $158.2 $165.6
In June 1995, in connection with the formation of the Engelhard-CLAL joint
venture, the Company transferred $3.6 million of its accrued benefit obligation
to the Engelhard-CLAL joint venture.
5. Related Party Transactions
In the ordinary course of business, the Company has raw material supply
arrangements with entities in which Anglo American Corporation of South Africa
Limited (Anglo) has material interests and with Engelhard-CLAL and its
subsidiaries. Anglo indirectly holds a significant minority interest in the
common stock of the Company. Engelhard-CLAL is a 50% owned joint venture. The
Company's purchases from such entities amounted to $367.3 million in 1995,
$233.1 million in 1994 and $228.7 million in 1993; sales to such entities
amounted to $442.4 million in 1995; and metal leases to such entities amounted
to $31.7 million in 1995 and $49.7 million in 1994. Management believes these
transactions were under terms no less favorable to the Company than those
arranged with other parties. At December 31, 1995 and 1994 amounts due to such
entities totaled $4.9 million and $14.8 million, respectively.
34
6. Income Taxes
The components of income tax expense are shown in the following table:
Income Tax Expense (Benefit)
(in millions) 1995 1994 1993
---- ---- ----
Current income tax expense
Federal $15.9 $13.3 $18.4
State 2.0 1.3 1.6
Foreign 12.0 7.5 7.8
----- ----- -----
29.9 22.1 27.8
Deferred income tax expense (benefit)
Federal 19.2 13.2 (39.8)
Changes in tax rates - 1.3 (1.6)
State 2.7 2.7 (2.7)
Foreign (2.6) 8.1 (1.2)
Loss carryforwards/tax credits (1.4) (8.1) (3.9)
----- ------ -----
17.9 17.2 (49.2)
----- ------ -----
Income tax expense (benefit) $47.8 $39.3 $(21.4)
The foreign portion of income (loss) before income tax expense (benefit)
was income of $40.8 million in 1995, $51.0 million in 1994 and $20.9 million in
1993. Taxes on income of foreign consolidated subsidiaries and affiliates are
provided at the tax rates applicable to their respective foreign tax
jurisdictions. Tax credits of $8.0 million in 1995, $3.6 million in 1994 and
$6.2 million in 1993, in connection with equity transactions, are included in
such adjustments for those years and are not reflected in the amounts shown
above.
The following table sets forth the components of the net deferred income
tax asset which results from temporary differences between the amounts of assets
and liabilities recognized for financial reporting and tax purposes:
Net Deferred Income Tax Asset
(in millions) 1995 1994
---- ----
Deferred tax assets
Accrued liabilities $71.5 $78.1
Noncurrent liabilities 62.6 66.4
Tax credits and carryforwards 41.0 41.3
Deferred tax liabilities
Prepaid pension expense (27.5) (28.5)
Property, plant and equipment (8.4) (16.1)
Other assets (41.9) (35.8)
------ ------
Net deferred income tax asset $97.3 $105.4
As of December 31, 1995, the Company had approximately $16.9 million of
non-expiring alternative minimum tax credit carryforwards and approximately $5.0
million of research and development credits with expiration dates through 2010
available to offset future U.S. Federal income taxes. Also, as of December 31,
1995, the Company had approximately $11.0 million of foreign nonexpiring net
operating loss carryforwards and approximately $6.0 million of foreign
investment tax credits expiring in 2000 available to offset certain future
foreign income taxes. Management believes that the Company will generate
sufficient taxable earnings and tax planning opportunities to ensure realization
of these tax benefits.
35
A reconciliation of the difference between the Company's consolidated
income tax expense (benefit) and the expense (benefit) computed at the federal
statutory rate is shown in the following table:
Consolidated Income Tax Expense (Benefit) Reconciliation
(in millions)
1995 1994 1993
---- ---- ----
Income tax expense (benefit) at federal
statutory rate $64.9 $55.0 $ (1.6)
Special charge - - (4.4)
Effect of tax law changes - 1.3 (1.6)
State income taxes, net of federal effect 3.0 2.6 2.8
Percentage depletion (14.0) (11.6) (11.6)
Equity earnings (.9) (.6) -
Effect of different tax rates on
foreign earnings, net (3.6) 2.3 (4.0)
Benefit of tax credits (.7) (7.5) (1.0)
Foreign sales corporation (4.1) (3.4) (1.4)
Other items, net 3.2 1.2 1.4
----- ------ -----
Income tax expense (benefit) $47.8 $39.3 $(21.4)
At December 31, 1995, the Company's share of the cumulative undistributed
earnings of foreign subsidiaries was approximately $256.8 million. No provision
has been made for U.S. or additional foreign taxes on the undistributed earnings
of foreign subsidiaries because such earnings are expected to be reinvested
indefinitely in the subsidiaries' operations. It is not practicable to estimate
the amount of additional tax that might be payable on these foreign earnings in
the event of distribution or sale; however, under existing law, foreign tax
credits would be available to substantially reduce, or in some cases eliminate,
U.S. taxes payable.
7. Inventories
Inventories consist of the following:
Inventories
(in millions) 1995 1994
---- ----
Raw materials $ 68.9 $ 62.9
Work in process 30.1 24.1
Finished goods 117.5 103.0
Precious metals 21.5 53.4
------ ------
Total inventories $238.0 $243.4
All precious metals inventories are stated at LIFO cost. The market value
of the precious metals inventories exceeded cost by $35.5 million and $61.0
million at December 31, 1995 and 1994, respectively. The Company also has a
long-term investment in precious metals. The combined market value of precious
metals in inventories and the investment exceeded cost by $35.8 million and
$71.0 million at December 31, 1995 and 1994, respectively.
In 1995, the Company contributed certain precious metals inventories to its
newly formed joint venture, Engelhard-CLAL.
In the normal course of business, certain customers and suppliers deposit
significant quantities of precious metals with the Company under a variety of
arrangements. Equivalent quantities of precious metals are returnable as product
or in other forms.
36
8. Investments
The Company has investments in affiliates that are accounted for on the equity
method. The more significant of these investments are Engelhard-CLAL and N.E.
Chemcat Corporation (N.E. Chemcat). Engelhard-CLAL, a 50/50 joint venture with
Paris-based CLAL (Groupe FIMALAC), was established in June 1995 for the purpose
of refining, manufacturing and marketing certain precious metal containing
products. N.E. Chemcat is a 38.8% owned, publicly-traded Japanese corporation
and a leading producer of automotive and chemical catalysts, electronic
chemicals and other precious metals based products.
At December 31, 1995, the quoted market value of the Company's investment
in N.E. Chemcat was in excess of $130 million. The valuation represents a
mathematical calculation based on a closing quotation published by the Tokyo
over-the-counter market and is not necessarily indicative of the amount that
could be realized upon sale.
In the first quarter of 1993, the Company sold its investment in M&T
Harshaw to its partner for $40 million in cash with the buyer assuming all
assets and liabilities. As a result, the Company realized an after-tax gain of
$6.3 million ($.04 per share).
The summarized unaudited financial information below represents an
aggregation of the Company's nonsubsidiary affiliates:
Financial Information (unaudited)
(in millions) 1995 1994 1993
---- ---- ----
Earnings data
Revenue $1,207.9 $348.1 $327.3
Gross profit 130.8 62.0 55.4
Net earnings 6.2 6.4 10.4
Company's equity in net earnings .7 .6 3.4
Balance sheet data
Current assets $ 573.8 $231.2
Noncurrent assets 190.0 123.5
Current liabilities 240.5 103.1
Noncurrent liabilities 90.1 18.8
Net assets 433.2 232.8
Company's equity in net assets 216.1 105.5
The Company's share of undistributed earnings of affiliated companies
included in consolidated retained earnings was $39.2 million and $41.8 million
at December 31, 1995 and 1994, respectively. Dividends from affiliated companies
were $3.4 million in 1995, $3.8 million in 1994 and $2.6 million in 1993.
The Company has other investments, including an investment in precious
metal, that are accounted for at cost.
37
9. Property, Plant, and Equipment
Property plant and equipment consist of the following:
Property, Plant and Equipment
(in millions) 1995 1994
---- ----
Land $ 24.2 $ 14.0
Buildings and building improvements 198.4 155.5
Machinery and equipment 1,001.5 982.5
Construction in progress 71.0 62.9
Mineral deposits and mine development 71.7 70.2
------- -------
1,366.8 1,285.1
Accumulated depreciation, depletion and amortization 757.3 744.7
------- -------
Property, plant and equipment, net $ 609.5 $ 540.4
In December 1995, the Company acquired, for $57.0 million, certain
properties previously operated under lease agreements. These properties consist
of land and a building that serves as the principal executive and administrative
offices of the Company and its operating businesses.
10. Short-term Borrowings and Long-term Debt
At December 31, 1995, unsecured committed revolving credit agreements include a
$300 million facility with a group of North American money center banks and a
$300 million facility with a group of major foreign banks both of which expire
in the year 2000. Commitment fees are paid on unused portions of these lines. In
connection with its credit facilities, the Company has agreed to certain
covenants, none of which is considered restrictive to the operations of the
Company.
At December 31, 1995 and 1994, short-term bank borrowings were $89.2
million and $52.3 million, respectively, at a weighted-average interest rate of
6.0% and 6.3%, respectively. At December 31, 1995 and 1994, commercial paper
borrowings were $94.0 million and $127.3 million, respectively, at
weighted-average interest rates of 5.8% and 6.0%, respectively.
Additional unused lines of credit available exceeded $650 million at
December 31, 1995. The Company's lines of credit with its banks are available in
accordance with normal terms for prime commercial borrowers and are not subject
to commitment fees or other restrictions.
The following table sets forth the components of long-term debt:
Debt Information
(in millions) 1995 1994
---- ----
Medium-Term Notes with a weighted-average
interest rate of 6.53%, due 2000 $100.0 $ -
10% Notes, callable at par in 1996, due 2000
(net of discount) 99.9 99.8
Industrial revenue bonds, 7.91%, currently
callable, due 1997 5.5 5.5
Industrial revenue bonds 64.5% to 68% of
prime rate, due 1997-1999 5.5 5.5
Foreign bank loans with a weighted-average
interest rate of 7.0%, due 1996-2000 .9 1.5
------ ------
211.8 112.3
Amounts due within one year .3 .5
------ ------
Total long-term debt $211.5 $111.8
38
As of December 31, 1995, the aggregate maturities of long-term debt for the
succeeding five years are as follows: $.3 million in 1996, $7.1 million in 1997,
$4.5 million in 1999, and $199.9 million in 2000. In addition, in 1996
management expects to call the $5.5 million 7.91% industrial revenue bonds and
the $100.0 million 10% notes, and refinance them with comparable long-term debt.
See Note 12, "Financial Instruments and Precious Metals Operations," for a
discussion about an interest rate swap agreement.
11. Lease Commitments
The Company rents real property and equipment under long-term operating leases.
Future minimum rental payments required under noncancellable operating leases,
having initial or remaining lease terms in excess of one year, are $2.6 million
in 1996, $1.6 million in 1997, $2.0 million in 1998, $1.8 million in 1999, $1.3
million in 2000 and $9.2 million thereafter. Rental/lease expense, including all
leases, amounted to $14.2 million in 1995, $14.5 million in 1994 and $13.5
million in 1993.
12. Financial Instruments and Precious Metals Operations
The Company does not generally speculate in or engage in the trading of
derivative financial instruments. Derivative financial instruments are used by
the Company primarily for hedging purposes to mitigate risk and include foreign
currency forward contracts and interest rate swap agreements. The Company's
nonderivative financial instruments consist primarily of cash in banks,
temporary investments, accounts receivable and debt.
The fair value of financial instruments in working capital approximates
book value. At December 31, 1995 and 1994, the fair value of long-term debt was
about $214.3 million and $114.2 million, respectively, based on current interest
rates, compared with a book value of $211.5 million and $111.8 million,
respectively.
The Company's financial instruments do not represent a concentration of
credit risk because the Company deals with a variety of major banks worldwide,
and its accounts receivable are spread among a number of major industries,
customers and geographic areas. In addition, a centralized credit committee
reviews significant credit transactions before consummation and an appropriate
level of reserves is maintained. Provisions to these reserves were not
significant in 1995, 1994 or 1993. Management believes that should a
counterparty fail to perform according to the terms of an agreement, it is
unlikely that any of the Company's off-balance sheet financial instruments would
result in a significant loss to the Company.
Foreign Currency Forward Contracts
In the normal course of business, the Company enters into transactions
denominated in foreign currencies. In addition, the Company has subsidiary and
nonsubsidiary investments in a number of different currencies. As a result, the
Company is subject to transaction and translation exposure from fluctuations in
foreign currency exchange rates. The Company uses a variety of strategies,
including foreign currency forward contracts and internal hedging, to minimize
or eliminate foreign currency exchange rate risk associated with substantially
all of its foreign currency transactions. Gains and losses on these hedging
transactions are generally recorded in earnings in the same period as they are
realized, which is usually in the same period as the underlying or originating
transactions. In selected circumstances, the Company enters into foreign
currency forward contracts to hedge the U.S. dollar value of its foreign
investments. Gains and losses on these hedging contracts are recognized as
39
cumulative translation adjustments. In limited and closely monitored situations,
for which preapproved exposure levels have been set, the Company may enter into
speculative foreign currency transactions. Gains and losses on these
transactions are recognized in earnings in the period of the change.
There were no speculative positions in foreign currencies as of December
31, 1995 and 1994, and there were no material gains or losses from such
positions for any year presented. The following table sets forth, in U.S.
dollars, the Company's open foreign currency forward contracts used for hedging:
Foreign Currency Forward Contracts Information (in millions)
1995 1994
----------------- ------------------
Buy Sell Buy Sell
Deutsche Mark $ 1.2 $ 3.8 $ 17.3 $ 29.8
Japanese Yen 40.6 115.6 68.9 99.9
Pound Sterling 7.7 15.5 38.9 15.8
South African Financial Rand - - 1.4 -
------ ------ ------ ------
Total open foreign currency
forward contracts $49.5 $134.9 $126.5 $145.5
None of these contracts exceeds a year in duration and the net amount of
deferred income and expense on foreign currency forward contracts, which will
predominately be recognized as cumulative translation adjustments, was $.1
million income in 1995 and $1.0 million expense in 1994.
Interest Rate Swap Agreement
The Company occasionally enters into interest rate swap agreements to modify the
characteristics of its outstanding borrowings from fixed to floating rate debt
or vice versa. The intent of these transactions is to reduce interest expense.
The use and mix of such instruments can vary depending on business and economic
conditions and management's interest rate outlook. The Company uses swap
instruments only as hedges or as integral parts of borrowings. See Note 10,
"Short-term Borrowings and Long-term Debt". As such, the differential to be paid
or received is accrued and recognized in income as an adjustment to interest
expense. During the past three-year period, the Company used one interest rate
swap agreement intended to reduce interest expense on certain of its outstanding
debt. In connection with the $100 million 10% Notes due in 2000, callable in
1996, the Company entered into a $100 million notional principal amount swap
contract running from May 11, 1993, to May 13, 1996, to receive 4.5% and to pay
LIBOR. This swap agreement was based on amounts and maturities which coincide
with the debt agreement. There has been no speculative trading in this
instrument and this agreement is intended to be held to maturity. The impact of
this swap contract was to increase interest expense by $1.9 million in 1995, to
increase interest expense by $.3 million in 1994 and to decrease interest
expense by $.7 million in 1993. The resulting impact on the Company's
weighted-average borrowings rate was not material for any year presented.
Precious Metals Operations
Some of the Company's businesses use precious metals in their manufacturing
processes. In addition, sales and purchases of precious metals to/from
industrial and refining customers are transacted through the Company's dealing
operations. Secondarily, and usually as a consequence of the above transactions,
the Company also engages in precious metals dealing with other counterparties.
Generally, all of these precious metals transactions are hedged on a daily
basis, using spot, forward, futures or option transactions, to substantially
eliminate the exposure to price risk. In limited and closely monitored
situations, for which preapproved exposure levels have been set, the Company
holds unhedged precious metal positions. Changes in the market value of unhedged
(open) precious metal positions are recognized in earnings in the period of the
change by marking these positions to their current market value.
40
The following table sets forth the Company's open precious metal positions:
Precious Metal Positions Information
(in millions) 1995 1994
----------------- -----------------
Gross Gross
Position value Position value
-------- ----- -------- -----
Platinum group metals Long $2.9 Long $5.8
Gold Long 3.0 Short (.6)
Silver Short (.3) Long .1
---- ----
Total open precious metal positions $5.6 $5.3
The total mark-to-market adjustment related to the above positions was $.2
million expense in 1995 and 1994.
As a result of its precious metals transactions, the Company earned
contango income of $3.7 million in 1995, $1.1 million in 1994, and $3.6 million
in 1993. Contango is a term common to precious metal transactions representing
the premium received or paid when settlement of the precious metal transaction
is in the future. This premium constitutes an offset to the financing costs
associated with carrying the precious metal that underlies the transaction. As
such, contango is reflected in the statement of earnings as an adjustment to
interest expense because it is an integral component of the Company's financing
costs.
13. Industry Segment and Geographic Area Data
The Company operates in three industry segments: Catalysts and Chemicals,
Pigments and Additives, and Engineered Materials and Industrial Commodities
Management (formerly Precious Metals Management).
The Catalysts and Chemicals segment develops, manufactures and markets a
wide range of catalysts and related products and processes for the automotive,
off-road vehicle, aircraft, power generation, petroleum refining, chemical,
petrochemical, pharmaceutical and food processing industries, among others,
located principally in the United States, Europe, the Asia-Pacific region and
South Africa. The Company's products are used by customers in these industries
to reduce emissions, achieve desired manufacturing yields and improve quality
and/or cost-efficiency.
The Pigments and Additives segment develops, manufactures and markets
coating and extender pigments for the paper industry and color pigments and
specialty minerals serving the plastics, coatings, paint and allied industries.
The segment's markets are principally located in the United States, Europe and
Japan. The Company's paper pigments are used principally to make coated and
uncoated papers and paper board. Its color pigments are used primarily in paints
and coatings, plastics, rubber and printing inks, while specialty mineral
products are sold to the plastics, rubber, wire and cable, coatings, inks and
adhesives industries.
The Engineered Materials and Industrial Commodities Management segment
develops, manufactures and markets fabricated products and coatings based on
precious metals for a number of industrial markets, including automotive,
electronics, air-conditioning and glass. These markets are principally located
in the United States. This segment also engages in precious metals management on
behalf of Company businesses and customers that use precious metals. It also
participates in refining of platinum group metals, base metal management and
marketing of energy-related services.
41
The following table presents certain data by industry segment:
Industry Segment Information
(in millions)
Engineered
Materials/
Industrial
Catalysts & Pigments & Commodities Corporate
Chemicals Additives Management and Other Consolidated
----------- ---------- ----------- --------- ------------
1995
Net sales $725.0 $403.8 $1,711.3 $ - $2,840.1
Operating earnings 106.5 90.6 48.3 - 245.4
Depreciation, depletion and amortization 28.1 29.4 4.3 3.7 65.5
Identifiable assets 534.4 468.8 123.2 519.2 1,645.6
Capital expenditures, net 32.8 49.0 5.3 60.6 147.7
1994
Net sales $602.5 $376.0 $1,407.3 $ - $2,385.8
Operating earnings excluding
special credit 96.9 72.0 36.8 - 205.7
Special credit - - - 8.0 8.0
Depreciation, depletion
and amortization 29.5 27.6 7.0 5.0 69.1
Identifiable assets 453.5 431.6 220.9 334.8 1,440.8
Capital expenditures, net 33.8 54.0 5.2 4.5 97.5
1993
Net sales $541.1 $369.0 $1,240.8 $ - $2,150.9
Operating earnings excluding
special charge 81.9 55.0 31.0 - 167.9
Special charge (79.1) (30.3) (38.6) - (148.0)
Depreciation, depletion
and amortization 27.0 29.7 7.1 4.4 68.2
Identifiable assets 394.4 393.5 212.7 278.5 1,279.1
Capital expenditures, net 61.0 36.2 7.5 2.4 107.1
The following table presents certain data by geographic area:
Geographic Area Data
(in millions)
Special
Net Inter-area Operating (charge) Identifiable
sales sales earnings credit assets
-------- ---------- --------- -------- ------------
1995
United States $1,680.9 $31.6 $203.4 $ - $733.3
Foreign 1,159.2 52.3 42.0 - 393.1
1994
United States $1,568.6 $32.5 $154.7 $ 2.0 $655.4
Foreign 817.2 77.0 51.0 6.0 450.6
1993
United States $1,396.8 $30.9 $118.5 $(120.3) $598.1
Foreign 754.1 86.0 49.4 (27.7) 402.5
42
Inter-area sales are generally based on market prices. Most of the
Company's foreign operations are based in Europe and the Asia-Pacific region.
United States export sales to customers throughout the world were $265.8 million
in 1995, $237.0 million in 1994 and $231.2 million in 1993.
The following table reconciles segment operating earnings with the earnings
before income taxes and cumulative effect of an accounting change as shown in
the Consolidated Statements of Earnings:
Reconciliation to Consolidated Statements of Earnings
(in millions) 1995 1994 1993
---- ---- ----
Operating earnings $245.4 $213.7 $ 19.9
Gain on sale of investment - - 10.1
Equity earnings .7 .6 3.4
Interest and other expenses, net (60.8) (57.0) (38.1)
------ ------ ------
Earnings (loss) before income taxes and
cumulative effect of an accounting change $185.3 $157.3 $ (4.7)
For the years ended December 31, 1995 and 1994, one customer of both the
Catalysts and Chemicals and the Engineered Materials and Industrial Commodities
Management segments accounted for 11% of the Company's net sales.
14. Stock Option and Bonus Plans
The Company's Stock Option Plans of 1991 and 1981, as amended (the Key Option
Plans) generally provide for the granting to key employees of options to
purchase an aggregate of 16,875,000 and 6,834,375 common shares, respectively,
at fair market value on the date of grant. No options under the Key Option Plans
may be granted after June 30, 2001. In 1993, the Company established the
Employee Stock Option Plan of 1993, as amended, which generally provided for the
granting to all employees (excluding U.S. bargaining unit employees and key
employees eligible under the Key Option Plans) of options to purchase an
aggregate of 2,812,500 common shares at fair market value on the date of grant.
No additional options may be granted under this plan. Options under all plans
become exercisable in installments beginning after one year, and no options may
be exercised after 10 years from the date of grant. Outstanding options may be
cancelled and reissued under terms specified in the plan documents. The effect
of outstanding stock options has been excluded from the calculation of the
number of shares outstanding used to compute earnings per share of common stock
because it is not significant.
43
Stock option transactions under all plans are as follows:
Stock Option Information
1995 1994 1993
-------------------------- -------------------------- ---------------------------
Number Option price Number Option price Number Option price
of shares per share of shares per share of shares per share
--------- ------------ ---------- ------------ ---------- ------------
Outstanding at beginning of year 8,608,870 $ 4.54-19.05 6,677,028 $ 4.54-19.05 5,030,141 $ 4.54-15.36
Granted 1,918,397 19.05-23.88 2,701,143 14.20-19.05 2,775,971 14.69-19.05
Cancelled (121,165) 5.54-19.14 (94,958) 5.54-19.05 (139,601) 5.26-19.05
Exercised (1,410,804) 4.54-19.14 (674,343) 5.26-19.05 (989,483) 4.54-11.45
--------- ----------- ---------- ----------- ---------- -----------
Outstanding at end of year 8,995,298 $ 5.26-23.88 8,608,870 $ 4.54-19.05 6,677,028 $ 4.54-19.05
Exercisible at end of year 2,860,532 $ 5.26-19.05 2,548,292 $ 4.54-19.05 1,933,977 $ 4.54-15.36
Available for future grants 9,882,146 11,679,378 14,285,564
The Company's Key Employee Stock Bonus Plan, as amended (the Bonus Plan) provides for the award of up to 15,187,500
common shares to key employees as compensation for future services, not exceeding 1,518,750 shares in any year (plus any
cancelled awards or shares available for award, but not previously awarded). The Bonus Plan terminates on June 30, 1996.
Shares awarded vest in five annual installments, providing the recipient is still employed by the Company on the vesting
date. Compensation value is measured on the date the award is granted.
In 1994, based on a study of incentive compensation and in response to changing demographics, the Company revised its
estimate of current compensation expense relating to stock awards to include the cost of shares where the risk of forfeiture
by the employee has been removed. The impact of this revised estimate was a net charge to 1994 earnings of $8.6 million
($5.3 million after tax--$.04 per share). Excluding the above change in estimate, compensation expense relating to stock
awards was $7.7 million in 1995, $8.6 million in 1994 and $6.4 million in 1993. Shares awarded, net of cancellations, are
included in average shares outstanding.
15. Environmental Costs
In the ordinary course of business, like most other industrial companies, the
Company is subject to extensive and changing federal, state, local and foreign
environmental laws and regulations, and has made provisions for the estimated
financial impact of environmental cleanup related costs.
The Company is currently preparing, has under review, or is implementing,
with the oversight of cognizant environmental agencies, environmental
investigations and cleanup plans at several currently or formerly owned and/or
operated sites, including Plainville, MA, Salt Lake City, UT, Attapulgus, GA,
and Newark, NJ. With respect to Plainville, in September 1993 the United States
Environmental Protection Agency (EPA) and the Company entered into a consent
order under which the Company is investigating contamination and will conduct
site stabilization measures. Plainville is also included on the Nuclear
Regulatory Commission (NRC) "Existing Site Decommissioning Management Plan
Sites" list and the Company is currently conducting further investigations of
the site pursuant to NRC approved plans. With respect to Salt Lake City, in
connection with obtaining an operating permit under the Utah Solid and Hazardous
Waste Act, the Company entered into an agreement in December 1993 with the Utah
Solid and Hazardous Waste Control Board under which the Company is continuing to
investigate the environmental status of the site. With respect to Attapulgus, in
January 1994 the Georgia Department of Natural Resources, Environmental
Protection Division and the Company entered into a consent order under which the
Company was to develop and implement a reclamation program. A reclamation
program has been approved and cleanup is underway. With respect to Newark, the
Company has substantially completed a cleanup plan in coordination with the New
Jersey Department of Environmental Protection.
44
In addition, 18 sites have been identified at which the Company believes
liability as a potentially responsible party (PRP) is probable under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or similar state laws (collectively referred to as Superfund) for
the cleanup of contamination resulting from the historic disposal of hazardous
substances allegedly generated by the Company, among others. Superfund requires
cleanup of certain sites from which there has been a release or threatened
release of hazardous substances and authorizes EPA or a state to take any
necessary action at such sites, including ordering PRPs to cleanup or contribute
to the cleanup of a site. Courts have interpreted Superfund to impose strict,
joint and several liability under certain circumstances. These claims are in
various stages of administrative or judicial proceedings, and include demands
for recovery of past costs and future investigative or cleanup action. In many
cases, the dollar amount of the claim is unspecified and claims have been
asserted against a number of other entities for the same relief sought from the
Company. Based on existing information, the Company believes that it is a de
minimis contributor of hazardous substances at most of the sites referenced
above. Subject to the reopening of existing settlement agreements for
extraordinary circumstances or natural resource damages, the Company has settled
a number of other cleanup proceedings. The Company has also responded to
information requests from EPA and state regulatory authorities in connection
with other Superfund sites.
The Company's policy is to accrue environmental cleanup related costs of a
noncapital nature when those costs are believed to be probable and can be
reasonably estimated. The quantification of environmental exposures requires an
assessment of many factors, including changing laws and regulations,
advancements in environmental technologies, the quality of information available
related to specific sites, the assessment stage of each site investigation,
preliminary findings, and the length of time involved in remediation or
settlement. For Superfund sites, the Company also assesses the financial
capability of other PRPs and, where allegations are based on tentative findings,
the reasonableness of the Company's apportionment. The Company has not
anticipated recoveries from insurance carriers or other potentially responsible
third parties in its accruals for environmental liabilities. The liabilities for
environmental cleanup related costs recorded in the consolidated balance sheets
at December 31, 1995 and 1994 were $54.6 million and $62.2 million,
respectively, including $10.0 million and $10.8 million, respectively, for the
Superfund sites. These amounts represent those costs which the Company believes
are probable and reasonably estimable. Based on currently available information
and analysis, the Company's accrual represents approximately 85% of what it
believes are reasonably possible environmental cleanup related costs of a
noncapital nature. The estimate of reasonably possible costs is less certain
than the probable estimate upon which the accrual is based.
During the past three-year period, cash payments for environmental cleanup
related matters were $7.6 million, $4.5 million and $.3 million for 1995, 1994
and 1993, respectively. In 1995 and 1994, the amounts accrued in connection with
environmental cleanup related matters were not significant. In 1993, $30.0
million was accrued as a result of developments during that year which caused
the Company to revise its estimates of environmental cleanup related costs at
sites being idled or affected by restructuring, where conditions had recently
changed, or where studies and cleanup plans had been approved and the assessment
of the likelihood or extent of remediation had changed.
For the past three-year period, environmental related capital projects have
averaged less than 10% of the Company's total capital expenditure programs and
the expense of environmental compliance (environmental testing, permits,
consultants and in-house staff) was not significant.
45
There can be no assurances that environmental laws and regulations will not
become more stringent in the future or that the Company will not incur
significant costs in the future to comply with such laws and regulations. Based
on existing information and currently enacted environmental laws and
regulations, cash payments for environmental cleanup related matters are
projected to approximate $10 million for 1996, all of which has already been
accrued. Further, the Company anticipates that the amounts of capitalized
environmental projects and the expense of environmental compliance will
approximate current levels. While it is not possible to predict with certainty,
management believes that environmental cleanup related reserves at December 31,
1995 are reasonable and adequate and that environmental matters are not expected
to have a material adverse effect on financial condition. These matters, if
resolved in a manner different from the estimates, could have a material adverse
effect on the operating results or cash flows when resolved in a future
reporting period.
16. Litigation and Contingencies
The Company is a defendant in a number of lawsuits covering a wide range of
matters. In some of these pending lawsuits, the remedies sought or damages
claimed are substantial. The Company and certain of its officers and directors
were named as defendants in purported class action complaints filed in November
1995 in the U.S. District Court for the District of New Jersey on behalf of
persons who bought Engelhard Stock between April 1995 and November 1995. The
complaints claim that defendants made false statements and omissions and traded
on nonpublic information. The complaints are expected to be combined into a
Consolidated Amended Complaint. The Company believes the class actions to be
without merit and is vigorously defending against them. The Company is also
subject to a number of environmental contingencies (see Note 15 "Environmental
Costs"). While it is not possible to predict with certainty the ultimate outcome
of these lawsuits or the resolution of the environmental contingencies,
management believes, after consultation with counsel, that resolution of these
matters is not expected to have a material adverse effect on financial
condition. These matters, if resolved in a manner different from the estimates,
could have a material adverse effect on the operating results or cash flows when
resolved in a future reporting period.
In January 1995, the Company received and is responding to a civil
investigative demand to produce documents and answer interrogatories in
connection with an investigation by the Antitrust Division of the U.S.
Department of Justice into "price coordination and market allocation by kaolin
producers".
46
17. Supplemental Information
The following table presents certain supplementary information to the
Consolidated Statements of Cash Flows:
Supplementary Cash Flow Information
(in millions) 1995 1994 1993
---- ---- ----
Cash paid during the year for
Interest, net of capitalized amounts
and contango $ 29.1 $ 24.2 $ 17.9
Income taxes 21.9 22.1 20.1
Change in assets and liabilities-source (use)
Receivables $(31.9) $(27.5) $ 11.7
Inventories (24.3) (20.2) 17.0
Other current assets 8.2 6.0 (5.5)
Other noncurrent assets (17.2) (27.2) (60.0)
Accounts payable 17.1 28.1 (15.3)
Accrued liabilities (6.7) (19.4) (34.9)
Noncurrent liabilities (12.4) (7.3) (4.5)
------ ------ ------
Net change in assets and liabilities $(67.2) $(67.5) $(91.5)
The following table presents certain supplementary information to the
Consolidated Balance Sheets:
Supplementary Balance Sheet Information
(in millions) 1995 1994
---- ----
Payroll-related accruals $ 34.3 $ 36.4
Environmental reserve 10.0 10.0
Restructuring reserve 32.5 45.5
Other 133.1 141.4
------ ------
Accrued liabilities $209.9 $233.3
47
Report of Independent Accountants
_________________________________
To the Shareholders and Board of Directors of Engelhard Corporation:
We have audited the accompanying consolidated balance sheets of Engelhard
Corporation and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Engelhard
Corporation and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1993
the Company changed its method of accounting for postemployment benefits.
Coopers & Lybrand, L.L.P.
New York, New York
February 6, 1996
48
Selected Quarterly Financial Data (unaudited)
First Second Third Fourth
(in millions, except per share amounts) quarter quarter quarter quarter
------- ------- ------- -------
1995
Net sales $694.5 $721.1 $724.6 $699.9
Gross profit 112.0 125.8 110.5 112.3
Earnings before income taxes 37.8 50.3 48.9 48.3
Net earnings 27.6 36.7 37.0 36.2
Net earnings per share* .19 .26 .26 .25
1994
Net sales $557.7 $633.4 $578.6 $616.1
Gross profit 89.8 104.4 103.3 117.7
Earnings before income taxes 30.3 42.5 39.6 44.9
Net earnings 22.8 31.9 29.7 33.6
Net earnings per share* .16 .22 .21 .24
Results in the fourth quarter of 1994 include a special credit of $8.0 million ($5.0 million after
tax--$.03 per share) representing the reversal of excess restructuring reserves and a net charge of $8.6
million ($5.3 million after tax--$.04 per share) for a change in the Company's estimate of compensation
expense relating to stock awards.
Earnings per share amounts are calculated independently for each of the quarters presented. The sum
of the quarters may not equal the full year earnings per share amounts.
* Reflects the three-for-two stock split as of June 30, 1995.
Changes in and Disagreements with
Item 9. Accountants on Accounting and Financial Disclosure
- ------ --------------------------------------------------
Not applicable.
49
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------- --------------------------------------------------
(a) Directors -
Information concerning directors of the Company is included under the
caption "Election of Directors" and "Information with Respect to Nominees and
Directors Whose Terms Continue" on pages 3 through 6 of the Proxy Statement for
the 1996 Annual Meeting of Shareholders and is incorporated herein by reference.
(b) Executive Officers -
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, The Summit Bancorp and Vulcan
Materials Company.
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.
MARTIN J. CONNOR, JR. Age 63. Controller of the Company from prior to
1991.
ARTHUR A. DORNBUSCH, II Age 52. Vice President, General Counsel and
Secretary of the Company from prior to 1991.
WILLIAM M. DUGLE Age 53. Vice President, Human Resources of the
Company from prior to 1991.
*Also a director of the Company
50
WILLIAM E. NETTLES Age 52. Vice President and Chief Financial
Officer since May 1995. Group Vice President
and General Manager of Chemical Catalysts from
July 1992 to January 1995. Group Vice
President and General Manager of Specialty
Minerals and Colors prior thereto.
ROBERT J. SCHAFFHAUSER Age 57. Vice President, Technology and Corporate
Development since January 1995. Vice President,
Corporate Development prior thereto.
MICHAEL A. SPERDUTO Age 38. Treasurer of the Company since January
1993. Vice President of Finance of the Industrial
Commodities Management Group prior thereto.
FRANCIS X. VITALE, JR. Age 51. Vice President, Strategic Development and
Corporate Affairs since January 1995. Vice
President, Investor Relations and Corporate
Communications of the Company prior thereto.
Officers of the Company are elected at the meeting of the Board of
Directors held in May of each year after the annual meeting of shareholders and
serve until their successors shall be elected and qualified and shall serve as
such at the pleasure of the Board.
Item 11. Executive Compensation
- ------- ----------------------
Information concerning executive compensation is included under the caption
"Executive Compensation and Other Information" on pages 11 through 21 of the
Proxy Statement for the 1996 Annual Meeting of Shareholders and is incorporated
herein by reference.
Security Ownership of Certain
Item 12. Beneficial Owners and Management
- ------- --------------------------------
Information concerning security ownership of certain beneficial owners and
management is included under the captions "Information as to Certain
Shareholders" and "Share Ownership of Directors and Officers" on pages 2 through
3 and page 7, respectively, of the Proxy Statement for the 1996 Annual Meeting
of Shareholders and is incorporated herein by reference.
Certain Relationships
Item 13. and Related Transactions
- ------- ------------------------
Information concerning certain business relationships of nominees for
director and directors and related transactions is included under the captions
"Information as to Certain Shareholders", "Information with Respect to Nominees
and Directors Whose Terms Continue", "Share Ownership of Directors and Officers"
and "Compensation Committee Interlocks, Insider Participation and Certain
Transactions" on pages 2 through 7 and page 10, respectively, of the Proxy
Statement for the 1996 Annual Meeting of Shareholders and is incorporated herein
by reference.
51
PART IV
Exhibits, Financial Statement
Item 14. Schedules and Reports on Form 8-K
- ------- ---------------------------------
Page
----
(a) (1) Financial Statements and Schedules
Report of Independent Accountants 48
Consolidated Statements of Earnings for each of the 26
three years in the period ended December 31, 1995
Consolidated Balance Sheets at December 31, 1995 and 1994 27
Consolidated Statements of Cash Flows for each of the 28
three years in the period ended December 31, 1995
Consolidated Statements of Shareholders' Equity for each 29
of the three years in the period ended December 31, 1995
Notes to Consolidated Financial Statements 30-47
(2) Financial Statement Schedules
Consolidated financial statement schedules not filed herein
have been omitted either because they are not applicable or
the required information is shown in the Notes to Consolidated
Financial Statement on pages 30-47 on this 10-K.
(b) Reports on Form 8K: Not applicable
52
Page
----
(3) Exhibits
(3a) Certificate of Incorporation of the Company *
(incorporated by reference to Form 10, as
amended on Form 8-K filed with the Securities
and Exchange Commission on May 19, 1981).
(3b) By-laws of the Company as amended September 17, 1981 *
(incorporated by reference to Form 10-Q for the
quarter ended September 30, 1981).
(3c) Certificate of Amendment to the Restated Certificate *
of Incorporation of the Company (incorporated by
reference to Form 10-K for the year ended December 31,
1987).
(3d) Article XVII of the Registrant's By-laws as amended *
on May 2, 1988 (incorporated by reference to Form 8-K
filed with the Securities and Exchange Commission on
May 21, 1988).
(3e) Certificate of Amendment to the Restated Certificate of *
Incorporation of the Company (Incorporated by reference
to Form 10-Q for the quarter ended March 31, 1993).
(10) Material Contracts
(a) Form of Agreement of Transfer entered into between *
Engelhard Minerals & Chemicals Corporation and the
Company, dated May 18, 1981 (incorporated by
reference to Form 10, as amended on Form 8 filed
with the Securities and Exchange Commission on
May 19, 1981).
(b) Engelhard Corporation Stock Option Plan of 1981 59-65
Restated as of December 13, 1989 - conformed copy
includes amendments through February 1995.
(c) Retirement Plan for Directors of Engelhard 66-68
Corporation Effective January 1, 1985 - conformed
copy includes amendments through June 1991.
(d) Deferred Compensation Plan for Key Employees of 69-74
Engelhard Corporation Effective August 1, 1985 -
conformed copy includes amendments through December
1993.
(e) Engelhard Corporation Directors and Executives 75-79
Deferred Compensation Plan (1986-1989) - conformed
copy includes amendments through December 1993.
(f) Employee Agreement with Orin R. Smith, President *
and Chief Executive Officer of the Company, dated
May 21, 1986 (incorporated by reference to the
Engelhard Corporation Annual Report, Form 10-K
for the fiscal year ended December 31, 1986).
* Incorporated by reference as indicated.
53
Page
----
(g) Key Employees Stock Bonus Plan of Engelhard 80-84
Corporation Effective July 1, 1986 - conformed
copy includes amendments through June 1992.
(h) Stock Bonus Plan for Non-Employee Directors of 85-89
Engelhard Corporation Effective July 1, 1986 -
conformed copy includes amendments through
June 1992.
(i) Deferred Compensation Plan for Directors of 90-95
Engelhard Corporation Restated as of May 7, 1987 -
conformed copy includes amendments through
December 1993.
(j) Supplemental Retirement Program of Engelhard 96-104
Corporation as Amended and Restated Effective
January 1, 1989 - conformed copy includes
amendments through November 1994.
(k) Engelhard Corporation Directors and Executives 105-110
Deferred Compensation Plan (1990-1993) -
conformed copy includes amendments through
November 1993.
(l) Engelhard Corporation Stock Option Plan of 1991 - *
conformed copy includes amendments through
February 1995 (incorporated by reference to the
Engelhard Corporation 1995 definitive Proxy
Statement as filed with the Securities and
Exchange Commission on March 31, 1995).
(m) Form of Separation Agreement With Robert L. Guyett, 111-120
Formerly a Director, Senior Vice President and
Chief Financial Officer, dated April 28, 1995.
(n) Engelhard Corporation Directors Stock Option *
Plan Effective May 4, 1995 (incorporated by
reference to the Engelhard Corporation 1995
definitive Proxy Statement as filed with the
Securities and Exchange Commission on March 31,
1995).
(o) Form of Agreement With Key Employees in the 121-132
Event of an Acquisition of a Control Interest in
the Company, dated November 2, 1995.
(p) Main Supply Agreement between P.G.M. (Brakspruit) **
(Proprietary) Limited and Engelhard Industries
International Limited effective as of January 1, 1972
and supplementary letter with respect thereto
(incorporated by reference to the Engelhard Minerals
& Chemicals Corporation Annual Report, Form 10-K for
the fiscal year ended December 31, 1972).
* Incorporated by reference as indicated.
** Incorporated by reference as indicated and granted confidential treatment
pursuant to an application filed by Engelhard Minerals & Chemicals Corp.
54
Page
----
(q) Supplementary Supply Agreement between Rustenburg **
Platinum Mines Limited and Engelhard Minerals &
Chemicals Corporation, effective as of January 1,
1972 (incorporated by reference to the Engelhard
Minerals & Chemicals Corporation Annual Report, Form
10-K for the fiscal year ended December 31, 1972).
(r) Agreement between Rustenburg Platinum Mines Limited **
and Engelhard Minerals & Chemicals Corporation,
dated November 3, 1972 (incorporated by reference to
the Engelhard Minerals & Chemicals Corporation Annual
Report, Form 10-K for the fiscal year ended December
31, 1972).
(s) Amendment to the Supplementary Supply Agreement **
between Rustenburg Platinum Mines Limited and
Engelhard Minerals & Chemicals Corporation,
effective as of January 1, 1972 dated April 1,
1973 (incorporated by reference to the Engelhard
Minerals & Chemicals Corporation Annual Report,
Form 10-K for the fiscal year ended December 31,
1973).
(t) Addendum to the Supplementary Supply Agreement **
between Rustenburg Platinum Mines Limited and
Engelhard Minerals & Chemicals Corporation dated
June 18 and July 5, 1974 (incorporated by
reference to Form 10-K, as amended on Form 8
filed with the Securities and Exchange Commission
on May 19, 1981).
(u) Amendment dated December 14, 1977 as supplemented **
January 10, 1978 to the Main Supply Agreement and
Supplementary Supply Agreement between Rustenburg
Platinum Mines Limited and Engelhard Minerals &
Chemicals Corporation (incorporated by reference
to the Engelhard Minerals & Chemicals Corporation
Annual Report, Form 10-K for the fiscal year ended
December 31, 1977).
(v) Amendment dated April 3, 1979 to the Supplemental **
Supply Agreement between Rustenburg Platinum Mines
Limited and Engelhard Minerals & Chemicals
Corporation (incorporated by reference to the
Engelhard Minerals & Chemicals Corporation Annual
Report, Form 10-K for the fiscal year ended December
31, 1979).
** Incorporated by reference as indicated and granted confidential treatment
pursuant to an application filed by Engelhard Minerals & Chemicals Corp.
55
Page
----
(w) Letters from Rustenburg Platinum Mines Limited *
dated March 13, 1992 advising that the Main Supply
and Supplementary Supply Agreements (Exhibits P
through V above) will terminate in their present
forms on December 31, 1996, the end of the initial
period (incorporated by reference to the Engelhard
Corporation Annual Report, Form 10-K for the fiscal
year ended December 31, 1992).
(21) Subsidiaries of the Registrant 133-134
(23) Consent of Independent Accountants 135-136
(24) Powers of Attorney 137-146
(99) (a) Annual Report on Form 11-K of the Salary 147-167
Deferral Savings Plan of Engelhard Corporation
for each of the three years in the period
ended December 31, 1995.
(b) Annual Report on Form 11-K of the Engelhard 168-183
Corporation Savings Plan for Hourly Paid Employees
for each of the three years in the period ended
December 31, 1995.
* Incorporated by reference as indicated.
56
Signatures
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in Iselin, New
Jersey on the 22nd day of March 1996.
Engelhard Corporation
---------------------
Registrant
/s/Orin R. Smith
---------------------
Orin R. Smith
(Chairman and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Orin R. Smith Chairman and Chief Executive March 22, 1996
- ---------------------- Officer & Director
Orin R. Smith (Principal Executive Officer)
/s/William E. Nettles Vice President and March 22, 1996
- ---------------------- Chief Financial Officer
William E. Nettles (Principal Financial Officer)
/s/Martin J. Connor, Jr. Controller March 22, 1996
- --------------------------- (Principal Accounting Officer)
Martin J. Connor, Jr.
57
* Director March 22,1996
- ---------------------------
Linda G. Alvarado
* Director March 22, 1996
- ---------------------------
Marion H. Antonini
* Director March 22, 1996
- ---------------------------
L. Donald LaTorre
* Director March 22, 1996
- --------------------------
Anthony W. Lea
* Director March 22, 1996
- --------------------------
James V. Napier
* Director March 22, 1996
- -------------------------
Norma T. Pace
* Director March 22, 1996
- -------------------------
Reuben F. Richards
* Director March 22, 1996
- -------------------------
Henry R. Slack
* Director March 22, 1996
- -------------------------
Douglas G. Watson
* By this signature below, Arthur A. Dornbusch, II has signed this Form 10-K
as attorney-in-fact for each person indicated by an asterisk pursuant to
duly executed powers of attorney filed with the Securities and Exchange
Commission included herein as Exhibit 25.
/s/Arthur A. Dornbusch, II March 22, 1996
- -------------------------------
Arthur A. Dornbusch, II
58
EXHIBIT 10(b):
ENGELHARD CORPORATION
STOCK OPTION PLAN OF 1981
59
[Conformed Copy -- Includes amendments
made in June, 1992 and in February, 1995]
ENGELHARD CORPORATION
STOCK OPTION PLAN OF 1981
(Restated as of December 13, 1989)
1. Purposes. This Stock Option Plan (the "Plan") of Engelhard Corporation (the
"Company") is established so that the Company may make available to essential
executives the opportunity to acquire ownership of Company stock pursuant to
options constituting incentive or non-qualified stock options under the Internal
Revenue Code. It is anticipated that such stock options will materially assist
the Company in providing incentives to essential executives.
2. Administration. The Plan shall be administered by a committee (the
"Committee") which shall be appointed from time to time by the Board of
Directors of the Company (the "Board of Directors"), and shall consist of not
less than two directors of the Company who qualify as "disinterested persons"
under Rule 16b-3(c)(2) issued by the Securities and Exchange Commission. The
Committee shall have full power and authority, subject to the terms and
conditions of the Plan, to determine the essential executives to whom awards may
be made under the Plan, the number of such shares to be awarded to each of such
essential executives, the applicable terms and conditions of such awards and all
other matters which may arise in the administration of the Plan. The
determination of the Committee concerning any matter arising under or with
respect to the Plan or any awards granted hereunder shall be final, binding and
conclusive on all interested persons. The Committee may as to all questions of
accounting rely conclusively upon any determinations made by the independent
auditors of the Company.
3. Stock Available for Options. There shall be available for option under the
Plan 3,695,000 shares of the Company's Common Stock (the "Stock"), subject to
any adjustments which may be made pursuant to Section 5(g) hereof. Subject to
any adjustments which may be made pursuant to Section 5(g) hereof, the aggregate
of all shares of Stock that may be subject to Type A Options (defined below)
shall not at any time exceed 3,525,000 shares and the aggregate of all shares of
Stock that may be subject to Type B Options (defined below) shall not at any
time exceed 170,000 shares. Shares of Stock used for purposes of the Plan may be
either authorized and unissued shares or treasury shares or both. Stock covered
by options which have terminated or expired prior to exercise or have been
surrendered and cancelled as contemplated by Section 7(b) hereof shall be
available for further option hereunder.
4. Eligibility. Essential managers and other key employees, including
officers and directors of the Company, and of any subsidiary corporation, as
defined in Section 424(f) of the Internal Revenue Code ("Subsidiary") of the
Company, shall be eligible to receive options under the Plan, provided that no
option may be granted to any director who is not also an employee of the Company
or a Subsidiary.
5. Terms and Conditions of Options. There shall be two classes of options
that may be granted under this Plan entitled Type A Options and Type B Options,
respectively. Each option granted hereunder shall be in writing, shall specify
its class and shall contain such terms and conditions as the Committee may
determine, which terms and conditions need not be the same in each case or
within each class, subject to the following:
60
(a) Option Price. The price at which each share of Stock covered by a Type A
Option granted hereunder may be purchased shall not be less than the greater of
the par value of the Stock or the fair market value thereof at the time of
grant, as determined by the Board of Directors. The price at which each share of
Stock covered by a Type B Option granted hereunder may be purchased shall not be
less than the greater of the par value of such Stock or twenty-five percent
(25%) of the fair market value thereof at the time of grant, as determined by
the Board of Directors.
(b) Option Period. The period for exercise of a Type A Option shall not
exceed ten years from the date the option is granted. The period for
exercise of a Type B Option shall not exceed five years from the date
the option is granted. Options may be made exercisable in installments
during the option period. Any shares not purchased on any applicable
installment date, if so provided in the related options, may be
purchased thereafter at any time prior to the expiration of the option
period. Any option exercisable in installments shall become
immediately exercisable in full in the event of an "acquisition of a
control interest" in the Company. For purposes of this Plan, an
"acquisition of a control interest" shall occur if: (A) twenty-five
percent (25%) or more of the Company's outstanding securities entitled
to vote in elections of directors ("voting securities") shall be
beneficially owned, directly or indirectly (including options,
conversion rights, warrants, and the like, considered as if
exercised), by any person or group of persons, other than the group
presently owning the same (including their affiliates and associates);
or (B) the 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. Any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of voting securities owned by other holders shall,
for the purposes of the foregoing definition of "acquisition of a
control interest," be deemed to constitute each party to such
agreement, arrangement or understanding as the owner of such
securities.
(c) Exercise of Options. No option shall be exercisable until the
expiration of at least one year from the date the option is granted;
provided, however, that an option shall become immediately exercisable
in full in the event of an "acquisition of a control interest" in this
Company (as such term is defined in subsection (b) of this Section 5),
whether or not such "acquisition of a control interest" in the Company
occurs prior to the expiration of one year after the date the option
is granted. To exercise an option, the holder thereof shall give
written notice to the Company specifying the number of shares to be
purchased and accompanied by payment in full of the purchase price
therefor. An option holder shall have none of the rights of a
stockholder until the shares are paid for in full and issued to him.
The purchase price may be paid in whole or in part with shares of
Stock having a fair market value on the exercise date equal to the
cash amount for which such shares are substituted; provided, however,
that in no event may any portion of the purchase price be paid with
shares of Stock acquired upon exercise of a stock option granted under
this Plan unless such shares were acquired more than thirty days
before the applicable date of exercise.
(d) Effect of Termination of Employment or Death. No option may be
exercised after the termination of employment of an optionee, except
that: (i) if such termination is by reason of disability or
retirement, at normal, deferred or early retirement age, under any
retirement plan maintained by the Company or any Subsidiary, or for
any other reason specifically approved in advance by the Board of
61
Directors, any options held by the optionee which were granted more
than one year before such termination shall thereupon become
exercisable in full, and may be exercised by the optionee for a period
of three months after such termination; (ii) if such termination is by
action of the employer other than as provided in (i) above and other
than discharge by reason of willful violation of the rules of the
Company or instructions of superior(s), any options held by the
optionee which are exercisable at the time his employment terminates
may be exercised by him for a period of three months after such
termination; (iii) in the event of the death of an optionee within
three months after the termination of his employment pursuant to (i)
or (ii) above, the person or persons to whom the optionee's rights are
transferred by will or the laws of descent and distribution shall have
a period of three months from the date of termination of the
optionee's employment to exercise any options which the optionee could
have exercised during such period; and (iv) in the event of the death
of an optionee while employed, any options then held by the optionee,
which were granted more than one year before his death, shall
thereupon become exercisable in full, and the person or persons to
whom the optionee's rights are transferred by will or the laws of
descent and distribution shall have a period of one year thereafter to
exercise such options. In no event, however, shall any option be
exercisable more than ten years from the date of grant thereof.
Nothing contained in the Plan or any option granted hereunder shall confer
on any employee any right to continue his employment or interfere in any way
with the right of his employer to terminate his employment at any time.
Notwithstanding any provision of this Plan to the contrary, the Committee
shall have the authority (which may be exercised at any time) to extend the
period during which any option granted under the Plan may be exercised;
provided, however, that no option may be exercisable for more than ten years
from the date of grant thereof.
(e) Nontransferability of the Options. During the optionee's lifetime his
option shall be exercisable only by him. No option shall be
transferable other than by will or the laws of descent and
distribution.
(f) Limitation on Transferability of Shares Acquired Through the Exercise
of Pre-May 2, 1986 Incentive Stock Options. No shares acquired through
the exercise of an Incentive Stock Option granted under the Plan prior
to May 2, 1986 shall be transferable within six months from the date
of acquisition by reason of such exercise except for transfer by will
or by the laws of descent and distribution.
(g) Adjustment for Change in Stock Subject to Plan. In the event of a
stock split, stock dividend, combination of shares, recapitalization,
reorganization, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of the Company, the Board
of Directors shall make such adjustments, if any, as it deems
appropriate for purposes hereof in the number and kind of shares
subject to the Plan, in the number and kind of shares covered by
outstanding options, or in the option prices.
(h) Registration, Listing and Qualification of Shares. Each option shall
be subject to the requirement that if at any time the Board of
Directors of the Company shall determine that the registration,
listing or qualification of the shares covered thereby upon any
securities exchange or under any federal or state law, or the consent
or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the granting of
such option or the purchase of shares thereunder, no such option may
62
be exercised unless and until such registration, listing,
qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board of
Directors. Any person exercising an option shall make such
representations and agreements and furnish such information as the
Board of Directors may request to assure compliance with the foregoing
or any other applicable legal requirements.
(i) Incentive Stock Options. Unless otherwise designated by the Committee,
options granted under the Plan shall be deemed to be options not
intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). However, the Committee may designate Type A Options granted
prior to March 31, 1991 to an employee other than a 10 percent
stockholder (as hereinafter defined) as Incentive Stock Options to the
extent that such options and all other incentive stock options (as
defined in Section 422 of the Code) held by the employee and
exercisable for the first time by such employee during any calendar
year (under all plans of the Company and its parent and subsidiary
corporations (as hereinafter defined)) cover shares of the Company
having an aggregate fair market value (determined by the Committee as
of the time the option is granted in such manner as will constitute an
attempt in good faith to meet the applicable requirements of Section
422(b) of the Code) of not more than $100,000. Options deemed to be
Incentive Stock Options hereunder shall comply with the following
requirements in addition to the terms and conditions previously set
forth in this Plan. Incentive Stock Options and other stock options
granted under the Plan shall be clearly identified as such.
The additional requirements referred to are the following:
(A) Notwithstanding the provisions of this Plan for exercise of stock
options after the death of Optionee or any other provision of this
Plan, an Incentive Stock Option may not in any event be exercised
after the expiration of ten years from the date that Incentive Stock
Option is granted. Each stock option agreement shall so Stock Options
covered by that agreement.
(B) An Incentive Stock Option granted prior to March 2, 1989 shall not be
exercisable while there is outstanding (within the meaning of Section
422A(c)(7) of the Code in effect prior to January 1, 1987) any
incentive stock option (as defined hereinabove) which was granted
before the granting of such Incentive Stock Option to the employee to
whom the Incentive Stock Option was granted to purchase shares of the
Company or stock in a corporation which (at the time of the granting
of the Incentive Stock Option) is a parent or subsidiary corporation
of the Company or in a predecessor corporation of any of such
corporation. (The terms "parent" and "subsidiary" corporation as used
in this Section 5(i) shall have the meanings set forth in Section
424(e) and (f) of the Code.)
(C) No Incentive Stock Option shall be granted to an individual who, at
the time the Incentive Stock Option is granted, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than
10 percent of the total combined voting power of all classes of stock
of the Company or of its parent or subsidiary corporation, if any (a
"10 percent shareholder"), unless, at the time the Incentive Stock
Option is granted, the option price is at least 110 percent of the
fair market value of the shares subject to the Incentive Stock Option
and the Incentive Stock Option by its terms is not exercisable after
the expiration of five years from the date the Incentive Stock Option
is granted.
63
(j) Tax Withholding. The Committee may establish such rules and procedures
as it considers desirable in order to satisfy any obligation of the
Company or any Subsidiary to withhold Federal income taxes or other
taxes with respect to the exercise of an option (other than an
Incentive Stock Option) under the Plan, including without limitation
rules and procedures permitting an optionee to elect that the Company
withhold shares of Stock otherwise issuable upon exercise of such
option in order to satisfy such withholding obligation.
6. Duration. Unless sooner terminated by the Board of Directors, the Plan
shall terminate on, and no option shall be granted hereunder after June 30,
1991; provided, however, that no Type B Option shall be granted after
December 31, 1981.
7.
(a) Amendment. The Board of Directors of the Company may amend the Plan at
any time, provided that no amendment, unless approved by the
stockholders of the Company, shall materially: (i) increase the
maximum number of shares for which options may be granted under the
Plan or increase the maximum number of shares which may be subject to
a specified class of option; (ii) reduce the minimum option price
provided herein; or (iii) extend the period during which options may
be granted or exercised, except that, notwithstanding the foregoing,
the Board of Directors shall have the right to accept the surrender of
and cancel options issued under the Plan and reissue those options and
to amend the terms of outstanding options under the following terms
and conditions.
(b) Surrender, Cancellation and Reissue of Options. The Board of
Directors, upon invitation by it during the term of this Plan to any
holder(s) of options under this Plan to do so, may accept the
surrender of outstanding options, cancel such options and issue in
exchange therefor new options under this Plan, provided:
(1) the tender of options for surrender is in accordance with such
conditions as the Board of Directors may set forth in its invitation
for that surrender;
(2) the number of shares covered by an option issued in exchange for
a surrendered and cancelled option shall not exceed the number of
shares covered by the option surrendered and cancelled;
(3) the price and all other terms of each option issued in exchange
shall comply with the requirements of this Plan for the issuance of
options; and
(4) no such invitation for surrender of options shall be made by the
Board of Directors unless it first shall have received a
recommendation of the Committee that it is in the interest of the
Company to provide an opportunity for the surrender and cancellation
of outstanding options and the issue of new options in exchange
therefor upon more appropriate terms and conditions, including
exercise price.
(c) Amendments of Outstanding Options. In the event that any options
issued under this Plan shall remain outstanding after June 30, 1991,
and if the Committee shall determine that it is in the interest of the
Company to amend the terms and conditions, including exercise price or
prices, of such options, the Committee shall have the right, by
written notice to the holders thereof, to amend the terms and
conditions of such options including exercise price or prices;
provided, however, that (i) no such amendment shall be adverse to the
64
holders of the options, and (ii) the amended terms of an option,
including exercise price or prices, would have been permitted under
this Plan had the Plan been outstanding at the time of such amendment.
8. Effectiveness of the Plan. This Plan will not be made effective unless
Approved by the holders of not less than a majority of the outstanding shares of
voting stock of the company represented and entitled to vote thereon at a
meeting thereof duly called and held for such purpose, and no option granted
hereunder shall be exercisable prior to such approval.
9. Other Actions. This Plan shall not restrict the authority of the Board of
Directors of the Company, for proper corporate purposes, to grant or assume
stock options, other than under the Plan, to or with respect to any employee or
other person.
10. Name. This Plan shall be known as the Engelhard Corporation Stock Option
Plan of 1981.
65
EXHIBIT 10(c):
RETIREMENT PLAN FOR DIRECTORS OF ENGELHARD CORPORATION
EFFECTIVE JANUARY 1, 1985
66
[Conformed Copy -- Includes amendments
made in June 1991]
RETIREMENT PLAN FOR DIRECTORS OF ENGELHARD CORPORATION
Effective January 1, 1985
1. Purpose
Engelhard Corporation (the "Corporation") has adopted this
Retirement Plan for Directors of Engelhard Corporation (the "Plan") in
order to enhance its ability to attract and retain competent and
experienced persons to serve as Directors and to recognize the service
of Directors to the Corporation by providing such Directors with
retirement benefits.
2. Definitions
Except as otherwise specified or as the context may otherwise
require, the following terms have the meanings indicated below for all
purposes of this Plan:
(a) Director means any person who is serving on the Effective
Date of the Plan, or who in the future serves, as a member
of the Board of Directors of the Corporation (the "Board")
or as a Director Emeritus.
(b) Service means service as a Director; provided, however,
that Service shall not include any period during which the
Director was a salaried employee of the Corporation or any
subsidiary of the Corporation. A Director shall be required
to terminate Service no later than the date of such
Director's 70th birthday; provided, however, that the Board
may by resolution waive such requirement or increase such
mandatory retirement age at any time generally or with
respect to any Director.
(c) Compensation means the annual Board retainer fee
(excluding meeting and committee fees) established by the
Board as in effect on the date of the Director's termination
of Service (disregarding any increase or decrease in such
fee that may be approved after such termination of Service).
(d) Retirement Date means the first day of the calendar month
coinciding with or next following the latest of: (i) the
date of the Director's 65th birthday or (ii) the date on
which the Director's Service terminates.
(e) Effective Date means January 1, 1985.
3. Eligibility
Any Director who has completed six or more years of Service or whose
age and Service at termination equals 65 shall be eligible for retirement
benefits as provided herein.
67
4. Benefits
The retirement benefits payable hereunder to a Director who meets the
eligibility requirements shall be an annual amount equal to the Director's
Compensation. Benefits shall commence on a Director's Retirement Date and
shall be payable in equal monthly installments. Payments shall cease upon
the earlier of (i) the date of Director's death or (ii) the completion of
payments for a period of time equal to the period of the Director's
Service; provided, however, that the Service shall be defined as not less
than six years for any person who is a Director on the Effective Date.
5. Provision of Benefits
All benefits payable hereunder shall be provided from the general
assets of the Corporation. No Director shall acquire any interest in any
specific assets of the Corporation by reason of this Plan. A Director shall
have the status of an unsecured general creditor of the Corporation with
respect to any benefits which become payable pursuant to this Plan.
6. Amendment and Termination
The Corporation reserves the right to terminate this Plan or amend
this Plan in any respect at any time; provided, however, that no such
termination or amendment may reduce the retirement benefits then being paid
to any retired Director or the retirement benefits then accrued by any
Director who has completed at least six years of Service.
7. Administration
This Plan shall be administered by the Compensation Committee of the
Board. Such Committee's decision, in making any determination or
construction under this Plan and in exercising any discretionary power,
shall in all instances be final and binding on all persons having or
claiming any rights under this Plan.
8. Miscellaneous
The adoption and maintenance of this Plan shall not constitute a
contract between the Corporation and any Director. Nothing herein contained
shall be deemed to give any Director the right to be retained as a
Director, nor shall it interfere with the Director's right to resign as a
Director at any time.
No benefit payable hereunder shall be subject to alienation or
assignment. The retirement benefits herein contained are in addition to all
other awards, arrangements, contracts or benefits, if any, that any
Director may have by virtue of service for the Corporation, unless and to
the extent that any such award, arrangement, contract or benefit otherwise
provides.
March 7, 1985
68
EXHIBIT 10(d):
DEFERRED COMPENSATION PLAN
FOR KEY EMPLOYEES OF ENGELHARD CORPORATION
EFFECTIVE AUGUST 1, 1985
69
[Conformed Copy -- Incorporating amendments
made in June 1992, November 1993,
December 1993 and August 1995]
DEFERRED COMPENSATION PLAN FOR
KEY EMPLOYEES OF ENGELHARD CORPORATION
(Effective August 1, 1985)
The purpose of the Deferred Compensation Plan for Key Employees of
Engelhard Corporation (the "Plan") is to provide a procedure whereby a key
employee of Engelhard Corporation (the "Company") may defer the payment of a
part of the future compensation payable to such key employee by the Company.
1. The persons eligible to participate in the Plan are those key employees of
the Company employed in the United States who have at least 1,232 Hay
points (the "Eligible Employees").
2. Each Eligible Employee shall have the option exercisable by written notice
to the Company on or before November 30 of any calendar year to defer
payment of (i) any portion of his salary for the next succeeding calendar
year and (ii) all or any portion of any regular or special bonus the amount
of which has not been determined as of the date of the deferral election
and which is to be paid in the next succeeding calendar year; provided,
however, that in no event shall the total amount so deferred exceed thirty
percent (30%) of the sum of the amounts described in (i) and (ii) above.
Notwithstanding the foregoing, (A) with respect to the 1985 calendar year
an Eligible Employee shall have the option exercisable by written notice to
the Company on or before July 1, 1985 to defer payment of up to fifteen
percent (15%) of his salary for the period from August 1, 1985 through
December 31, 1985 and (B) in the case of an individual who first becomes an
Eligible Employee during a calendar year, such individual shall have the
option exercisable by written notice to the Company to defer payment of up
to fifteen percent (15%) of his salary for the period during such calendar
year beginning on the date specified by the individual in his deferral
election (which shall be at least one month after the date on which his
deferral election is filed with the Company) and ending on the last day of
such calendar year. An election made by an Eligible Employee pursuant to
this paragraph 2 with respect to salary and bonuses for a calendar year
shall become irrevocable as of the last day for making the election.
3. In addition to the deferrals described in paragraph 2 above, each Eligible
Employee shall have the option, exercisable not less than two months before
any stock award vests under the Company's Key Employees Stock Bonus Plan,
to defer delivery of said stock award for a period of at least one year. An
election made by an Eligible Employee pursuant to this paragraph 3 with
respect to a stock award shall become irrevocable as of the last day for
making such election.
4. All salary and bonuses deferred pursuant to paragraph 2 above shall be held
in the general funds of the Company and shall be credited to a bookkeeping
account maintained by the Company in the name of the Eligible Employee, and
shall bear the equivalent of interest from the end of the calendar month in
which the compensation would have been paid if it had not been deferred.
Interest equivalents shall be credited on December 31 of each year up to
and including the year preceding that in which the last installment is
paid, it being the intent that interest equivalents shall not cease to
accrue upon payment of the first installment, but shall continue to accrue
with respect to the balance undistributed at any time. The amount of
interest equivalent credited to the Eligible Employee's account shall be
70
determined by applying the interest equivalent rate established hereunder
to the balance in the Eligible Employee's account (which balance shall
include, for this purpose, interest equivalent accrued but not credited to
the account) at the end of each month. For purposes of the foregoing, the
interest equivalent rate shall be set monthly and shall be equal to 120% of
the long-term federal rate, compounded monthly (within the meaning of
Section 1274(d) of the Internal Revenue Code of 1986, as amended) as in
effect for the month for which interest equivalent is being computed. For
periods prior to January 1, 1994 the last two sentences of paragraph 4 are
as follows: "The amount of interest equivalents credited to the Eligible
Employee's account annually shall be determined by applying the interest
equivalent rate established hereunder to the average balance in the
Eligible Employee's account during the year. For purposes of the foregoing,
the annual interest equivalent rate shall be determined by averaging the
rate of interest for 3-year U.S. Treasury notes as reported in the monthly
Federal Reserve Bulletin for each calendar quarter of the year for which
interest is being computed.*
* For periods prior to January 1, 1994 the last two sentences of paragraph 4
are as follows: "The amount of interest equivalentS credited to the
Eligible Employee's account annually shall be determined by applying the
interest equivalent rate established hereunder to the average balance in
the Eligible Employee's account during the year. For purposes of the
foregoing, the annual interest equivalent rate shall be determined by
averaging the rate of interest for 3-year U.S. Treasury notes as reported
in the monthly Federal Reserve Bulletin for each calendar quarter of the
year for which interest is being computed."
5. All stock awards deferred by an Eligible Employee shall be transferred for
the benefit of the Eligible Employee to a trust ("Trust") established by
the Company with such terms and conditions as shall be determined by the
Committee described in Section 8 below. The assets of the Trust shall be
subject to the claims of the general creditors of the Company. Any
dividends payable with respect to any deferred stock awards made for the
benefit of the Eligible Employee shall be handled in one of the following
ways, as irrevocably elected by the Eligible Employee in his deferral
election:
(i) such dividends shall be added to the bookkeeping account described in
paragraph 4 above, and shall be credited with interest equivalents
pursuant to said paragraph 4;
(ii) such dividends shall be paid out currently to such Eligible Employee;
or
(iii)such dividends shall be applied by the Company or the trustee of the
Trust to provide the maximum number of whole shares of Common Stock of
the Company obtainable at then prevailing prices with such shares
being added to the deferred stock awards of the Eligible Employee (and
any amount which is insufficient to add an additional whole share
shall be added to the bookkeeping account described in paragraph 4
above, and shall be credited with interest equivalents pursuant to
said paragraph 4).
The Eligible Employee's election of one of the above options with respect to
the handling of dividends with respect to a stock award shall become
irrevocable as of the last date for making the deferral election with respect to
such stock award. In the case of an Eligible Employee who is subject to the
limitations of Section 16 of the Securities Exchange Act of 1934, as amended,
and who elects the option described in (iii) above, such election shall be
effective only with respect to dividends that become payable on or after the
date six months following the date such election becomes irrevocable. Depending
71
on the terms and nature of the Trust established hereunder, the references to
dividends in this paragraph 5 may instead refer to dividend equivalents equal to
the dividends that would have been payable on the applicable deferred stock
awards.
In addition, if any voting rights are exercisable with respect to any
shares of Common Stock of the Company included in a deferred stock award for the
benefit of an Eligible Employee under the Trust, the trustee of the Trust in
exercising such voting rights shall follow the directions of such Eligible
Employee (and shall not exercise such voting rights to the extent that
directions are not received from the Eligible Employee); provided, however, that
this sentence shall not apply unless and until the Company receives a letter
ruling from the Internal Revenue Service or an attorney's opinion letter
satisfactory to the Company to the effect that allowing Eligible Employees to
exercise voting rights will not result in inclusion of the value of a deferred
stock award in the income of the Eligible Employee for federal income tax
purposes.
6. Except as hereinafter provided with respect to an "Immediate Payment
Event" or an "Additional Deferral Election" (each as hereinafter defined), any
amounts to which an Eligible Employee is entitled hereunder (including shares
of the Company's Common Stock receivable under a deferred stock award)
shall be paid or delivered either (i) in a lump sum on or about the date
specified in the Eligible Employee's deferral election or (ii) in annual
installments over a period of up to ten years payable on or about January 1 of
each payment year beginning with the January 1 specified in the Eligible
Employee's deferral election. The Eligible Employee's deferral election with
respect to the applicable deferred amounts shall designate the time and manner
of payment or delivery of such deferred amounts, and such designation shall
become irrevocable with respect to such deferred amounts as of the last date for
making the deferral election.
An Eligible Employee shall have an option exercisable by written notice to
the Company to further irrevocably defer payments previously deferred under
paragraph 2 hereof or delivery of stock awards previously deferred under
paragraph 3 hereof to a date or dates specified in the Eligible Employee's
further deferral election (an "Additional Deferral Election"). An Additional
Deferral Election shall specify such payment or delivery either (x) in the form
of a lump sum on or about the date specified in the Additional Deferral Election
or (y) in annual installments over a period of up to ten years payable on or
about January 1 of each payment year beginning with the January 1 specified in
the Additional Deferral Election. However, in order for an Additional Deferral
Election to be effective (i) the Additional Deferral Election must be made at
least twelve months prior to the date the payment would otherwise be due or the
delivery is otherwise scheduled to be made, as the case may be, in accordance
with a prior deferral election under this Plan, (ii) the Eligible Employee must
agree with the Company to remain employed by the Company (on the same terms and
conditions as in effect on the day preceding the additional period of
employment, subject to any changes mutually agreed to by the parities and
subject to the Company's right to terminate the Eligible Employee's employment
at any time) for at least one additional year following the date of the
Additional Deferral Election, (iii) the Additional Deferral Election may not
specify any payment of amounts hereunder or any delivery of stock awards
hereunder on a date prior to the date such payment or delivery was otherwise due
under this Plan, and (iv) the further deferral of each payment or delivery
specified in the Additional Deferral Election must be for a period of at least
one year.
72
If payment or delivery is to be made in installments, the amount of each
installment shall be determined by multiplying the "Accumulated Account" (as
hereinafter defined) as of the December 31 preceding the installment payment
date by a fraction, the numerator of which will be "1" and the denominator of
which will be the number of annual installments elected by the Eligible Employee
less the number of installments theretofore paid. If shares of Common Stock of
the Company held in the Trust are to be distributed in installments, each
installment payment shall consist of the appropriate number of whole shares
(disregarding fractional shares).
If an "Immediate Payment Event" (as hereinafter defined) occurs prior to
the date on which all deferred amounts have been paid or delivered, the Eligible
Employee's "Accumulated Account" shall be paid or delivered to the Eligible
Employee (or, in the event of his death, to his estate) as soon as practicable
following such "Immediate Payment Event." If such payment or delivery by reason
of an "Immediate Payment Event" is not made on or about January 1 of a calendar
year, the distribution of the Eligible Employee's "Accumulated Account" shall
include interest equivalents calculated by the Committee in a manner consistent
with paragraph 4 hereof for the period from the preceding December 31 to the
last day of the month preceding the date of such payment.
For purposes of this paragraph 6, the term "Accumulated Account" shall mean
(i) the amount of the salary and bonuses deferred by the Eligible Employee
pursuant to paragraph 2 hereof, and any dividends (or dividend equivalents)
added pursuant to paragraph 5 hereof to the bookkeeping account described in
paragraph 4, plus the interest equivalents accumulated thereon, less any portion
thereof theretofore distributed to him, and (ii) the amount of the Company's
Common Stock held for the benefit of the Eligible Employee pursuant to his
election of deferral of a stock award. For purposes of this paragraph 6, the
term "Immediate Payment Event" shall mean:
(i) the death of the Eligible Employee;
(ii) a "Change of Control" (as defined below);
(iii)a "Hardship" (as defined below) of the Eligible
Employee as determined by the Committee; or
(iv) such additional events as may be specified by the
Eligible Employee in his deferral election with the
approval of the Committee.
A "Change of Control" for the purpose of (ii) above shall occur if:
(A) twenty-five percent (25%) or more of the Company's
outstanding securities entitled to vote in elections of directors
("voting securities") shall be beneficially owned, directly or
indirectly (including options, conversion rights, warrants, and the
like, considered as if exercised), by any person or group of persons,
other than the group presently owning the same (including their
affiliates and associates); or
(B) the 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.
Any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of voting securities owned by other holders shall
for the purposes of this provision be deemed to constitute each party to such
agreement, arrangement or understanding as the owner of such securities.
73
For the purpose of (iii) above a "Hardship" shall mean an immediate and
heavy financial need of the Eligible Employee which cannot reasonably be
expected to be satisfied from other resources available to the Eligible
Employee.
7. The right of an Eligible Employee to the amounts described hereunder
(including shares of the Company's Common Stock receivable under a deferred
stock award) shall not be subject to assignment or other disposition by him
other than by will, or the laws of descent and distribution. In the event that,
notwithstanding this provision, an Eligible Employee attempts to make a
prohibited disposition, the Company may disregard the same and discharge its
obligation hereunder by making payment or delivery thereof as though no such
disposition had been attempted.
8. The Plan shall be administered by a committee (the "Committee") which shall
be appointed from time to time by the Board of Directors of the Company, and
shall consist of not less than two directors of the Company who qualify as
"disinterested persons" under Rule 16b-3(c)(2) issued by the Securities and
Exchange Commission. The decision of the Committee with respect to any questions
arising as to the interpretation of this Plan, including the reconciliation of
any inconsistent provisions, the supplying of omissions and the severability of
any and all of the provisions hereof, shall be final, binding and conclusive on
all interested persons. Notwithstanding the foregoing, with respect to any
matter involving deferred stock awards, references to the "Committee" shall mean
the Committee serving under the Company's Key Employees Stock Bonus Plan.
9. The Board of Directors of the Company may discontinue the Plan at any time
and may from time to time amend the Plan; provided, however, that (a) no such
discontinuance or amendment shall operate to annul an election already in effect
for the current calendar year or any preceding year or adversely affect the
right of an Eligible Employee to receive the amounts described herein, and (b)
no such amendment affecting deferred stock awards, unless approved by the
stockholders of the Company, shall materially: (i) increase the maximum number
of shares of the Common Stock of the Company which may be issued under the Plan;
(ii) modify the requirements as to eligibility to defer stock awards hereunder;
or (iii) increase the benefits accruing to Eligible Employees hereunder.
10. Except as and to the extent expressly provided in this Plan or in the
Trust, neither the Eligible Employee nor any other person shall have any
interest in any fund or in any specific asset of the Company by reason of
amounts credited to the Accumulated Account of an Eligible Employee, nor the
right to receive any distribution under this Plan. Distributions hereunder shall
be made from the general funds of the Company or from the Trust, and the rights
of the Eligible Employee shall not be superior to those of an unsecured general
creditor of the Company.
11. Nothing contained herein shall be deemed to give any Eligible Employee the
right to be retained in the service of his employer or to interfere with the
right of such employer to discharge or retire any Eligible Employee at any time.
74
EXHIBIT 10(e)
ENGELHARD CORPORATION DIRECTORS AND EXECUTIVES
DEFERRED COMPENSATION PLAN
(1986 - 1989)
75
[Conformed Copy -- Incorporates amendments made
in June 1992, November 1993 and
December 1993]
DEFERRED COMPENSATION PLAN FOR
DIRECTORS OF ENGELHARD CORPORATION
(As restated as of May 7, 1987)
The purpose of the Deferred Compensation Plan for Directors of Engelhard
Corporation (the "Plan") is to provide a procedure whereby a member of the Board
of Directors of Engelhard Corporation (the "Company") may defer the payment of
all or a specified part of the future compensation payable to the Director for
services as a Director (including compensation payable to a Director for future
services as a member of a committee of the Board).
1. Each Director who is not an employee of the Company or any of its
subsidiaries may elect, on or before December 31 of any calendar year by
written notice to the Company, to defer payment of all or a designated
portion of the compensation payable to him for service as a Director
commencing at the beginning of the next calendar year (inclusive of fees
paid for attendance at meetings of the Board and committees thereof).
Any person elected to fill a vacancy on the Board who was not a Director on
the preceding December 31 may elect, within 31 days of the date of his election
as a Director by written notice to the Company, to defer payment of all or a
designated portion of the compensation payable to him for service as a Director
from and after the date on which such election is made during the balance of the
calendar year in which he was elected to the Board and thereafter.
Deferrals hereunder shall continue until the Director notifies the Company
in writing, prior to the commencement of any calendar year, that he wishes his
compensation for such calendar year and all succeeding periods to be paid on a
current basis. Elections to defer payment of compensation, or to discontinue
such deferrals, shall be irrevocable when made.
Any election to defer compensation pursuant to this paragraph 1 shall
include an election as to whether the deferred compensation shall be credited to
the Accumulated Account described in paragraph 4 or to the Stock Account
described in paragraph 5; provided, however, that a Director's election to have
deferred compensation credited to the Stock Account, or to discontinue having
deferred compensation credited to the Stock Account, shall be effective only
with respect to compensation that becomes payable on or after the date six
months following the date such election is made (and during such period any
compensation deferred by such Director shall be credited to the Accumulated
Account).
2. In addition to the deferrals described in paragraph 1 above, each
Director who is not an employee of the Company shall have the option,
exercisable not less than two months before any stock award vests under the
Company's Stock Bonus Plan for Non-Employee Directors, to defer delivery of
said stock award for a period of at least one year. An election made by a
Director pursuant to this paragraph 2 with respect to a stock award shall
become irrevocable as of the last day for making such election.
3. For purposes of this Plan:
(a) The calendar year in which a Director ceases to serve as such shall be
referred to as the "Retirement Year."
76
(b) The deferred compensation and dividend equivalents for any Director
which are credited to the account described in paragraph 4, plus the
equivalent of accumulated interest thereon, less any portion thereof
theretofore distributed or transferred from such account, shall be
referred to as the Director's "Accumulated Account."
(c) The deferred compensation, deferred stock awards and dividend
equivalents for any Director which are credited in the form of units
to the stock account described in paragraph 5, less any portion
thereof theretofore distributed from such account, shall be referred
to as the Director's "Stock Account."
(d) Shares of Common Stock of the Company shall be referred to as
"Shares."
4. Except for amounts credited to the Stock Account described in paragraph 5,
all deferred compensation hereunder shall be held in the general funds of
the Company and shall be credited to a bookkeeping account ("Accumulated
Account") maintained by the Company in the name of the Director, and shall
bear the equivalent of interest from, the first day following the end of
the calendar quarter to which the compensation is applicable. Interest
equivalents shall be credited on December 31 of each year up to an
including the year preceding that in which the last installment is paid, it
being the intent that interest equivalents shall not cease to accrue upon
payment of the first installment, but shall continue to accrue with respect
to the balance undistributed at any time. The amount of interest equivalent
credited to the Director's account shall be determined by applying the
interest equivalent rate established hereunder to the balance in the
Director's account (which balance shall include, for this purpose, interest
equivalent accrued but not credited to the account) at the end of each
month. For purposes of the foregoing, the interest equivalent rate shall be
set monthly and shall be equal to 120% of the long-term federal rate,
compounded monthly (within the meaning of Section 1274(d) of the Internal
Revenue Code of 1986, as amended) as in effect for the month for which
interest equivalent is being computed. For periods prior to January 1, 1994
the last two sentences of paragraph 4 are as follows: "The amount of
interest equivalent credited to the Director's account annually shall be
determined by applying the interest equivalent rate established hereunder
to the average balance in the Director's account during the year. For
purposes of the foregoing, the annual interest equivalent rate shall be
determined by averaging the rate of interest for 3-year U.S. Treasury notes
as reported in the monthly Federal Reserve Bulletin for each calendar
quarter of the year for which interest is being computed."
5. All deferred compensation which a Director elects pursuant to paragraph 1
to have credited to the Stock Account (including any amounts transferred
from the Accumulated Account pursuant to the last sentence of paragraph 1)
and all stock awards deferred by a Director pursuant to paragraph 2 shall
be credited in the form of units to a bookkeeping account maintained by the
Company in the name of the Director. The number of units so credited shall
be equal to the sum of (i) the maximum number of whole Shares obtainable at
then prevailing prices with the amounts of the Director's deferred
compensation credited to the Stock Account pursuant to paragraph 1 as of
the date such compensation is so credited (disregarding fractional shares)
and (ii) the number of Shares corresponding to the number of the Director's
deferred stock awards pursuant to paragraph 2. Each such unit shall
represent the right to receive one Share at the time and in the manner
determined pursuant to the Director's deferral election and the terms of
this Plan.
77
If any dividends are payable on Shares during the deferral period, dividend
equivalents equal to the dividend that would have been payable on the units
credited to a Director's Stock Account if such units had constituted Shares
shall be handled in one of the following ways, as irrevocably elected by
the Director in his deferral election:
(i) such dividend equivalents shall be added to the Accumulated Account
described in paragraph 4 above, and shall be credited with interest
equivalents pursuant to said paragraph 4;
(ii) such dividends shall be paid out currently to such Director; or
(iii)such dividend equivalents shall be credited to the Stock Account and
applied to provide additional units corresponding to the maximum
number of whole Shares obtainable at then prevailing prices with such
dividend equivalents (disregarding fractional shares).
The Director's election of one of the above options with respect to the handling
of dividend equivalents shall become irrevocable as of the last date for making
the deferral election with respect to such stock award; provided, however, that
an election by a Director of the option described in (iii) above shall be
effective only with respect to dividend equivalents that become payable on or
after the date six months following the date such election becomes irrevocable.
The Company may in its discretion establish a trust to satisfy its
obligations under this Plan with respect to the units credited to the Stock
Account and transfer to such trust Shares corresponding to such units or cash to
be used by the trustee to purchase such Shares. The assets of such trust shall
be subject to the claims of general creditors of the Company. If such a trust is
established, any voting rights which are exercisable with respect to a number of
Shares held in such trust corresponding to the number of units credited to a
Director's Stock Account shall be exercised by the trustee of such trust in
accordance with the directions of such Director (and the trustee shall not
exercise voting rights with respect to such Shares to the extent that directions
are not received from the Director).
6. The amount to which a Director is entitled hereunder shall be paid to him in
any number of annual installments, as initially elected by him, up to ten,
payable in January of each payment year beginning with the calendar year
designated by the Director in his initial deferral election. A Director may
irrevocably elect by written notice to the Company to further defer payments
previously deferred under paragraph 1 hereof or delivery of stock awards
previously deferred under paragraph 2 hereof to a date or dates specified in the
Director's further deferral election (an "Additional Deferral Election"). An
Additional Deferral Election shall specify the calendar year in which such
payments or deliveries will commence and the number of annual installment
payments or deliveries (up to ten). Such annual installments shall be payable in
January of each payment year beginning with the calendar year specified in the
Additional Deferral Election. However, in order for an Additional Deferral
Election to be effective (i) the Additional Deferral Election must be made at
least twelve months prior to the date the payment would otherwise be due or the
delivery is otherwise scheduled to be made, as the case may be, in accordance
with a prior deferral election under this Plan, (ii) the Director must agree
with the Company that, if nominated and elected, he will continue to serve as a
Director of the Company for at least one year following the date of the
Additional Deferral Election, (iii) the Additional Deferral Election may not
specify any payment of amounts hereunder or any delivery of stock hereunder on a
date prior to the date such payment or delivery was otherwise due under this
Plan, and (iv) the further deferral of each payment or delivery specified in the
Additional Deferral Election must be for a period of at least one year. The
amount of each installment shall be determined by multiplying the Accumulated
Account amount and the units credited to the Director's Stock Account as of the
78
December 31 preceding the installment payment date by a fraction, the numerator
of which shall be "1" and the denominator of which shall be the number of annual
installments initially elected by the Director less the number of installment
payments theretofore made. If a Director should die before full payment of all
amounts owing to him, his Accumulated Account and the units credited to the
Director's Stock Account as of December 31 of the year of his death shall be
paid to his estate in January of the calendar year following the year of his
death, or the Accumulated Account and the units credited to the Director's Stock
Account as at such earlier date as the Board of Directors, in its discretion,
may determine may be paid in lieu thereof. Any such in lieu payment from the
Accumulated Account shall be adjusted for interim interest equivalent additions
to such extent, if any, as the Board of Directors shall determine. Each
installment payment of units credited to a Director's Stock Account shall be
made through payment of a number of whole Shares equal to the number of units
which are then payable (disregarding fractional units).
7. The right of a Director to the amounts described hereunder (including
Shares) shall not be subject to assignment or other disposition by him other
than by will, descent or distribution. In the event that, notwithstanding this
provision, a Director makes a prohibited disposition, the Company may disregard
the same and discharge its obligation hereunder by making payment or delivery
thereof as though no such disposition had been made.
8. The Plan shall be administered by a committee appointed by the Board of
Directors of the Company consisting entirely of members of such Board not
eligible to participate in the Plan ("Committee"). The decision of the Committee
with respect to any questions arising as to the interpretation of this Plan,
including the severability of any and all of the provisions thereof, shall be
final, conclusive and binding.
9. The Board of Directors of the Company may discontinue the Plan at any time
and may from time to time amend the Plan; provided, however, that no such
discontinuance or amendment shall operate to annul an election already in effect
for the current calendar year or any preceding year or adversely affect the
right of a Director to receive the amounts described herein, and no such
amendment affecting Stock Accounts, unless approved by the stockholders of the
Company, shall materially: (i) increase the maximum number of Shares which may
be issued under the Plan; (ii) modify the requirements as to eligibility to
defer compensation or stock awards hereunder; or (iii) increase the benefits
accruing to Directors hereunder.
10. Except as and to the extent otherwise provided in this Plan or in any trust
referred to in paragraph 5, neither the Director nor any other person shall have
any interest in any fund or in any specific asset of the Company by reason of
amounts credited to the Accumulated Account or Stock Account of a Director
hereunder, nor the right to receive any distribution under this Plan.
Distributions hereunder shall be made from the general funds of the Company or
from the trust referred to in paragraph 5, and the rights of the Director shall
be those of an unsecured general creditor of the Company.
11. Nothing contained herein shall impose any obligation on the Company to
continue the tenure of the Director beyond the term for which he may have been
elected or retained.
79
EXHIBIT 10(g)
KEY EMPLOYEES STOCK BONUS PLAN OF ENGELHARD CORPORATION
EFFECTIVE JULY 1, 1986
80
[Conformed Copy -- Includes amendments
made in June 1991 and June 1992]
KEY EMPLOYEES STOCK BONUS PLAN OF
ENGELHARD CORPORATION
(Effective July 1, 1986)
1. Purpose. The Purpose of this Key Employees Stock Bonus Plan
(hereinafter referred to as the "Plan") is to provide for awards of shares of
Common Stock of Engelhard Corporation (the "Company") to key employees for
services which contribute in a substantial degree to the success of the Company.
Key employees are those employees, including officers of the Company and its
subsidiaries in managerial or other important positions selected by the
Committee administering the Plan who, by virtue of their ability and
qualifications, make important contributions to the Company. The Plan supercedes
the prior Key Employee Stock Bonus Plan, and any shares awarded under said prior
plan which have not vested as of June 30, 1986 shall be governed by the terms of
this Plan.
2. Duration. The Plan will terminate on June 30, 1996 and no shares of the
Company's Common Stock may be awarded to key employees after such date; however,
shares awarded on or prior to such date may be subsequently delivered to key
employees in accordance with the terms and conditions applicable to their
awards.
3. Administration. The Plan shall be administered by a committee (the
"Committee") which shall be appointed from time to time by the Board of
Directors of the Company, and shall consist of not less than two directors of
the Company who qualify as "disinterested persons" under Rule 16b-3(c)(2) issued
by the Securities and Exchange Commission. The Committee shall have full power
and authority, subject to the terms and conditions of the Plan, to determine the
key employees to whom awards may be made under the Plan, the number of such
shares to be awarded to each of such key employees, the applicable terms and
conditions of such awards and all other matters which may arise in the
administration of the Plan. The determination of the Committee concerning any
matter arising under or with respect to the Plan or any awards granted hereunder
shall be final, binding and conclusive on all interested persons. The Committee
may as to all questions of accounting rely conclusively upon any determinations
made by the independent auditors of the Company.determinations made by the
independent auditors of the Company.
4. Shares Available For Awards. The total number of shares of the Company's
Common Stock which may be awarded under the Plan shall not exceed 4,500,000
(Currently 10,125,000 due to stock splits--March, 1995) shares and the total
number of shares of the Company's Common Stock which may be awarded pursuant to
the Plan to key employees in any calendar year shall not exceed 450,000
(Currently 1,012,500 due to stock splits--March, 1995) shares; provided,
however, that any number of shares which might have been awarded in any calendar
year during the term of the Plan which were not so awarded may be awarded in any
subsequent calendar year during the term of the Plan. The foregoing yearly
maximum number of shares shall be subject in each case to Paragraph 7 of the
Plan. Shares of the Company's Common Stock used for purposes of the Plan may be
either authorized but unissued shares or treasury shares or both. Unvested
shares of the Company's Common Stock returned to the Company upon the
cancellation and termination of awards granted under the Plan shall be available
for further awards under the Plan in any calendar year during the term of the
Plan; provided, however, that any such returned shares with respect to which
benefits of ownership (such as dividends) had been received by key employees
81
shall not be available for further awards under the Plan to key employees
subject to the requirements of Section 16 of the Securities Exchange Act of
1934, as amended.
5. Form of Awards and Related Matters. The Company shall deliver (a) to each
key employee to whom an award is made a written instrument signed by the Company
setting forth the number of shares of the Company's Common Stock represented by
such award and the number of shares which shall vest at the end of each
anniversary date of such award, and (b) to the escrow agent a certificate or
certificates registered in the name of such key employee representing the total
number of shares of the Company's Common Stock represented by such award and a
copy of such instrument. Such certificate or certificates shall be legended to
indicate that the shares represented thereby are subject to the terms and
provisions of the award and the Plan. The shares of the Company's Common Stock
represented by the certificates held by the escrow agent shall constitute issued
and outstanding shares of the Company's Common Stock for all corporate purposes,
and the key employee shall receive all cash dividends thereon and have the right
to vote such shares provided that the right to receive such dividends and to
vote such shares shall forthwith terminate with respect to unvested shares of
any key employee whose award has been cancelled. While such shares are held in
escrow and until such shares have vested, the key employees for whose account
such shares are held shall not have the right to sell or otherwise dispose of
such shares or any interest therein and such shares shall not be subject to
attachment or any other legal or equitable process brought by or on behalf of
any creditor of such employees. As shares of the Company's Common Stock from
time to time vest in the key employees in accordance with their awards, the
escrow agent shall deliver to the key employees or their respective
beneficiary(ies) certificates representing such vested shares.neficiary(ies)
certificates representing such vested shares. As a condition precedent to
delivering certificates representing shares covered by awards to the escrow
agent, the Company may require a key employee to deliver to the escrow agent a
duly executed irrevocable stock power or powers (in blank) covering the shares
represented by such certificates. In addition, if the shares represented by an
award are not registered under the Securities Act of 1933, as a condition
precedent to delivering certificates representing such shares to the escrow
agent and/or certificates representing vested shares to the key employees, the
Company may require a key employee to agree in writing that such shares are
being acquired for investment and without a view to the distribution thereof and
may place an appropriate legend on any certificates representing such shares.
Certificates representing unvested shares held by the escrow agent for the
account of any key employee whose award has been cancelled and terminated shall
be returned (together with the related stock power) by the escrow agent to the
Company.
6. Vesting of the Company Common Stock.
(a) An award of the Company Common Stock shall vest in the key employee
to whom it is made at the rate of 20% of the shares covered by such award on
each of the five succeeding annual anniversaries of the date of such award,
provided and only to the extent that the key employee remains in the service of
the Company on such vesting date.
(b) Upon termination of the service of the key employee with the Company,
any award previously made to such key employee shall be automatically cancelled
and terminated as of the date of such termination of service to the extent of
any unvested shares subject to such award.
(c) Notwithstanding subparagraphs (a) and (b) above,
(i) In the case of termination of the key normal retirement age or
permitted early retirement age as defined in the Retirement Plan of the Company
of which such employee shall have been a member immediately before his
82
retirement or as established by the Committee (and not due to discharge for
cause even if occurring after attainment of retirement age) or in the case of
such termination of service due to permanent disability, the shares of the
Company's Common Stock held for his account by the escrow agent shall vest on
the date of his termination of service.
(ii) In the case of the death of a key employee, including a key employee
whose service with the Company has terminated but has not been deemed
terminated pursuant to (c)(i) above, the shares held for his account by the
escrow agent shall vest on the date of his death and the escrow agent shall
deliver a certificate or certificates representing such shares to such
person or persons as the employee shall theretofore have designated as
beneficiary(ies) in a written instrument filed with the Committee and the
escrow agent; provided, however,
(a) that the Committee may refuse to accept a designation of
beneficiary(ies) if the Committee determines that there would be an
unreasonable expense or difficulty to effect distribution to such
beneficiary(ies), and
(b) the Committee may require such evidence of payment or provision
for taxes, liens and claims and evidence of authority and other
documentation as it shall determine to be necessary or appropriate in
its sole and uncontrolled discretion.
(iii) In the case of an "acquisition of a control interest" in the Company,
the shares of the Company's Common Stock held for the key employee's
account by the escrow agent shall vest on the date of such "acquisition of
a control interest." For this purpose, an acquisition of a control
interest" shall occur if:an acquisition of a control interest" shall occur
if:
(a) twenty-five percent (25%) or more of the Company's outstanding
securities entitled to vote in elections of directors ("voting
securities") shall be beneficially owned, directly or indirectly
(including options, conversions rights, warrants, and the like,
considered as if exercised), by any person or group of persons, other
than the groups presently owning of the same (including their
affiliates and associates); or
(b) the 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.
Any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of voting securities owned by
other holders shall for the purposes of this provision be deemed to
constitute each party to such agreement, or arrangement, or under-
standing as the owner of such securities.
7. Effect of Recapitalization. In case of a stock split, stock dividends or
other change in the Common Stock of the Company, the Committee, subject to the
approval of the Board of Directors of the Company, shall make such adjustment,
if any, as it deems appropriate in the number or kind of shares which remain
available under the Plan for further awards. Unvested shares held by the escrow
agent for the account of key employees shall participate in any of such events
to the same extent as any other issued and outstanding shares of the Company's
Common Stock, but appropriate adjustments, if required, shall be made by the
Committee, subject to the approval of the Board of Directors of the Company, so
that after giving effect to the occurrence of any such events the escrow agent
shall continue to hold such unvested shares and/or any other securities
delivered in respect thereof for the account of such key employees to the extent
practicable upon the terms and conditions of the Plan and of awards granted
hereunder.
83
8. Escrow Agent. The escrow agent agent shall be appointed by the Committee
for such period and upon such terms and conditions as the Committee deems
appropriate. The Committee shall have the power to remove any person from the
position of escrow agent and to appoint substitute or successor escrow agents.
The fees and expenses of the escrow agent shall be paid by the Company. The
escrow agent shall not incur liability for any action taken pursuant to the Plan
or any award granted thereunder so long as the escrow agent acts in good faith
in accordance with the instructions of the Committee, and the Company, at the
request of the escrow agent, may enter into an agreement indemnifying the escrow
agent against any such liability and costs and expenses related thereto.
9. Limitations.
(a) No employee or other person shall have any claim or right (legal,
equitable or other) to be granted an award under the Plan, and no director,
officer or employee of the Company or any other person shall be authorized to
enter into any agreement with any person for the making of an award or to make
any representation or warranty with respect thereto.
(b) The key employee to whom an award is made shall have a right to
receive the shares of Common Stock (or other stock or securities in such award)
only in accordance with the terms and conditions of the Plan and such award and
the determination of the Committee and not otherwise and such key employee may
not assign or transfer such award or any shares or securities not distributed to
him or any interest therein.
(c) Neither the action of the Company in establishing the Plan, nor any
action taken under it by the Committee, nor any provision of the Plan or any
award granted thereunder shall be construed as giving to any employee a right to
be retained in the service of the Company.
10. Amendments. The Board of Directors of the Company may discontinue the Plan
at any time and may from time to time amend the Plan; provided, however, that no
such discontinuance or amendment shall materially affect adversely any right or
obligation with respect to any award theretofore made, and no such amendment,
unless approved by the stockholders of the Company, shall materially; (i)
increase the maximum number of shares which may be awarded under the Plan (other
than pursuant to Section 7); (ii) modify the requirements as to eligibility to
receive awards hereunder; (iii) increase the benefits accruing to key employees
hereunder or (iv) increase the cost of the Plan to the Company.
11. Expenses. All expenses to the Plan, including the fees and expenses of the
escrow agent, shall be borne by the Company.
12. Deferred Compensation Plan. Anything in this Plan to the contrary
notwithstanding, if a key employee elects to defer receipt of any stock awards
under this Plan pursuant to the terms of the Deferred Compensation Plan for Key
Employees of Engelhard Corporation (hereinafter referred to as the "Deferred
Compensation Plan"), the terms of the Deferred Compensation Plan rather than
this Plan will govern the vehicle in which the deferred stock awards will be
held and the key employee's rights to such stock awards. The terms of the
Deferred Compensation Plan affecting such deferred stock awards are hereby
incorporated by this reference into and made a part of this Plan.
84
EXHIBIT 10(h):
STOCK BONUS PLAN FOR NON-EMPLOYEE DIRECTORS OF ENGELHARD CORPORATION
EFFECTIVE JULY 1, 1986
85
[Conformed Copy -- Includes amendments
made in June, 1991 and June, 1992]
STOCK BONUS PLAN
FOR NON-EMPLOYEE DIRECTORS
OF
ENGELHARD CORPORATION
(Effective July 1, 1986)
1. Purpose. The purpose of this Stock Bonus Plan for Non-Employee Directors
of Engelhard Corporation (the "Plan") is to encourage the highest level of
performance of non-employee directors of Engelhard Corporation (the "Company")
by providing such directors with a proprietary interest in the Company's success
and progress by awarding them shares of the Company's Common Stock ("Common
Stock"), subject to the terms and conditions set forth below.
2. Effective Date and Duration. Subject to Section 13, the effective date of
the Plan is July 1, 1986. The Plan will terminate on June 30, 1996 and no shares
of the Company's Common Stock may be awarded after such date; however, shares
awarded on or prior to such date may be subsequently delivered to the persons
entitled thereto in accordance with the terms and conditions applicable to such
awards.
3. Administration. The Plan shall be administered by a committee (the
"Committee") which shall be appointed from time to time by the Board of
Directors of the Company, and shall consist of not less than two directors of
the Company who qualify as "disinterested persons" under Rule 16b-3(c)(2) issued
by the Securities and Exchange Commission. The Committee shall have full power
and authority, subject to the terms and conditions of the Plan, to determine the
persons entitled to awards under the Plan, the applicable terms and conditions
of such awards and all other matters which may arise in the administration of
the Plan. The determination of the Committee concerning any matter arising under
or with respect to the Plan or any awards granted hereunder shall be final,
binding and conclusive on all interested persons. The Committee may as to all
questions of accounting rely conclusively upon any determinations made by the
independent auditors of the Company.
4. Shares Available for Awards. The total number of shares of the Company's
Common Stock which may be awarded under the Plan shall not exceed 45,000 shares.
Shares of the Company's Common Stock used for purposes of the Plan may be either
authorized but unissued shares or treasury shares or both. Shares of the
Company's Common Stock returned to the Company upon the forfeiture of such
shares pursuant to the Plan shall not be available for further awards under the
Plan unless the forfeiting Non-Employee Director received no benefits of
ownership (such as dividends) with respect to such shares.its of ownership (such
as dividends) with respect to such shares.
5. Eligibility and Awards. To be eligible to participate in the Plan, a person
must be a director of the Company who is not an officer or employee of the
Company or any of its subsidiaries or affiliates ("Non-Employee Director"). Each
Non-Employee Director on the effective date of the Plan shall be awarded 1,500
shares of Common Stock, effective as of such effective date. In addition, each
person who becomes a Non-Employee Director after the effective date of the Plan
shall be awarded 1,500 shares of Common Stock, effective as of such Non-Employee
Director's election to the Board of Directors (subject to the limitation set
forth in Section 4).
86
6. Form of Awards and Related Matters. The Company shall deliver (a) to each
Non-Employee Director to whom an award is made a written instrument signed by
the Company setting forth the number of shares of the Company's Common Stock
represented by such award, and (b) to the escrow agent a certificate or
certificates representing the total number of shares of the Company's Common
Stock represented by such award and a copy of such instrument. Such certificate
or certificates shall be legended to indicate that shares represented thereby
are subject to the terms and provisions of the award and the Plan. The shares of
the Company's Common Stock represented by the certificates held by the escrow
agent shall constitute issued and outstanding shares of the Company's Common
Stock for all corporate purposes, and the Non-Employee Director shall receive
all cash dividends thereon and have the right to vote such shares provided that
the right to receive such dividends and to vote such shares shall forthwith
terminate with respect to shares of any Non-Employee Director which are
forfeited pursuant to the Plan. While such shares are held in escrow and until
such shares have been delivered to the applicable Non-Employee Director pursuant
to the Plan, the Non-Employee Director for whose account such shares are held
shall not have the right to sell or otherwise dispose of such shares or any
interest therein and such shares shall not be subject to attachment or any other
legal or equitable process brought by or on behalf of any creditor of such
Non-Employee Director. At such time as the Non-Employee Director's service as a
non-employee director terminates (or following an "acquisition of a control
interest" as described in subparagraph (c)(iii) of Section 7), the escrow agent
shall deliver to the Non-Employee Director or his beneficiary(ies) certificates
representing such shares held by the escrow agent for the Non-Employee
Director's account as are not forfeited pursuant to Section 7. As a condition
precedent to delivering certificates representing shares covered by awards to
the escrow agent, the Company may require a Non-Employee Director to deliver to
the escrow agent a duly executed irrevocable stock power or powers (in blank)
covering the shares represented by such certificates. In addition, if the shares
represented by an award are not registered under the Securities Act of 1933, as
a condition precedent to delivering certificates representing such shares to the
escrow agent and/or certificates representing shares to Non-Employee Directors,
the Company may require a Non-Employee Director to agree in writing that such
shares are being acquired for investment and without a view to the distribution
thereof and may place an appropriate legend on any certificates representing
such shares. Certificates representing shares held by the escrow agent for the
account of any Non-Employee Director which are forfeited pursuant to the Plan
shall be returned (together with the related stock power) by the escrow agent to
the Company.
7. Vesting of the Company Common Stock.
(a) An award of the Company's Common Stock shall tentatively vest in the
Non-Employee Director to whom it is made at the rate of 10% of the shares
covered by such award for each full year of the Non-Employee Director's service
as a non-employee director of the Company (including service prior to the date
of the award); provided, however, that in no event shall any shares tentatively
vest prior to the expiration of the six-month period immediately following the
date of their award.
(b) Upon termination of the service of the Non-Employee Director as a
non-employee director of the Company, any award previously made to such
Non-Employee Director shall automatically be forfeited as of the date of such
termination of service to the extent of (i) any shares subject to such award
which have not tentatively vested pursuant to subparagraph (a) above, and (ii)
any shares subject to such award as to which the Committee has not made a
determination that receipt of such shares by the Non-Employee Director is
warranted in light of the Non-Employee Director's services to the Company and
the circumstances of the Non-Employee Director's termination of service.
87
(c) Notwithstanding subparagraphs (a) and (b) above,
(i) In the case of termination of the Non-Employee Director's service
as a non-employee director of the Company due to permanent disability
after the expiration of the six-month period immediately following
the date of the award to the Non-Employee Director hereunder, all of
the shares of the Company's Common Stock held for his account by the
escrow agent shall become fully vested on the date of such
termination of service, and the escrow agent shall (in accordance with
Section 6) deliver a certificate or certificates representing such
shares to the Non-Employee Director.
(ii) In the case of the death of a Non-Employee Director after the
expiration of the six-month period immediately following the date of
the award to the Non-Employee Director hereunder, all of the shares
held for his account by the escrow agent shall become fully vested on
the date of his death and the escrow agent shall (in accordance with
Section 6) deliver a certificate or certificates representing such
shares to such person or persons as the Non-Employee Director shall
theretofore have designated as beneficiary(ies) in a written instrument
filed with the Committee and the escrow agent; provided, however,
(A) that the Committee may refuse to accept a designation of
beneficiary(ies) if the Committee determines that there would be an
unreasonable expense or difficulty to effect distribution to such
beneficiary(ies), and
(B) the Committee may require such evidence of payment or
provision for taxes, liens and claims and evidence of authority and
other documentation as it shall determine to be necessary or
appropriate in its sole and uncontrolled discretion.
(iii) In the event of an "acquisition of a control interest" in the
Company after the expiration of the six-month period immediately
following the date of the award to the Non-Employee Director hereunder,
all of the shares of the Company's Common Stock held for the
Non-Employee Director's account by the escrow agent shall become fully
vested on the date of such "acquisition of a control interest", and the
escrow agent shall (in accordance with Section 6) deliver a certificate
or certificates representing such shares to the Non-Employee Director
as soon as practicable following such "acquisition of a control
interest." For the purpose of this subparagraph (c)(iii), an
"acquisition of a control interest" shall occur if:
(A) twenty-five percent (25%) or more of the Company's
outstanding securities entitled to vote in elections of directors
("voting securities") shall be beneficially owned, directly or
indirectly (including options, conversion rights, warrants, and the
like, considered as if exercised), by any person or group of persons,
other than the group presently owning the same (including their
affiliates and associates); or
(B) the 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.
Any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of voting securities owned by
other holders shall for the purposes of this provision be deemed to
constitute each party to such agreement, arrangement or understanding
as the owner of such securities.
88
8. Effect of Recapitalization. In case of a stock split, stock dividends or
other change in the Common Stock of the Company, the Committee shall make such
adjustment, if any, as it deems appropriate in the number or kind of shares
which remain available under the Plan for further awards and which are to be
awarded to persons becoming Non-Employee Directors. Shares held by the escrow
agent for the account of Non-Employee Directors which have not been forfeited
pursuant to the Plan shall participate in any of such events to the same extent
as any other issued and outstanding shares of the Company's Common Stock, but
appropriate adjustments, if required, shall be made by the Committee, so that
after giving effect to the occurrence of any of such events the escrow agent
shall continue to hold such shares and/or any other securities delivered in
respect thereof for the account of such Non-Employee Directors to the extent
practicable upon the terms and conditions of the Plan and of awards granted
hereunder.
9. Escrow Agent. The escrow agent shall be appointed by the Committee for
such period and upon such terms and conditions as the Committee deems
appropriate. The Committee shall have the power to remove any person from the
position of escrow agent and to appoint substitute or successor escrow agents.
The fees and expenses of the escrow agent shall be paid by the Company. The
escrow agent shall not incur liability for any action taken pursuant to the Plan
or any award granted thereunder so long as the escrow agent acts in good faith
in accordance with the instructions of the Committee, and the Company, at the
request of the escrow agent, may enter into an agreement indemnifying the escrow
agent against any such liability and costs and expenses related hereto.
10. Limitations.
(a) Nothing in the Plan shall be deemed to create any obligation on the
part of the Company to continue any person as a director.
(b) The Non-Employee Director to whom an award is made shall have a right
to receive the shares of Common Stock (or other stock or securities in such
award) only in accordance with the terms and conditions of the Plan and such
award and the determination of the Committee and not otherwise and such Non-
Employee Director may not assign or transfer such award or any shares or
securities not distributed to him or any interest therein.
11. Termination or Amendment of Plan. The Board of Directors of the Company
may discontinue the Plan at any time prior to the date set forth in Section 2
and may from time to time amend the Plan; provided, however, that no such
discontinuance or amendment shall materially affect adversely any right or
obligation with respect to any award theretofore made, and no such amendment,
unless approved by the stockholders of the Company, shall materially:
(i) increase the maximum number of shares which may be awarded under
thePlan (other than pursuant to Section 8);
(ii) modify the requirements as to eligibility to receive awards
hereunder; (iii) increase the benefits accruing to Non-Employee
Directors hereunder or (iv) increase the cost of the Plan to the
Company.
12. Expenses. All expenses to the Plan, including the fees and expenses of the
escrow agent, shall be borne by the Company.
13. Effectiveness of the Plan. This Plan shall not be effective unless
approved by the holders of not less than a majority of the outstanding shares of
voting stock of the Company present, or represented, and entitled to vote
thereon at a meeting thereof duly called and held for such purpose, and no
shares awarded hereunder shall be delivered to any Non-Employee Director or
beneficiary prior to such approval.
89
EXHIBIT 10(i):
DEFERRED COMPENSATION PLAN FOR
DIRECTORS OF ENGELHARD CORPORATION
RESTATED AS OF MAY 7, 1987
90
[Conformed Copy -- Incorporates amendments made
in June 1992, November 1993 and
December 1993]
DEFERRED COMPENSATION PLAN FOR
DIRECTORS OF ENGELHARD CORPORATION
(As restated as of May 7, 1987)
The purpose of the Deferred Compensation Plan for Directors of Engelhard
Corporation (the "Plan") is to provide a procedure whereby a member of the Board
of Directors of Engelhard Corporation (the "Company") may defer the payment of
all or a specified part of the future compensation payable to the Director for
services as a Director (including compensation payable to a Director for future
services as a member of a committee of the Board).
1. Each Director who is not an employee of the Company or any of its
subsidiaries may elect, on or before December 31 of any calendar year by written
notice to the Company, to defer payment of all or a designated portion of the
compensation payable to him for service as a Director commencing at the
beginning of the next calendar year (inclusive of fees paid for attendance at
meetings of the Board and committees thereof).
Any person elected to fill a vacancy on the Board who was not a Director on
the preceding December 31 may elect, within 31 days of the date of his election
as a Director by written notice to the Company, to defer payment of all or a
designated portion of the compensation payable to him for service as a Director
from and after the date on which such election is made during the balance of the
calendar year in which he was elected to the Board and thereafter.
Deferrals hereunder shall continue until the Director notifies the Company
in writing, prior to the commencement of any calendar year, that he wishes his
compensation for such calendar year and all succeeding periods to be paid on a
current basis. Elections to defer payment of compensation, or to discontinue
such deferrals, shall be irrevocable when made.
Any election to defer compensation pursuant to this paragraph 1 shall
include an election as to whether the deferred compensation shall be credited to
the Accumulated Account described in paragraph 4 or to the Stock Account
described in paragraph 5; provided, however, that a Director's election to have
deferred compensation credited to the Stock Account, or to discontinue having
deferred compensation credited to the Stock Account, shall be effective only
with respect to compensation that becomes payable on or after the date six
months following the date such election is made (and during such period any
compensation deferred by such Director shall be credited to the Accumulated
Account). by such Director shall be credited to the Accumulated Account).
2. In addition to the deferrals described in paragraph 1 above, each Director
who is not an employee of the Company shall have the option, exercisable not
less than two months before any stock award vests under the Company's Stock
Bonus Plan for Non-Employee Directors, to defer delivery of said stock award for
a period of at least one year. An election made by a Director pursuant to this
paragraph 2 with respect to a stock award shall become irrevocable as of the
last day for making such election.
3. For purposes of this Plan:
(a) The calendar year in which a Director ceases to serve as such shall be
referred to as the "Retirement Year."
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(b) The deferred compensation and dividend equivalents for any Director
which are credited to the account described in paragraph 4, plus the equivalent
of accumulated interest thereon, less any portion thereof theretofore
distributed or transferred from such account, shall be referred to as the
Director's "Accumulated Account."
(c) The deferred compensation, deferred stock awards and dividend
equivalents for any Director which are credited in the form of units to the
stock account described in paragraph 5, less any portion thereof theretofore
distributed from such account, shall be referred to as the Director's "Stock
Account."
(d) Shares of Common Stock of the Company shall be referred to as
"Shares."
4. Except for amounts credited to the Stock Account described in paragraph 5,
all deferred compensation hereunder shall be held in the general funds of the
Company and shall be credited to a bookkeeping account ("Accumulated Account")
maintained by the Company in the name of the Director, and shall bear the
equivalent of interest from, the first day following the end of the calendar
quarter to which the compensation is applicable. Interest equivalents shall be
credited on December 31 of each year up to an including the year preceding that
in which the last installment is paid, it being the intent that interest
equivalents shall not cease to accrue upon payment of the first installment, but
shall continue to accrue with respect to the balance undistributed at any time.
The amount of interest equivalent credited to the Director's account shall be
determined by applying the interest equivalent rate established hereunder to the
balance in the Director's account (which balance shall include, for this
purpose, interest equivalent accrued but not credited to the account) at the end
of each month. For purposes of the foregoing, the interest equivalent rate shall
be set monthly and shall be equal to 120% of the long-term federal rate,
compounded monthly (within the meaning of Section 1274(d) of the Internal
Revenue Code of 1986, as amended) as in effect for the month for which interest
equivalent is being computed. For periods prior to January 1, 1994 the last two
sentences of paragraph 4 are as follows: "The amount of interest equivalent
credited to the Director's account annually shall be determined by applying the
interest equivalent rate established hereunder to the average balance in the
Director's account during the year. For purposes of the foregoing, the annual
interest equivalent rate shall be determined by averaging the rate of interest
for 3-year U.S. Treasury notes as reported in the monthly Federal Reserve
Bulletin for each calendar quarter of the year for which interest is being
computed.*"
5. All deferred compensation which a Director elects pursuant to paragraph 1
to have credited to the Stock Account (including any amounts transferred from
the Accumulated Account pursuant to the last sentence of paragraph 1) and all
stock awards deferred by a Director pursuant to paragraph 2 shall be credited in
the form of units to a bookkeeping account maintained by the Company in the name
of the Director. The number of units so credited shall be equal to the sum of
(i) the maximum number of whole Shares obtainable at then prevailing prices with
the amounts of the Director's deferred compensation credited to the Stock
Account pursuant to paragraph 1 as of the date such compensation is so credited
(disregarding fractional shares) and (ii) the number of Shares corresponding to
the number of the Director's deferred stock awards pursuant to paragraph 2. Each
such unit shall represent the right to receive one Share at the time and in the
manner determined pursuant to the Director's deferral election and the terms of
this Plan.
* For periods prior to January 1, 1994 the last two sentences of paragraph 4
are as follows: "The amount of interest equivalent credited to the
Directors' account annually shall be determined by applying the interest
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equivalent rate established hereunder to the average balance in the
Director's account during the year. For purposes of the foregoing, the
annual interest equivalent rate shall be determined by averaging the rate
of interest for 3-year U.S. Treasury notes as reported in the monthly
Federal Reserve Bulletin for each calendar quarter of the year for which
interest is being computed.
If any dividends are payable on Shares during the deferral period, dividend
equivalents equal to the dividend that would have been payable on the units
credited to a Director's Stock Account if such units had constituted Shares
shall be handled in one of the following ways, as irrevocably elected by the
Director in his deferral election:
(i) such dividend equivalents shall be added to the
Accumulated Account described in paragraph 4
above, and shall be credited with interest
equivalents pursuant to said paragraph 4;
(ii) such dividends shall be paid out currently to
such Director; or
(iii) such dividend equivalents shall be credited to
the Stock Account and applied to provide
additional units corresponding to the maximum
number of whole Shares obtainable at then
prevailing prices with such dividend
equivalents (disregarding fractional shares).
The Director's election of one of the above options with respect to the handling
of dividend equivalents shall become irrevocable as of the last date for making
the deferral election with respect to such stock award; provided, however, that
an election by a Director of the option described in (iii) above shall be
effective only with respect to dividend equivalents that become payable on or
after the date six months following the date such election becomes irrevocable.
The Company may in its discretion establish a trust to satisfy its
obligations under this Plan with respect to the units credited to the Stock
Account and transfer to such trust Shares corresponding to such units or cash to
be used by the trustee to purchase such Shares. The assets of such trust shall
be subject to the claims of general creditors of the Company. If such a trust is
established, any voting rights which are exercisable with respect to a number of
Shares held in such trust corresponding to the number of units credited to a
Director's Stock Account shall be exercised by the trustee of such trust in
accordance with the directions of such Director (and the trustee shall not
exercise voting rights with respect to such Shares to the extent that directions
are not received from the Director).
6. The amount to which a Director is entitled hereunder shall be paid to him
in any number of annual installments, as initially elected by him, up to ten,
payable in January of each payment year beginning with the calendar year
designated by the Director in his initial deferral election. A Director may
irrevocably elect by written notice to the Company to further defer payments
previously deferred under paragraph 1 hereof or delivery of stock awards
previously deferred under paragraph 2 hereof to a date or dates specified in the
Director's further deferral election (an "Additional Deferral Election"). An
Additional Deferral Election shall specify the calendar year in which such
payments or deliveries will commence and the number of annual installment
payments or deliveries (up to ten). Such annual installments shall be payable in
January of each payment year beginning with the calendar year specified in the
Additional Deferral Election. However, in order for an Additional Deferral
Election to be effective (i) the Additional Deferral Election must be made at
least twelve months prior to the date the payment would otherwise be due or the
93
delivery is otherwise scheduled to be made, as the case may be, in accordance
with a prior deferral election under this Plan, (ii) the Director must agree
with the Company that, if nominated and elected, he will continue to serve as a
Director of the Company for at least one year following the date of the
Additional Deferral Election, (iii) the Additional Deferral Election may not
specify any payment of amounts hereunder or any delivery of stock hereunder on a
date prior to the date such payment or delivery was otherwise due under this
Plan, and (iv) the further deferral of each payment or delivery specified in the
Additional Deferral Election must be for a period of at least one year. The
amount of each installment shall be determined by multiplying the Accumulated
Account amount and the units credited to the Director's Stock Account as of the
December 31 preceding the installment payment date by a fraction, the numerator
of which shall be "1" and the denominator of which shall be the number of annual
installments initially elected by the Director less the number of installment
payments theretofore made. If a Director should die before full payment of all
amounts owing to him, his Accumulated Account and the units credited to the
Director's Stock Account as of December 31 of the year of his death shall be
paid to his estate in January of the calendar year following the year of his
death, or the Accumulated Account and the units credited to the Director's Stock
Account as at such earlier date as the Board of Directors, in its discretion,
may determine may be paid in lieu thereof. Any such in lieu payment from the
Accumulated Account shall be adjusted for interim interest equivalent additions
to such extent, if any, as the Board of Directors shall determine. Each
installment payment of units credited to a Director's Stock Account shall be
made through payment of a number of whole Shares equal to the number of units
which are then payable (disregarding fractional units).of units which are then
payable (disregarding fractional units).
7. The right of a Director to the amounts described hereunder (including
Shares) shall not be subject to assignment or other disposition by him other
than by will, descent or distribution. In the event that, notwithstanding this
provision, a Director makes a prohibited disposition, the Company may disregard
the same and discharge its obligation hereunder by making payment or delivery
thereof as though no such disposition had been made.
8. The Plan shall be administered by a committee appointed by the Board of
Directors of the Company consisting entirely of members of such Board not
eligible to participate in the Plan ("Committee"). The decision of the Committee
with respect to any questions arising as to the interpretation of this Plan,
including the severability of any and all of the provisions thereof, shall be
final, conclusive and binding.
9. The Board of Directors of the Company may discontinue the Plan at any time
and may from time to time amend the Plan; provided, however, that no such
discontinuance or amendment shall operate to annul an election already in effect
for the current calendar year or any preceding year or adversely affect the
right of a Director to receive the amounts described herein, and no such
amendment affecting Stock Accounts, unless approved by the stockholders of the
Company, shall materially: (i) increase the maximum number of Shares which may
be issued under the Plan; (ii) modify the requirements as to eligibility to
defer compensation or stock awards hereunder; or (iii) increase the benefits
accruing to Directors hereunder accruing to Directors hereunder.
10. Except as and to the extent otherwise provided in this Plan or in any trust
referred to in paragraph 5, neither the Director nor any other person shall have
any interest in any fund or in any specific asset of the Company by reason of
amounts credited to the Accumulated Account or Stock Account of a Director
hereunder, nor the right to receive any distribution under this Plan.
Distributions hereunder shall be made from the general funds of the Company or
from the trust referred to in paragraph 5, and the rights of the Director shall
be those of an unsecured general creditor of the Company.
94
11. Nothing contained herein shall impose any obligation on the Company to
continue the tenure of the Director beyond the term for which he may have been
elected or retained.
95
EXHIBIT 10(j):
SUPPLEMENTAL RETIREMENT PROGRAM OF
ENGELHARD CORPORATION AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 1989
96
[Conformed Copy -- Includes amendments made
in June 1992, December 1993, April 1994 and November 1994]
SUPPLEMENTAL RETIREMENT PROGRAM
OF ENGELHARD CORPORATION
(as amended and restated effective January 1, 1989)
1. Purpose
The Supplemental Retirement Program of Engelhard Corporation consists of
two separate plans, the terms of which are set forth herein: (i) the Excess
Benefit Plan and (ii) the Supplemental Executive Retirement Plan. The purpose of
the Excess Benefit Plan is to provide certain salaried employees with a pension
benefit payable from employer funds, notwithstanding the limitations of Section
415 of the Internal Revenue Code of 1986, as amended (the "Code") as from time
to time in effect, having an actuarial value equivalent to the excess of the
amount of benefits which would have been payable to such employees under the
Retirement Income Plan for Salaried Employees of Engelhard Corporation ("Pension
Plan") were it not for Section 415 of the Code over the amount thereof in fact
payable under the Pension Plan. The purposes of the Supplemental Executive
Retirement Plan are (i) to provide certain other salaried employees with a
pension benefit payable from employer funds, notwithstanding the limitations of
Section 401(a)(17) and 415 of the Code as from time to time in effect (or of any
similar provision of the Code or any other law or regulations that may now or
hereafter limit benefits payable under qualified pension or retirement plans
(all of which are herein referred to as "IRC limitations")), having an actuarial
value equivalent to the excess of the amount of benefits which would have been
payable to such employees under the Pension Plan were it not for the IRC
limitations and any election by the employees to defer salary or bonus under the
Company's Deferred Compensation Plan for Key Employees over the amount thereof
in fact payable under the Pension Plan and (ii) to provide certain elected
officers who complete more than ten years of service with retirement benefits in
addition to those provided under the Pension Plan and, if applicable, the Excess
Benefit Plan.
2. Eligibility
(a) Excess Benefit Plan
An employee shall be eligible to receive payment under the Excess Benefit
Plan provided that, as of his Severance From Service Date as defined in
Section 3.7 of the Pension Plan (the "Severance From Service Date"), such
employee: (i) is a Participant as defined in Section 2.1(dd) of the Pension
Plan;
(ii) is credited under the Pension Plan with no less than 5 years of
Vesting Service, as defined in Section 3.5 of the Pension Plan,
except that an employee whose Vesting Service is less than 5
years will be eligible to receive payment hereunder if the sum
of (A) his age in whole and fractional years, and (B) his
Vesting Service, equals or exceeds 65; and
(iii) is not affected under Section 2.1(ee) of the Pension Plan by
the Internal Revenue Code Section 401(a)(17) annual limitation
on Pay that can be taken into account for benefit calculation
purposes under the Pension Plan.
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(b) Supplemental Executive Retirement Plan
An employee shall be eligible to receive payment under Part A of the
Supplemental Executive Retirement Plan provided that, as of his
Severance From Service Date, such employee:
(i) is a Participant as defined in Section 2.1(dd) of the Pension
Plan;
(ii) is credited under the Pension Plan with no less than 5 years of
Vesting Service, except that an employee whose Vesting Service
is less than 5 years will be eligible to receive payment here-
under if the sum of (A) his age in whole and fractional years,
and (B) his Vesting Service, equals or exceeds 65; and
(iii) is affected (or would be affected if the Pension Plan were to
take into account Deferred Compensation (as defined below) in
determining Pay) under Section 2.1(ee) of the Pension Plan by
the Internal Revenue Code Section 401(a)(17) annual limitation
on Pay that can be taken into account for benefit calculation
purposes under the Pension Plan.
An employee shall be eligible to receive payment under Part B of the
Supplemental Executive Retirement Plan provided that such employee:
(i) is a Participant as defined in Section 2.1(dd) of the Pension
Plan as of his Severance From Service Date;
(ii) had completed less than 10 years of Credited Service, as defined
in Section 3.6 of the Pension Plan, as of January 5, 1984;
(iii) is an elected officer of Engelhard Corporation (the "Company")
and designated by the Board of Directors of the Company to
participate in Part B of the Supplemental Executive Retirement
Plan, and is listed on Schedule A attached hereto; and
(iv) had completed more than 10 years of Credited Service, as defined
in Section 3.6 of the Pension Plan, as of his Severance From
Service Date.
3. Benefit
(a) Excess Benefit Plan
An eligible employee's annual benefit under the Excess Benefit Plan
shall be the difference between (i) and (ii) following:
(i) the annualized Normal Retirement Benefit, Early Retirement
Benefit or Disability Benefit, as determined under Sections
4.1, 4.2 and 6.1, respectively, of the Pension Plan (determined
before application of Section 415 of the Code); and
(ii) the benefit payable to him under the Pension Plan after
application of Section 415 of the Code, including any required
adjustments for retirement before social security retirement
age, and other such actuarial adjustments thereto, in effect as
of the date benefit payments commence under the Pension Plan.
In no event shall an eligible employee be entitled to receive an aggregate
benefit, from the Pension Plan and the Excess Benefit Plan, greater than that
which he would have received under the Pension Plan but for Section 415 of the
Code.
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(b) Part A of Supplemental Executive Retirement Plan
An eligible employee's annual benefit under Part A of the Supplemental Executive
Retirement Plan shall be the difference between (i) and (ii) following:
(i) the annualized Normal Retirement Benefit, Early Retirement
Benefit or Disability Benefit, as determined under Section 4.1,
4.2 and 6.1, respectively, of the Pension Plan, determined
before application of the IRC limitations, and determined as if
the employee's Pay (as defined in Section 2.1(ee) of the Pension
Plan), for Plan Years beginning on or after January 1, 1994, for
a Plan Year included salary and bonus that he elected to defer
under the Deferred Compensation Plan for Key Employees of the
Company ('Deferred Compensation') and which would otherwise have
been paid in the Plan Year; and
(ii) the benefit payable to him under the Pension Plan after
application of the IRC limitations (and without modifying the
definition of Pay in the Pension Plan to include Deferred
Compensation), including any required adjustment for retirement
before social security retirement age, and other such actuarial
adjustments thereto, in effect as of the date benefit payments
commence under the Pension Plan.
In no event shall an eligible employee be entitled to receive an
aggregate benefit, from the Pension Plan, the Excess Benefit Plan and
Part A of the Supplemental Executive Retirement Plan, greater than
that which he would have received under the Pension Plan but for the
IRC limitations and, for periods beginning on or after January 1,
1994, his elective deferral of Deferred Compensation. (c)Part B of
Supplemental Executive Retirement Plan.
An eligible employee's annual benefit under Part B of the Supplemental
Executive Retirement Plan shall be the difference between (i) and (ii)
following:
(i) the annualized Normal Retirement Benefit, Early Retirement
Benefit or Disability Benefit, as determined under Section
4.1, 4.2 and 6.1, respectively, of the Pension Plan
(determined before application of the IRC limitations) as if
the employee's number of years of Credited Service were
equal to the sum of (A) the employee's actual number of year
of Credited Service as of his Severance From Service Date
plus (B) the lesser of 5 years of Credited Service or
one-half of the employee's actual number of years of
Credited Service in excess of 10 as of his Severance From
Service Date and as if the employee's Pay, for Plan Years
beginning on or after January 1, 1994, for a Plan Year
included Deferred Compensation which, but for the employee's
deferral election, would have been paid in the Plan Year;
and
(ii) the annualized Normal Retirement Benefit, Early Retirement
Benefit or Disability Benefit, as determined under Section
4.1, 4.2 and 6.1, respectively, of the Pension Plan
(determined before application of the IRC limitations and by
including Deferred Compensation in Pay for Plan Years
beginning on or after January 1, 1994 as provided in Section
3(b)(i) hereof) based on the employee's actual number of
years of Credited Service as of his Severance From Service
Date.
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4. Administration
The Excess Benefit Plan and the Supplemental Executive Retirement Plan
shall be administered by the Pension and Employee Benefit Plans Committee (the
"Committee") which, in so doing, shall be entitled to exercise with respect to
each such Plan all the powers and authorities with respect to the Pension Plan
vested in the Committee under the Pension Plan.
5. Payment Form
(a) Except as provided in Paragraphs (b), (c) and (e) of this Section 5, an
eligible employee's benefit under the Excess Benefit Plan and/or the
Supplemental Executive Retirement Plan shall be subject to the same terms,
conditions and adjustments as the benefit such employee receives from the
Pension Plan, and an employee's elections under the Pension Plan as to
retirement date, form of payment, beneficiary, etc., shall be deemed
elections under the Excess Benefit Plan and the Supplemental Executive
Retirement Plan as well.
(b) Notwithstanding Paragraph (a) of this Section 5, (i) an employee may
elect pursuant to this Paragraph (b) that the benefit payable under the
Excess Benefit Plan and/or the Supplemental Executive Retirement Plan with
respect to him be paid to such employee or, following the employee's death,
to his beneficiary or beneficiaries in accordance with the following
provisions of this Paragraph (b) by filing a written application with the
Committee not less than 60 days prior to the date benefits payable to the
employee and his beneficiaries under the Pension Plan commence to be paid
and (ii) an employee who elects a lump sum option under Section 7.5(e) of
the Pension Plan shall not receive his benefit under the Excess Benefit
Plan or the Supplemental Executive Retirement Plan in a lump sum but shall
instead be deemed to have elected to receive such benefit in accordance
with the following provisions of this Paragraph (b) unless the employee
elects another form of distribution pursuant to Paragraph (c) of this
Section 5. Notwithstanding the foregoing, an employee who is subject to the
limitations of Section 16 of the Securities Exchange Act of 1934, as
amended, shall not be entitled to elect (and shall not be deemed to have
elected) to have his benefit under the Excess Benefit Plan and/or the
Supplemental Executive Retirement Plan paid in accordance with the
provisions of this Paragraph (b) until after his Severance From Service
Date. In the event such an employee does make (or is deemed to have made)
such an election following his Severance From Service Date, the "Pension
Distribution Date" defined in subparagraph (i) below applicable to such
employee shall not occur earlier than the date on which the employee makes
(or is deemed to have made) such election.
(i) If an employee elects, or is deemed to have elected, to
receive his benefit under the Excess Benefit Plan and/or the
Supplemental Executive Retirement Plan pursuant to this Paragraph
(b), the Committee shall determine the lump sum value of the
employee's benefit as of the date benefits payable to the
employee and his beneficiaries under the Pension Plan commence to
be paid (the "Pension Distribution Date"). Said lump sum value
shall be equal to the sum of (A) the present value of the
benefits otherwise payable to the employee under the Excess
Benefit Plan and/or the Supplemental Executive Retirement Plan in
the form of a straight life annuity determined in accordance with
the factors, methods and assumptions used for determining
actuarial equivalence under the Pension Plan as in effect on such
Pension Distribution Date plus (B) the present value of the
benefit derived by the Company from the deferral of payments to
the four succeeding anniversaries of such Pension Distribution
100
Date in accordance with subparagraph (iii) below as measured on
the basis of the excess (if any) of the prime rate prevailing in
New York City (as determined by the Committee) on such Pension
Distribution Date over the annual dividend rate on the Company's
common stock on such date grossed up to a pre-tax figure,
determined by dividing the amount of taxable dividends paid per
share of Company common stock during the 12-month period ending
on the Pension Distribution Date by an amount equal to the mean
between the highest and lowest quoted selling prices of a share
of such stock on the New York Stock Exchange - Composite
Transactions on the Pension Distribution Date and then dividing
the result by the difference between 1.00 and the effective
federal income tax rate applicable in determining the Company's
net after-tax income for its annual accounting period next
preceding (or ending on) such Pension Distribution Date. (ii)g
(or ending on) such Pension Distribution Date. (ii)ion
Distribution Date. (ii)g (or ending on) such Pension Distribution
Date.
(ii) The Committee shall determine the number of shares of the
Company's common stock equivalent in value to the lump sum value
determined pursuant to subparagraph (i) above by dividing an
amount equal to the mean between the highest and lowest quoted
selling prices of a share of such stock on the New York Stock
Exchange - Composite Transactions on the Pension Distribution
Date into the lump sum value determined pursuant to subparagraph
(i) above, and rounding to the nearest whole number of shares.
(iii)Subject to subparagraphs (iv) and (v) below, the number of shares
determined pursuant subparagraph (ii) above shall be paid in
installments to the employee or, following his death, to his
beneficiary or beneficiaries, as follows: (A) a number of shares
of the Company's common stock equal to 20% of the number of such
shares determined pursuant to subparagraph (ii) above, rounded to
the nearest whole number, shall be paid as soon as practicable
following the employee's Pension Distribution Date and on each of
the three succeeding anniversaries of such Pension Distribution
Date and (B) the balance of the number of such shares determined
pursuant to subparagraph (ii) above shall be paid on the fourth
anniversary of such Pension Distribution Date.
(iv) As a condition to receiving benefits pursuant to this Paragraph
(b), the employee shall agree that for a period of five years
following such Pension Distribution Date, he shall not (on his
own behalf, either as an officer, shareholder, partner, employee
or otherwise or on behalf of any significant competitor of the
Company), in any manner, directly or indirectly without the
express prior written consent of the Company, or except on behalf
of the Company, engage in any activity, accept employment with,
render any service in any capacity to or have any interest in
(including investment in the equity securities of) any business
or enterprise or other activity (x) which will conflict with the
significant interests of the Company or its business or (y) which
is a significant competitor of or is in significant competition
with the Company; provided, however, that the employee may
acquire or hold (beneficially and of record) up to but not more
than 1% of the equity securities of any such significant
competitor or entity without the consent of the Company if such
equity securities are listed on the New York Stock Exchange or
the American Stock Exchange or are quoted on NASDAQ. If the
employee shall violate such agreement, he shall forfeit his right
101
to any remaining installments to which he would otherwise have
been entitled pursuant to this Paragraph (b) and shall be
entitled to no further benefits under the Excess Benefit Plan or
the Supplemental Executive Retirement Plan. (v)ental Executive
Retirement Plan.
(v) The Company may in its sole discretion establish a revocable
trust as the Company's agent for payment of the installments
described in subparagraph (iii) above and transfer to the trustee
thereof all or any part of the stock payable pursuant to said
subparagraph (iii). If the Company establishes such a trust, the
Company shall retain the right to revoke such trust at any time
and for any reason. Such trust may provide that any dividends
paid on any shares of the Company's common stock held by the
trustee shall be paid out to the person or persons to whom the
stock is tentatively distributable as an additional benefit and
may also provide that the trustee in exercising voting rights
with respect to shares held by it shall follow any directions
that the trustee may receive from the person or persons to whom
the stock is tentatively distributable; provided, however, that
the Company shall have the right at any time to eliminate any
such provisions from the trust instrument. Neither the employee
nor his spouse, child, beneficiary or any other party (other than
the Company) shall have any interest in the assets of such trust
until amounts are actually distributed, and the employee and his
beneficiaries shall have the status of an unsecured general
creditor of the employee's employer with respect to any benefits
which become payable hereunder. If the necessary shares of the
Company's common stock are not held in a trust described in this
subparagraph (v) at the time that the employee or his beneficiary
or beneficiaries becomes entitled to receive an installment
pursuant to subparagraph (iii) above, such installment shall not
be paid in the form of shares of the Company's common stock, but
the employee or his beneficiary or beneficiaries shall instead
receive a cash payment of an amount equal to the value of the
shares that would otherwise have been paid (with the value of
each such share being based on the mean between the highest and
lowest quoted selling prices on the New York Stock Exchange -
Composite Transactions for the Company's common stock on the date
on which the installment would otherwise have been paid).
(vi) For the purposes of this Paragraph (b), an employee's beneficiary
or beneficiaries shall be the person or persons so designated by
the employee on a form filed with the Committee specifically
referring to this Paragraph (b). If no such effective designation
is on file with the Committee at the time of the employee's
death, the employee's beneficiary shall be his estate.of the
employee's death, the employee's beneficiary shall be his estate.
(c) An employee may elect pursuant to this Paragraph (c) that the benefit
payable under the Excess Benefit Plan and/or the Supplemental Executive
Retirement Plan with respect to him be payable in a form (other than in a
lump sum) differing from that in which the benefit with respect to him
shall be paid under the Pension Plan if such form of benefit under the
Excess Benefit Plan and/or the Supplemental Executive Retirement Plan is
(i) selected by the employee in a written application filed with the
Committee not less than 60 days prior to the date benefits payable to the
employee and his beneficiaries under the Pension Plan commence to be paid,
(ii) permissible under the Pension Plan and (iii) approved by the
Committee, and shall be subject to the same terms and conditions as would
102
apply to such benefit had it been paid under the Pension Plan except for
any term or condition limiting pursuant to the IRC limitations the benefits
that may be paid to any individual.
(d) Benefits under the Excess Benefit Plan and the Supplemental Executive
Retirement Plan shall be paid from the general assets of the employee's
employer and shall not be separately funded. No trust shall be established
in connection herewith except for any revocable trust established pursuant
to Paragraph (b) of this Section 5; and no assets of any employee's
employer shall be set aside, other than tentatively, for the purpose of
paying benefits under the Excess Benefit Plan or the Supplemental Executive
Retirement Plan.
(e) Anything in this Supplemental Retirement Program to the contrary
notwithstanding, in no event may the benefits hereunder be paid in the form
of a lump sum distribution other than as provided in Paragraph (b) of this
Section 5.
6. Committee Determinations
Any determination of the Committee with respect to (a) any employee's
eligibility for a benefit under the Excess Benefit Plan or the Supplemental
Executive Retirement Plan, (b) the amount of such benefit, (c) the form,
duration, terms and conditions of payment thereof, and (d) any other question or
matter arising under the Excess Benefit Plan or the Supplemental Executive
Retirement Plan, shall be final and binding on the employers, employees,
beneficiaries and all other persons.
7. Interest of Employees and Others
No employee, spouse, child, beneficiary or other party shall have any
interest in amounts due and payable under the Excess Benefit Plan or the
Supplemental Executive Retirement Plan until such amounts are actually
distributed and the employee and his beneficiaries shall have the status of an
unsecured general creditor of the employee's employer with respect to any
benefits which become payable under the Excess Benefit Plan or the Supplemental
Executive Retirement Plan.
8. Non-Qualified Plan
The Excess Benefit Plan and the Supplemental Executive Retirement Plan are
not intended to qualify under Section 401 of the Internal Revenue Code. The
protections, obligations, rights and duties described in the Internal Revenue
Code and applicable to employee pension plans qualifying under said Section 401
of the Code have no application to either the Excess Benefit Plan or the
Supplemental Executive Retirement Plan. The provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA") relating to employee pension
benefit plans and/or employee welfare benefit plans shall have no application to
the Excess Benefit Plan. In the case of the Supplemental Executive Retirement
Plan, the only provisions of ERISA that are applicable are certain reporting and
disclosure provisions of Part 1 of Subtitle B of Title I of ERISA and certain
provisions relating to administration and enforcement set forth in Part 5 of
Subtitle B of Title I of ERISA.
9. No Enlargement of Employee Rights
Nothing contained in the Excess Benefit Plan or the Supplemental Executive
Retirement Plan shall be deemed to give any employee the right to be retained in
the service of his employer or to interfere with the right of such employer to
discharge or retire any employee at any time.
103
10. Amendment and Termination
The Company, by action of its Board of Directors, reserves the right to
amend or terminate the Excess Benefit Plan or the Supplemental Executive
Retirement Plan, or both, at any time. References to provisions of the Pension
Plan contained herein relate to the Pension Plan as amended and restated
effective as of January 1, 1994. Any subsequent amendment to the Pension Plan,
to the extent it affects any reference thereto contained in the Excess Benefit
Plan and the Supplemental Executive Retirement Plan, shall be deemed to
concurrently amend and shall be given full force and effect under the Excess
Benefit Plan and the Supplemental Executive Retirement Plan, as if such
amendment were separately adopted hereunder.
104
EXHIBIT 10(k):
ENGELHARD COPORATION DIRECTORS AND EXECUTIVES
DEFERRED COMPENSATION PLAN (1990-1993)
105
[Conformed Copy -- Includes amendments
made in November 1993]
ENGELHARD CORPORATION DIRECTORS AND EXECUTIVES
DEFERRED COMPENSATION PLAN
[1990 - 1993]
1. Eligibility
Participation in this Plan is limited to (a) nonemployee directors of Engelhard
Corporation and (b) those key executive employees of Engelhard Corporation or
its subsidiary corporations ("Engelhard") who have been approved for
participation in this Plan by the Compensation Committee of the Board of
Directors of Engelhard ("the Committee") or, if the Committee so resolves, by
the Chief Executive Officer of Engelhard.
As a condition of eligibility, each person invited to participate may be
required to take a physical examination prescribed by Engelhard. The Committee
may exclude from participation anyone whose life, based on such examination, is
not medically insurable by an insurer of Engelhard's choice at standard premium
rates.
2. Deferral of Compensation
During such period or periods as may from time to time be selected by the
Committee each person eligible to participate in the Plan shall be given the
opportunity to elect irrevocably to defer a portion of the compensation that
otherwise would be payable to such person by Engelhard for services rendered
following the making of such election as a director or employee, as the case may
be. The period of deferral shall be four years, all deferrals shall be in
multiples of $1,000, the minimum amount deferred shall be $8,000 ($2,000 per
year), and the maximum amount deferred shall be 15 percent of an employee's
Compensation and 100% of an nonemployee director's Compensation. "Compensation"
for employees is the sum of (i) annualized base salary approved as of December
13, 1989 and (ii) regular or special bonus which was paid in February 1989. For
nonemployee directors, "Compensation" means annualized Director's fees,
attendance fees and Chairman's fees expected to be paid in or payable for 1990.
The amount deferred by an employee participant shall be deferred by means of
reductions in the employee's (i) base salary, (ii) bonus or (iii) a combination
of both base salary and bonus, as the participant shall elect, in four equal
annual amounts. The amount deferred by a nonemployee director shall be deferred
by means of reductions in the director's quarterly fees, in equal annual amounts
to the maximum extent possible, over the four-year deferral period.
The opportunity to make the foregoing deferral election shall be given to those
persons initially selected to participate in this Plan during the month of
December 1989, with respect of Compensation that would otherwise be payable (i)
to each nonemployee director for services rendered after receipt by Engelhard
during the above referenced election period of the director's irrevocable
election to defer and (ii) to each employee for services rendered and bonus paid
during the period February 1, 1990 through December 31, 1993. Thereafter, such
opportunity shall be given (a) to a person initially eligible to participate
only with respect to Compensation that would otherwise be payable to him during
the balance of the four-year period commencing in a calendar year following the
year in which the election is made, and (b) to a person later selected to
participate in this Plan with respect to Compensation that would otherwise be
payable to him for services rendered after the end of the calendar month in
which Engelhard receives his irrevocable election to defer.
106
3. Supplemental Retirement Benefit
If a nonemployee director participant continues to serve upon the Engelhard
Board of Directors for a period of four years following the commencement of the
deferral referred to in Section 2 hereof, or if an employee participant
continues in employment or to serve upon the Engelhard Board of Directors
throughout the designated four-year amount elected by him, then the participant
shall be entitled to receive from Engelhard 180 equal monthly payments in the
amount specified as a Supplemental Retirement Benefit in the Participation
Agreement. Unless the participant elects otherwise, such payments shall begin on
the first day of the month following the participant's 65th birthday or, if
later, the end of the four-year deferral period. If the commencement of payments
hereunder is subsequent to the first day of the month following a participant's
65th birthday, the participant shall elect, at the time of his deferral
election, to have Supplemental Retirement Benefits paid for (a) 180 months or
(b) the number of months between the commencement of Supplemental Retirement
Benefits and the month in which occurs the participant's 80th birthday. If the
participant's election results in payments of less than 180 months' duration,
the amount of each monthly payment shall be increased to provide an actuarially
equivalent benefit.
If the commencement of payments hereunder is prior to the participant's 65th
birthday, but in no case before attaining age 60, the participant shall elect,
at the time of his deferral election, to have Supplemental Retirement Benefits
paid for (a) 180 months or (b) the number of months between the commencement of
Supplemental Retirement Benefits and the month in which occurs the participant's
80th birthday. If the participant's election results in payments of greater than
180 months' duration, the amount of each monthly payment shall be decreased to
provide an actuarially equivalent benefit.
A participant may elect by written notice to Engelhard to irrevocably defer the
date on which Supplemental Retirement Benefits will commence to be paid to a
date specified in the deferral election (the "Additional Deferral Election").
The number of Supplemental Retirement Benefit payments to a participant shall
not change as a result of the Additional Deferral Election. However, the amount
of the Supplemental Retirement Benefit payments shall be adjusted to provide an
actuarially equivalent benefit. In order for an Additional Deferral Election to
be effective (i) the Additional Deferral Election must be made at least twelve
months prior to the date payments would otherwise commence in accordance with a
prior deferral election under this Plan, (ii) a participant who is an employee
must agree with Engelhard to remain employed by Engelhard (on the same terms and
conditions as in effect on the day preceding the additional period of
employment, subject to any changes mutually agreed to by the parties and subject
to the Company's right to terminate the participant's employment at any time)
for at least one additional year following the date of the Additional Deferral
Election, (iii) a participant who is a nonemployee director must agree with
Engelhard that, if nominated and elected, he will continue to serve as a
director of Engelhard for at least one year following the date of the Additional
Deferral Election, (iv) the Additional Deferral Election may not specify any
payment of amounts hereunder on a date prior to the date such payment or
delivery was otherwise due under this Plan, and (v) the deferral of commencement
of payments specified in the Additional Deferral Election must be for a period
of at least one year.
If a participant does not cause the deferral of the full amount elected by him
because the compensation payable to such participant has proved insufficient to
accommodate such full deferral, of if such participant retires under the
Retirement Income Plan for Salaried Employees of Engelhard Corporation
("Retirement Plan") prior to the end of such four-year period, or if such
participant ceases to be a participant within such four-year period because his
employment terminated or he ceases to be a nonemployee director, the amount
107
payable shall be reduced by multiplying such Benefit by a fraction (i) the
numerator of which shall be the aggregate amount actually deferred prior to
termination and (ii) the denominator of which shall be the full amount elected
for deferral. A participant whose employer ceases to be a subsidiary of
Engelhard shall be considered to have terminated his or her employment on the
ted his or her employment on the date such employer ceases to be a subsidiary.
date such employer ceases to be a subsidiary.
If a participant should die after payment of such Supplemental Retirement
Benefit begins but before receipt of the last of such payments, the amounts
unpaid shall be paid on their due dates to the participant's beneficiary
designated in the Participation Agreement or, failing such designation, to the
participant's legal representatives.
4. Survivor Benefit
If a participant should die prior to commencement of payment of the Supplemental
Retirement Benefit provided under Section 3 hereof, no Supplemental Retirement
Benefit shall become payable, but in lieu thereof the Survivor Benefit specified
in the Participation Agreement shall be paid to the participant's designated
legal representatives. Such Survivor Benefit shall be paid in 180 equal monthly
installments beginning on the first day of the month following the month in
which the participant's death occurs.
5. Amount of Supplemental Retirement and Survivor Benefits
The amount of Supplemental Retirement and Survivor Benefits to be included in
the Participation Agreements are set forth in the Schedule attached to this
Plan, but may be amended as specified in Section 7. In addition, if a
participant makes an effective Additional Deferral Election pursuant to Section
3 hereof, his Supplemental Retirement Benefits shall be adjusted in order to
provide an actuarially equivalent benefit.
6. Financing
Engelhard proposes to finance its obligations under this Plan by the purchase of
one or more policies of life insurance upon the lives of participants, with
Engelhard to be the owner of and beneficiary under such policies. No participant
shall have any right or interest in any such policy or the proceeds thereof or
in any other specific fund or asset of Engelhard or any participating subsidiary
as a result of the Plan. The rights of participants to benefit payments
hereunder shall be no greater than those of an unsecured creditor. Each
participant shall cooperate fully in the application by Engelhard for, and in
the maintenance of, any policy or policies of insurance upon such participant's
life.
7. Amendment or Termination
Subject to Section 9, the Board of Directors of Engelhard or the Committee may
terminate or amend this Plan at any time. The rights of any participant under a
Participation Agreement shall not be impaired by such termination or amendment
except that the Board of Directors may amend the amounts of Supplemental
Retirement and Survivor Benefits payable under the Plan to reflect any
adjustment to the assumed rate of earnings accrued on deferred amounts which the
Board of Directors in its sole judgement may deem necessary for Engelhard to
provide the plan benefits and cover its cost of borrowed money, in response to
changes in the tax laws or insurance policy dividend levels.
8. Administration
The Plan shall be administered by such person or persons as may be appointed
from time to time by the Committee. The Committee shall be responsible for any
108
interpretation of the Plan or the Participation Agreement that may be required.
The Committee shall have discretionary authority to determine eligibility to
participate and the amount of benefits to which participants may be entitled
under the Plan.
9. Change in Control
Notwithstanding anything contained in this Plan to the contrary, upon the
occurrence of a "Change In Control" (as hereinafter defined) neither the Board
of Directors of Engelhard, nor the Committee, nor any other party shall be
entitled to terminate or amend this Plan, or otherwise to impair the rights of
any participant hereunder even if there occurs a change in the tax laws or other
events adversely affecting the financing of the benefits payable under the Plan.
Engelhard or its successor hereby agrees to reimburse participants for any
expense incurred by them (including attorneys fees and costs) to enforce their
rights under this Section 9.
At the time a participant makes a deferral election pursuant to Section 2
hereof, he shall be required to make an irrevocable election as to whether, upon
the occurrence of a Change In Control, he wishes to receive a "lump sum payment"
(as hereinafter defined) or to remain subject to the deferral election so made
hereunder. If a participant elects a "lump sum payment" he shall also be
required to elect whether to receive such payment (a) immediately (i.e., within
90 days) following a Change In Control regardless of whether or not his
employment with Engelhard continues or (b) only upon termination of his
employment with Engelhard, prior to the date at which Supplemental Retirement
Benefits are to commence hereunder, following such Change In Control. "Lump sum
payment" shall mean a return of all principal amounts deferred by the
participant plus earnings accrued at a per annum rate of 11.0% (compounded
annually) to the elected Benefit Commencement Date.
A "Change In Control" for the purpose of the preceding paragraphs shall occur
if:
(A) twenty-five percent (25%) or more of Engelhard's outstanding
securities entitled to vote in election of directors ("voting
securities") shall be beneficially owned, directly or indirectly
(including options, conversion rights, warrants, and the like,
considered as if exercised), by any person or group of persons,
other than the groups owning of the same on January 1, 1990
(including their affiliates and associates); or
(B) the majority of the Board of Directors of Engelhard ceases to
consist of the membership in existence on January 1, 1990 or
successors nominated by said existing membership or their similar
successor; or
(C) any other event or transaction occurs as a result of which any
payment made pursuant to this Agreement could be treated as
contingent on such event or transaction for the purposes of
Section 280G of the Code.
Any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of voting securities owned by other holders shall
for the purposes of this Section 9 be deemed to constitute each party to such
agreement, arrangement or understanding as the owner of such securities.
Notwithstanding the foregoing subparagraph, an event or transaction shall not be
considered an "acquisition of a control interest" if such event or transaction
is approved by a majority of the membership of the Board of Directors of
Engelhard as in existence on January 1, 1990 or successors nominated by said
existing membership or their similar successors.
109
References to sections of the Code set forth in this Section 9 shall be deemed
to include references to successor sections of the Code or of any successor code
or statute.
10. Miscellaneous
The term "subsidiary" as used herein shall include any corporation, partnership
or joint venture controlled directly or indirectly by Engelhard and the term
"participating subsidiary" shall mean any subsidiary that adopts the Plan for
its subsidiaries with the consent of the Committee.
No amount payable under the Plan or any Participation Agreement shall be subject
to assignment, transfer, sale, pledge, encumbrance, alienation or charge by a
participant or the beneficiary of a participant except as may be required by
law.
"Actuarial equivalent" or "actuarially equivalent", as used herein, shall mean
the present value of benefits determined at a rate of interest of 11.0% per
annum, compounded annually.
11. Termination For Cause
Notwithstanding any other provision of the Plan or any Participation Agreement,
if an employee-participant is terminated by Engelhard "For Cause" (as
hereinafter defined), then the Supplemental Retirement Benefit to which such
participant is otherwise entitled pursuant to Section 3 hereof shall be paid in
an actuarially equivalent lump sum as soon as practicable following his
termination of employment; provided, however, that interest equivalents credited
to the amounts actually deferred by the participant shall be determined at a
rate of 6 percent per annum, compounded annually.
For the purpose of the preceding paragraph, a termination of employment shall be
"For Cause" if (a) the participant has been convicted of a felony by a court of
competent jurisdiction and such conviction is no longer subject to direct
appeal, or (b) the participant has been adjudicated by a court of competent
jurisdiction to be liable for a willful and material breach of the participant's
duties resulting in material injury to Engelhard and such adjudication is no
longer subject to direct appeal.
110
EXHIBIT 10(m):
SEPARATION AGREEMENT WITH ROBERT L. GUYETT
111
April 28, 1995
Mr. Robert Guyett
20 Parsonage Hill Road
Short Hills, New Jersey 07078
Dear Bob:
This letter is to confirm the terms under which your employment with Engelhard
will change.
Your last day of active employment with Engelhard will be May 4, 1995. Salary
continuation will begin on May 5, 1995 and will end upon the first to occur of
the following: (i) December 1, 1996, (ii) Orin Smith (whether or not an employee
of Engelhard) reasonably determines that you have acted or are acting contrary
to Engelhard's interest or, if Orin Smith is unable to make such a determination
because of death or incapacity, William Dugle reasonably determines that you
have acted or are acting contrary to Engelhard's interest, (iii) your death, or
(iv) you have secured alternate employment in violation of the provisions set
forth in Attachment 1. Salary continuation payments will be based on your
current salary of $31,190.00 per month. The salary continuation provided for in
this paragraph is in lieu of any and all payments under any and all other
severance or salary continuation plans and policies of Engelhard.
Only a portion of the salary continuation period may be included in determining
service under the Retirement Income Plan for Salaried Employees of Engelhard
Corporation as amended (the "RIP"). Since you will not have sufficient service
to vest under the RIP, you will not be entitled to receive a pension under the
RIP or under the Supplemental Excess Retirement Program of Engelhard Corporation
as amended (the "SERP"). Engelhard will however pay to you an amount equivalent
to the amount you would have received under the RIP and the SERP if your accrued
benefit under these plans was vested ("Alternate Retirement Plan"). Such amount
will be based on the period from September 23, 1991 to the date on which the
salary continuation described above terminates, will take into account the
salary continuation payments and cash bonus, if any, received by you during that
period, will be paid in the same manner as payments are made under the SERP,
will terminate on the same basis that benefits under the SERP terminate, and
will (as is the case with the SERP) be a nontransferable general unsecured
obligation of Engelhard.
Medical, life insurance and dental coverage will remain in effect until the end
of the period for which salary continuation payments are made or until you
secure alternate employment, whichever is earlier. These coverages, including
the termination of such coverages, will be in accordance with the terms and
provisions of each applicable plan. You may be able to extend certain coverages
at the end of the applicable period at your expense if you are not covered under
another plan.
All other coverages and benefits, such as, but not limited to long term
disability, short term disability (if you are receiving salary continuation
payments as provided for in this letter, such payments do not terminate because
of disability), salary deferral savings (401K plan), and vacation, cease on May
4, 1995.
Any vacation benefit for 1995 which is unused will be paid as a lump sum
following the end of the salary continuation period.
112
Stock options previously awarded to you under the Engelhard Corporation Stock
Option Plan of 1991 as amended ("Stock Option Plan") and shares previously
awarded to you under the Key Employees Stock Bonus Plan of Engelhard Corporation
as amended ("Stock Bonus Plan") will be subject to the terms of the respective
plans. If the shareholders at the Annual Shareholders Meeting of Engelhard
scheduled for May 1995 approve the amendment to the Stock Option Plan to permit
the Stock Option/Stock Bonus Committee (the "Committee") to extend the period
following termination of employment in which an individual may exercise options
previously awarded under the Stock Option Plan, Engelhard will recommend to the
Committee that the maximum extension be granted with respect to the options
previously awarded to you under the Stock Option Plan. Such recommendation to
the Committee will be made at the first regularly scheduled meeting of the
Committee following approval of the above described amendment to the Stock
Option Plan by the shareholders and receipt by Engelhard of the duplicate of
this letter signed by you. The Committee may approve such extension conditioned
on you not breaching any of your obligations set forth in this letter or its
attachments or exhibits. Shares previously awarded to you under the Stock Bonus
Plan and options previously awarded to you under the Stock Option Plan will
continue to vest and become exercisable in accordance with their existing
vesting schedule so long as you continue receiving salary continuation payments.
If the salary continuation period terminates on December 1, 1996 and not earlier
by reason of your acting or having acted contrary to Engelhard's interest, or by
reason of your death, or by reason of you having secured alternate employment,
and if you are entitled to receive or are receiving payment or payments under
the Alternate Retirement Plan described above, Engelhard has (i) recommended to
the Committee that it consider you as having terminated your employment due
solely to retirement under Section 6(c)(i) of the Stock Bonus Plan and that the
shares held in your account by the escrow agent under the Stock Bonus Plan
should vest on December 1, 1996 and (ii) recommended to the Committee that it
accelerate the right to exercise all of your remaining unexercisable options.
If an event or a series of events occur which make it certain that under no
circumstance will you or your beneficiary vest in all or a portion of the shares
previously awarded to you under the Stock Bonus Plan, then and only then will
Engelhard pay to you or your beneficiary an amount determined by Engelhard in
its judgment to be equal to the value of such shares previously awarded under
the Stock Bonus Plan and which will not, under any circumstance, vest.
Commencing on May 5, 1995 and ending on December 1, 1996 (or earlier as provided
for in Exhibit A) Engelhard engages you to perform the services described in
Exhibit A on the terms and conditions described in Exhibit A and you agree to
perform such services on such terms and conditions. Payments to be made to you
under the provisions of Exhibit A will be made to you in the same manner as
salary payments are made to Engelhard employees (there will be withholding for
federal and state income taxes, FICA, and other similar items and a W-2 Form
will be issued). Payments made to you under the provisions of Exhibit A will not
be included in determining your benefit, if any, under the Alternate Retirement
Plan.
You will be recommended for a 1995 cash bonus which will take into consideration
your contributions to Engelhard and will be based on the period January 1, 1995
to May 4, 1995. The amount of such cash bonus (pro rated for the applicable time
period) will be determined and paid by Engelhard in the same manner as cash
bonuses for 1995 are determined and paid for other Engelhard executives. This
amount, if any, will be included in determining your benefit, if any, under the
Alternate Retirement Plan.
113
During the period you receive salary continuation you may continue to use the
company car currently provided to you. Engelhard will maintain insurance with
respect to such vehicle; you will be responsible for all other costs and
expenses, including but not limited to routine maintenance. If the salary
continuation period terminates on December 1, 1996 and not earlier, you will be
offered the opportunity to purchase the car at its fair market value. If you
want to accept the offer, you must complete the purchase within ten days of the
offer being made by Engelhard.
In consideration for the extended salary continuation period, your engagement
under the terms and conditions of Exhibit A, the offer of the Alternate
Retirement Plan (subject to the terms set forth above) and the offer to
recommend that the Committee take certain actions (subject to the terms set
forth above), you will sign, have notarized and return the Release and Waiver
attached as Exhibit B. This will be done by no later than May 31, 1995. In
addition, if requested by Engelhard, you will re-execute and have notarized the
Release and Waiver promptly following the final salary continuation payment to
you. The additional consideration provided to you is subject to and contingent
on you executing and re-executing as described the Release and Waiver.
Your obligations and Engelhard's rights under the Confidentiality and Patent
Agreement which you executed remain in effect.
If the foregoing accurately sets forth the terms and conditions of your change
of employment with Engelhard, please sign the duplicate of this letter where
indicate and return it to me by May 31, 1995.
Very truly yours,
/s/William Dugle
----------------
William Dugle
READ AND AGREED TO
/s/Robert Guyett
- ----------------
Robert Guyett
114
EXHIBIT A
1. Engelhard engages you to provide financial management services, advice and
direction with respect to joint ventures of Engelhard, and such other services
as may be requested from time to time by Engelhard's Chief Executive Officer or
President on the terms and conditions set forth below. You agree to perform such
services as may be requested by Engelhard to the best of your ability.
2. During the period commencing on May 5, 1995 and ending on December 31, 1995
inclusive you will, if requested by Engelhard, provide at least 25 days of
services. As compensation for such services, Engelhard will pay you $50,000
payable as set forth in Schedule 1. If during such period Engelhard requests and
you perform more than 25 days of services, Engelhard will pay you $3000 for each
such day of services in excess of 25 days. Payment for such excess days of
services will be made by Engelhard within 30 days following written notice by
you to Engelhard that you have rendered such excess services during such period.
3. During the period commencing on January 1, 1996 and ending on December 1,
1996 inclusive you will, if requested by Engelhard, provide at least 25 days of
services. As compensation for such services, Engelhard will pay you $75,000
payable as set forth in Schedule 1. If during such period Engelhard requests and
you perform more than 25 days of services, Engelhard will pay you $3000 for each
such day of services in excess of 25 days. Payment for such excess days of
services will be made by Engelhard within 30 days following written notice by
you to Engelhard that you have rendered such excess services during such period.
4. From all payments made to you, Engelhard will withhold amounts for federal
and state income taxes, FICA and other similar items which Engelhard is
obligated to do so with respect to compensation paid to its employees. If your
engagement is terminated as provided for in Paragraph 10 below, payments which
are not due on or before the date of such termination will not become due,
however,
(i) if such termination is on or before December 31, 1995 (within the
period described in Paragraph 2 of this Exhibit A) and if the product of
(a) the number of days of service requested by Engelhard and actually
rendered by you during the period from May 5, 1995 to termination and
(b) $2,000.00 exceeds the amount paid to you with respect to the period
described in Paragraph 2 of this Exhibit, Engelhard will pay you the
amount of such excess, and
ii) if such termination is on or after January 1, 1996 and on or before
December 1, 1996 (within the period described in Paragraph 3 of this
Exhibit A) and if the product of (a) the number of days of service
requested by Engelhard and actually rendered by you during the period
from January 1, 1996 to termination and (b) $3,000.00 exceeds the amount
paid to you with respect to the period described in Paragraph 3 of this
Exhibit A, Engelhard will pay you the amount of such excess.
5. A day of rendering services consists of at least four hours during a calendar
day spent by you in performing the services requested by Engelhard. If you
perform less than four hours of services in any calendar day, you will be deemed
to have rendered a fraction of a day of services based on an four hour day. If
you perform more than four hours of services in a calendar day, you will,
irrespective of anything to the contrary, be deemed to have performed one day of
services.
115
6. Engelhard will reimburse you for all reasonable travel, lodging and food
expenses, as well as other routine business expenses necessarily incurred by you
while carrying out requested services as set forth in Paragraph 1 above. You
will submit to Engelhard reports of such expenses, accompanied by such receipts
as Engelhard may reasonably request.
7. You will keep in confidence, and will not use for your own benefit or for the
benefit of any third party and will not disclose or impart to others, any
proprietary material or information disclosed to you by Engelhard, including
information received by Engelhard in confidence from third parties as well as
any information developed by you at Engelhard's request, unless a release is
obtained in writing from Engelhard. You also agree, upon request, to return all
written or printed information or samples received from Engelhard.
8. If, during the term of your engagement, any inventions, improvements or
developments are made by you which result from or are related to the services
you perform for Engelhard, you will promptly disclose the same to Engelhard and
further agree to assign, and do hereby agree to assign, your full rights therein
to Engelhard, and to execute all necessary papers transferring such right, title
and interest to Engelhard. At Engelhard's request, and with out charge to
Engelhard, you will execute any and all additional documents which may be
required in connection with the filing of a patent, copyright, or trademark
application in the United States or elsewhere covering such inventions,
improvements or developments. Engelhard will pay the expenses connected with the
preparation and prosecution of all applications filed.
9. Your obligations under Paragraphs 7 and 8 above are in addition to and not in
lieu of any other obligations you may have to Engelhard and its affiliates and
subsidiaries with respect to such matters.
10. Your engagement by Engelhard will automatically
terminate upon the earliest of the following:
(i) December 1, 1996;
(ii) immediately upon notice from Engelhard to you that in
Engelhard's opinion (a) you have failed to perform in
accordance with the terms set forth in this EXHIBIT A or (b)
you have acted or are acting contrary to Engelhard's interest
as reasonably determined by Orin Smith (whether or not he is
an employee of Engelhard or, if Orin Smith is unable to make
such a determination because of death or incapacity, as
reasonably determined by William Dugle;
(iii) immediately upon your death, incapacity or
disability; or
(iv) immediately upon you securing alternate employment in
violation of the provisions of Attachment 1 to the letter to
which this EXHIBIT A is attached.
11. Notwithstanding any termination or expiration of this Agreement, Engelhard's
rights and your obligations under Paragraphs 7 and 8 hereof will survive such
termination or expiration and shall continue in full force and effect in
accordance with the terms hereof.
12. Each party's obligations and rights under this EXHIBIT A will be interpreted
and construed in accordance with the substantive laws of the State of New
Jersey.
116
SCHEDULE 1 PAYMENT DUE DATES
For services described in Paragraph 2 of EXHIBIT A:
On or before June 1, 1995 $7200.00
On or before July 1,1995 $7200.00
On or before August 1, 1995 $7200.00
On or before September 1, 1995 $7200.00
On or before October 1, 1995 $7200.00
On or before November 1, 1995 $7200.00
On or before December 1, 1995 $6800.00
--------
TOTAL $50000.00
For services described in Paragraph 3 of EXHIBIT A
On or before February 1, 1996 $7500.00
On or before March 1, 1996 $7500.00
On or before April 1, 1996 $7500.00
On or before May 1, 1996 $7500.00
On or before June 1, 1996 $7500.00
On or before July 1, 1996 $7500.00
On or before August 1, 1996 $7500.00
On or before September 1, 1996 $7500.00
On or before October 1, 1996 $7500.00
On or before November 1, 1996 $7500.00
--------
TOTAL $75000.00
From the amounts set forth above deductions will be made for federal and state
income tax withholding, FICA, and other similar items.
117
EXHIBIT B
RELEASE AND WAIVER
This Release and Waiver is made and entered into by Robert Guyett.
1. For the consideration described in the letter from Engelhard Corporation
dated April 28, 1995 (the "Letter") to which this Release and Waiver is
attached, I hereby knowingly and voluntarily release Engelhard Corporation, its
successors, assigns, affiliates, shareholders, officers, directors, agents and
employees from any and all claims, liabilities, causes of action and/or suits of
any nature whatsoever which I have or may have as of the date(s) I sign this
Release and Waiver, including but not limited to, any such claim that I have or
may have under the Americans With Disabilities Act (prohibiting disability
discrimination); Title VII of the Civil Rights Act of 1964 (prohibiting race,
sex, religion, color and national origin discrimination); the Civil Rights Act
of 1866 (prohibiting race discrimination); the laws of the State of New Jersey
and/or of any other federal or state law or common law or any legal or
contractual restrictions on Engelhard Corporation's right to termination my
employment. This Release and Waiver also includes any claims, causes of action,
and suits for breach of employment contract, severance pay, unemployment income
assistance and equal pay.
2. I also specifically release and waive any claims of age discrimination which
I may have as of the date(s) I sign this Release and Waiver against Engelhard
Corporation, its successors, assigns, affiliates, shareholders, officers,
directors, agents and employees under the Age Discrimination in Employment Act,
as amended, or any state statute which prohibits discrimination on the basis of
age.
3. I affirm that the only consideration for my agreement to sign, and my signing
of this Release and Waiver, is that described in the Letter, that there are no
other promises, representations, or agreements of any kind which have been made
to me or with me by any person or entity whatsoever to cause me to sign this
Release and Waiver except those fully expressed therein.
4. I agree to use my best efforts to prevent disclosure of the nature and terms
of this Release and Waiver, however, I may disclose this Release and Waiver to
my attorneys and/or financial advisors provided that prior to any such
disclosure I obtain the agreement of all such persons to whom disclosure is made
agree not to disclose the non-public nature and terms of this Release and
Waiver. I agree to avoid direct or indirect references to the nature of this
Release and Waiver.
5. I understand and affirm that this Release and Waiver does not constitute any
admission by Engelhard Corporation of a violation of any statute, ordinance, or
common law; and that the Release and Waiver shall not be deemed an admission,
finding, or indication for any purpose whatsoever that Engelhard Corporation
has at any time, including the present, acted contrary to the law or violated
any rights.
6. I understand and agree that this Release and Waiver may not be changed
orally. Any term of this Release and Waiver which is invalid or unenforceable
shall be ineffective to the extent of such invalidity or unenforceability,
without affecting in any way the remaining terms hereof.
118
7. I understand that I have been encouraged to seek legal advice and counsel
regarding the legal and other consequences of the terms and conditions set forth
in this document, that I have been advised I have twenty-one days in which to
decide to sign this document, and that I have seven days from the date I sign
this document to revoke it.
I have carefully read the foregoing Release and Waiver and affirm that I know
and understand the contents thereof. I execute this Release and Waiver of my own
free will.
/s/Robert Guyett
- ---------------------------
Robert Guyett
119
ATTACHMENT 1
PROCEDURE REGARDING ALTERNATE EMPLOYMENT
Before being employed by any entity or person you will notify in writing
Engelhard's Vice President of Human Resources. Such notice will include (i) the
name and address of the entity or individual which will employ you, (ii) a
detailed description of the services, responsibilities and functions with
respect to such employment, (iii) your title, if any, (iv) the title and name of
the individual to whom you will report and/or from whom you will receive
assignments, (v) the compensation offered with respect to such employment, and
(vi) such other information as Engelhard may request to enable it to make an
informed decision whether or not to object to such employment. Employment
includes but is not limited to (i) employment in a traditional employer/employee
relationship, (ii) employment as an independent contractor, (iii) the
engagement, hiring, retaining or other arrangement under which you provide
services to, or for the benefit of, or at the request of, an entity or
individual. Employment includes employment on a full time basis and employment
on a less than full time basis. Entity includes but is not limited to
corporations, companies, firms, partnerships, associations, unions, schools,
colleges, universities, governments, and agencies and departments of
governments. Engelhard has thirty days of receipt from you of a notice which
complies with the requirements for such notice set forth above to object to such
employment. Employment excludes directorships on Boards as of May 4, 1995 and
enterprises or investments in which you or your family are majority owners. If
Engelhard, in its judgment, has a reasonable basis for objecting to you entering
into such employment and if you enter into such employment, such employment is
alternate employment in violation of the provisions set forth in this Attachment
1.
Notification by you in one instance does not relieve you of the obligation to
subsequently notify Engelhard in other instances or of the obligation to notify
Engelhard of subsequent changes with respect to your employment.
120
EXHIBIT 10(o):
FORM OF AGREEMENT WITH KEY EMPLOYEES
IN THE EVENT OF AN ACQUISITION OF A
CONTROL INTEREST IN THE COMPANY,
DATED NOVEMBER 2, 1995
121
CHANGE IN CONTROL AGREEMENT
Agreement, made this 2nd day of November, 1995, by and between
ENGELHARD CORPORATION, a Delaware corporation (the "Company"), and (the
"Executive").
WHEREAS, the Executive is a key employee of the Company, and
WHEREAS, the Board of Directors of the Company (the "Board") considers
the maintenance of a sound management to be essential to protecting and
enhancing the best interests of the Company and its stockholders and recognizes
that the possibility of a change in control raises uncertainty and questions
among key employees and may result in the departure or distraction of such key
employees to the detriment of the Company and its stockholders; and
WHEREAS, the Board wishes to assure that it will have the continued
dedication of the Executive and the availability of his advice and counsel
notwithstanding the possibility, threat or occurrence of a bid to take over
control of the Company, and to induce the Executive to remain in the employ of
the Company; and
WHEREAS, the Executive is willing to continue to serve the Company
taking into account the provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, and the respective
covenants and agreements of the parties herein contained, the parties agree as
follows:
1. Potential Change in Control; Change in Control. Benefits
shall be provided hereunder only in the event there shall have occurred a
"Potential Change in Control" or "Change in Control," as such terms are defined
below, and the Executive's employment by the Company shall thereafter have
terminated in accordance with Section 2 below within the period beginning on the
date of the "Potential Change in Control" or "Change in Control" and ending on
the third anniversary of the date on which a "Change in Control" occurs (the
"Protection Period"); provided, however, that if the Protection Period begins by
reason of a "Potential Change in Control," and the Board determines in good
faith that a "Change in Control" is unlikely to occur, such Protection Period
shall end on the date of adoption of a resolution by the Board to that effect.
If any Protection Period terminates without the Executive's employment having
terminated, any "Potential Change in Control" or "Change in Control" subsequent
to such termination shall give rise to a new Protection Period. No benefits
shall be paid under this Agreement if the Executive's employment terminates
outside of a Protection Period.
(i) For purposes of this Agreement, a "Potential Change in
Control" shall be deemed to have occurred if:
(A) the Company enters into an agreement the
consummation of which, or the approval by shareholders of
which, would constitute a Change in Control;
(B) proxies for the election of directors are
solicited by anyone other than the Company;
(C) any Person (as defined below) publicly announces
an intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control; or
(D) any other event occurs which is deemed to be a
Potential Change in Control by the Board and the Board adopts
a resolution to the effect that a Potential Change in Control
has occurred.
122
(ii) For purposes of this Agreement, a "Change in Control" shall
mean:
(A) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person"), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
25% or more of either (1) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company (other
than by exercise of a conversion privilege); (ii) any
acquisition by the Company or any of its subsidiaries; (iii)
any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any of its
subsidiaries; (iv) any acquisition by any corporation with
respect to which, following such acquisition, more than 60%
of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors
is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Company Voting Securities immediately prior
to such acquisition in substantially the same proportions as
their ownership, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be; or (v) any acquisition
by a Person owning more than 25% of the Outstanding Company
Common Stock on the date hereof;
(B) During any period of two consecutive years,
individuals who, as of the beginning of such period,
constitute the Board (the "Incumbent Board"), cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the beginning of such period whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
123
(C) approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with
respect to which all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such reorganization,
merger or consolidation, do not, following such
reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(D) approval by the shareholders of the Company of
(1) a complete liquidation or dissolution of the Company or
(2) a sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition,
more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in
substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be.
2. Termination Following Change in Control. The Executive
shall be entitled to the benefits provided in Section 3 hereof upon any
termination of his employment with the Company a Protection Period, except a
termination of employment (a) because of his death, (b) because of a
"Disability", (c) by the Company for "Cause", or (d) by the Executive other than
for "Good Reason."
(i) Disability. The Executive's employment shall be deemed to have
terminated because of a "Disability" if the Executive applies for and
is determined to be eligible to receive disability benefits under the
Company's Long-Term Disability Plan.
124
(ii) Cause. Termination of the Executive's employment by the
Company for "Cause" shall mean termination by reason of the
Executive's willful engagement in conduct which involves dishonesty or
moral turpitude in connection with his employment and which is
demonstrably and materially injurious to the financial condition or
reputation of the Company. An act or omission shall be deemed
"willful" only if done, or omitted to be done, in bad faith and
without reasonable belief that it was in the best interest of the
Company. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to the Executive a written notice of termination
from the Compensation Committee (the "Committee") after reasonable
notice to the Executive and an opportunity for him, together with his
counsel, to be heard before the Committee, finding that, in the good
faith opinion of such Committee, he was guilty of conduct set forth
above in the first sentence of this subsection (ii) and specifying the
particulars in detail.
(iii) Without Cause. The Company may terminate the employment of the
Executive without Cause during a Protection Period only by giving the
Executive written notice of termination to that effect. In that event,
the Executive's employment shall terminate on the last day of the
month in which such notice is given (or such later date as may be
specified in such notice), and the benefits set forth in Section 3
hereof shall be provided to the Executive.
(iv) Good Reason. Termination of employment by the
Executive for "Good Reason" shall mean termination:
(A) within a Protection Period, if there has occurred
a reduction by the Company in the Executive's base salary in
effect immediately before the beginning of the Protection
Period or as increased from time to time thereafter;
(B) within a Protection Period, and without the
Executive's written consent, if the Company has required the
Executive to be relocated anywhere in excess of thirty-five
(35) miles from his office location immediately before the
beginning of the Protection Period, except for required travel
on the business of the Company to an extent substantially
consistent with the Executive's business travel obligations
immediately before the beginning of the Protection Period;
(C) within a Protection Period, if there has occurred
a failure by the Company to maintain plans providing benefits
at least as beneficial as those provided by any benefit or
compensation plan (including, without limitation, any
incentive compensation plan, bonus plan or program,
retirement, pension or savings plan, stock option plan,
restricted stock plan, life insurance plan, health and dental
plan and disability plan) in which the Executive is
participating immediately before the beginning of the
Protection Period, or if the Company has taken any action
which would adversely affect the Executive's participation in
or reduce the Executive's benefits under any of such plans or
deprive the Executive of any material fringe benefit enjoyed
125
by him immediately before the beginning of the Protection
Period, or if the Company has failed to provide the Executive
with the number of paid vacation days to which he would be
entitled in accordance with the normal vacations policy of the
Company as in effect immediately before the beginning of the
Protection Period; provided, however, that a reduction in
benefits under the Company's tax-qualified retirement, pension
or savings plans or its life insurance plan, health and dental
plan, disability plans or other insurance plans which
reduction applies equally to all participants in the plans and
has a de minimis effect on the Executive shall not constitute
"Good Reason" for termination by the Executive;
(D) within a Protection Period, if the Company has
reduced in any manner which the Executive considers important
the Executive's title, job authorities or responsibilities
immediately before the beginning of the Protection Period;
(E) within a Protection Period, if the Company has
failed to obtain the assumption of the obligations contained
in this Agreement by any successor as contemplated in Section
8(c) hereof; or
(F) within a Protection Period, if there occurs any
purported termination of the Executive's employment by the
Company which is not effected pursuant to a written notice of
termination as described in subsection (ii) or (iii) above.
The Executive shall exercise his right to terminate his
employment for Good Reason by giving the Company a written notice of termination
specifying in reasonable detail the circumstances constituting such Good Reason.
In that event, the Executive's employment shall terminate on the last day of the
month in which such notice is given.
A termination of employment by the Executive within a
Protection Period shall be for Good Reason if one of the occurrences specified
in this subsection (iv) shall have occurred, notwithstanding that the Executive
may have other reasons for terminating employment, including employment by
another employer which the Executive desires to accept. For purposes of this
subsection (iv), any good faith determination of "Good Reason" made by the
Executive shall be conclusive.
3. Benefits Upon Termination Within Protection
Period. If, within a Protection Period, the Executive's employment
by the Company shall be terminated (a) by the Company other than for Cause or
because of a Disability, or (b) by the Executive for Good Reason, the Executive
shall be entitled to the benefits provided for below:
(i) The Company shall pay to the Executive through the
date of the Executive's termination of employment salary at the rate
then in effect, together with salary in lieu of vacation accrued to
the date on which his employment terminates, in accordance with the
standard payroll practices of the Company;
126
(ii) The Company shall pay to the Executive an amount equal to the
product of (A) the total incentive pool under the Company's Incentive
Compensation Plan (the "Incentive Plan") for the Executive for the
calendar year that includes the date of the Change in Control,
determined based on the Executive's annual base salary in effect at
the time of the Change in Control, the Executive's "Pool
Development Factors" (i.e., cash bonus factor, equity pool factor and
stock options factor) under the Incentive Plan for the year that
includes the date of the Change in Control, and the highest
"Performance Multiplier" attributable solely to Company performance
under the Incentive Plan for each Pool Development Factor in respect
of any of the 3 calendar years immediately preceding the
calendar year that includes the date of the Change in Control (or if
less than 3 full calendar years have elapsed since December 31, 1994,
the number of full calendar years that have elapsed since that date),
multiplied by (B) a fraction, the numerator of which is the number of
days elapsed in the calendar year through the date of termination of
the Executive's employment, and the denominator of which is 365; and
such payment shall be made in a lump sum within 10 business days after
the date of such termination of employment;
(iii) The Company shall pay to the Executive an amount equal to the
sum of (A) his highest annual salary in effect during any of the 36
months immediately preceding his date of termination of employment,
and (B) the total incentive pool under the Incentive Plan for the
Executive for the calendar year that includes the date of the Change
in Control, determined based on the Executive's annual base salary in
effect at the time of the Change in Control, the Executive's "Pool
Development Factors" (i.e, cash bonus factor, equity pool factor and
stock options factor) under the Incentive Plan for the year that
includes the date of the Change in Control, and the highest
"Performance Multiplier" attributable solely to Company performance
under the Incentive Plan for each Pool Development Factor in respect
of any of the 3 calendar years immediately preceding the calendar year
that includes the date of the Change in Control (or if less than 3
full calendar years have elapsed since December 31, 1994, the number
of full calendar years that have elapsed since that date); and such
payment shall be made in a lump sum within 10 business days after the
date of such termination of employment;
(iv) The Company shall continue to cover the Executive and his
dependents under, or provide the Executive and his dependents with
insurance coverage no less favorable than, the Company's life,
disability, health, dental or other employee welfare benefit plans or
programs (as in effect on the day immediately preceding the Protection
Period or, at the option of the Executive, on the date of termination
of his employment) for a period equal to the lesser of (x) one year
following the date of termination or (y) until the Executive is
provided by another employer with benefits substantially comparable to
the benefits provided by such plans or programs; and
(v) Following the Executive's termination of employment, the
Company shall treat the Executive as if he had continued participation
and benefit accruals under the Company's Supplemental Retirement
Program or a successor plan (as in effect on the date immediately
preceding the Protection Period) for one year following the date of
termination, or the Company shall provide an equivalent benefit
outside such plan with the result that an additional year of age and
service shall be granted to the Executive.
127
4. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plans, practices, policies or
programs provided by the Company or any of its subsidiaries and for
which the Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any stock
option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, practice, policy or
program of the Company or any of its subsidiaries at or subsequent to
the date of termination of the Executive's employment shall be payable
in accordance with such plan, practice, policy or program.
5. Full Settlement; Legal Expenses. The Company's obligation
to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or
action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement. The
Company agrees to pay, upon written demand therefor by the Executive,
all legal fees and expenses which the Executive may reasonably incur
as a result of any dispute or contest (regardless of the outcome
thereof) by or with the Company or others regarding the validity or
enforceability of, or liability under, any provision of this Agreement
(including as a result of any contest by the Executive about the
amount of any payment hereunder), plus in each case interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the
Internal Revenue Code of 1986, as amended (the "Code"). In any such
action brought by the Executive for damages or to enforce any
provisions of this Agreement, he shall be entitled to seek both legal
and equitable relief and remedies, including, without limitation,
specific performance of the Company's obligations hereunder, in his
sole discretion.
6. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment
or distribution made, or benefit provided (including, without
limitation, the acceleration of any payment, distribution or benefit),
by the Company to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6) (a "Payment") would
be subject to the excise tax imposed by Section 4999 of the Code (or
any similar excise tax) or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all
taxes (including any Excise Tax) imposed upon the Gross-Up Payment and
any interest or penalties imposed with respect to such taxes, the
Executive retains from the Gross-Up Payment an amount equal to the
Excise Tax imposed upon the Payments.
128
(b) Subject to the provisions of Section 6(c), all
determinations required to be made under this Section 6, including
determination of whether a Gross-Up Payment is required and of the
amount of any such Gross-Up Payment, shall be made by Coopers &
Lybrand (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within
15 business days of the date of termination of the Executive's
employment, if applicable, or such earlier time as is requested by the
Company, provided that any determination that an Excise Tax is payable
by the Executive shall be made on the basis of substantial authority.
The initial Gross-Up Payment, if any, as determined pursuant to this
Section 6(b), shall be paid to the Executive within five business days
of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall furnish the Executive with a written opinion that
he has substantial authority not to report any Excise Tax on his
Federal income tax return. Any determination by the Accounting Firm
meeting the requirements of this Section 6(b) shall be binding upon
the Company and the Executive; subject only to payments pursuant to
the following sentence based on a determination that additional
Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such
additional payments are referred to herein as the "Gross-Up
Underpayment").
In the event that the Company exhausts its remedies pursuant to Section 6(c) and
the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Gross-Up Underpayment that has
occurred and any such Gross-Up Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive. The fees and disbursements of
the Accounting Firm shall be paid by the Company.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but not later than
ten business days after the Executive receives written notice of such
claim and shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to
contest such claim and that it will bear the costs and provide the
indemnification as required by this sentence, the Executive shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
129
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 6(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income
tax, including interest or penalties with respect thereto, imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to the payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 6(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of Section 6(c)) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section
6(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such determination,
then any obligation of the Executive to repay such advance shall be
forgiven and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
7. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or
any of its subsidiaries, and their respective businesses, which shall
have been obtained by the Executive during the Executive's employment
by the Company or any of its subsidiaries and which shall not be or
become public knowledge (other than by acts of the Executive or his
representatives in violation of this Agreement). After the date of
termination of the Executive's employment with the Company, the
Executive shall not, without the prior written consent of the Company,
130
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 7
constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
8. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives or successor(s) in interest.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
------------------------
------------------------
------------------------
If to the Company:
Engelhard Corporation
101 Wood Avenue
Iselin, New Jersey 08830-0770
Attention: Arthur A. Dornbusch, II
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
131
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(d) The Company may withhold from any amounts
payable under this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision thereof.
(f) This Agreement contains the entire understanding
of the Company and the Executive with respect to the subject matter hereof but
does not supersede or override the provisions of any stock option, employee
benefit or other plan, program, policy or practice in which Executive is a
participant or under which Executive is a beneficiary.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed as of the day and year first above written.
Executive:
/s/ Martin J. Connor, Jr. /s/ Ian P. McLean
------------------------------ -----------------------------
Name: Martin J. Connor, Jr. Name: Ian P. McLean
/s/ Arthur A. Dornbusch, II /s/ William E. Nettles
------------------------------ -----------------------------
Name: Arthur A. Dornbusch, II Name: William E. Nettles
/s/ William M. Dugle /s/ Barry W. Perry
------------------------------ -----------------------------
Name: William M. Dugle Name: Barry W. Perry
/s/ Joseph E. Gonnella /s/ Robert J. Schaffhauser
------------------------------ -----------------------------
Name: Joseph E. Gonnella Name: Robert J. Schaffhauser
/s/ William R. Gustafson /s/ Michael A. Sperduto
------------------------------ -----------------------------
Name: William R. Gustafson Name: Michael A. Sperduto
/s/ L. Donald LaTorre /s/ Francis X. Vitale, Jr.
------------------------------ -----------------------------
Name: L. Donald LaTorre Name: Francis X. Vitale, Jr.
/s/ James A. Martin
------------------------------
Name: James A. Martin
ENGELHARD CORPORATION
By:/s/ Arthur A. Dornbusch, II
-----------------------------
Name: Arthur A. Dornbusch, II
Title: V.P., General Counsel & Secretary
Attest:
/s/ William M. Dugle
- -----------------------------
Name: William M. Dugle
Title: V.P., Human Resources
132
EXHIBIT 21:
SUBSIDIARIES OF THE REGISTRANT
133
Subsidiaries of the Registrant
------------------------------
Jurisdiction Under Which
Name of Subsidiary Incorporated Or Organized
- ------------------ -------------------------
Engelhard West, Inc. California
Engelhard Canada, Ltd. Canada
Engelhard Industries International, Ltd. Canada
Engelhard Technologies, Ltd. Canada
EC Delaware, Inc. Delaware
Engelhard Asia Pacific, Inc. Delaware
Engelhard C Cubed Corporation Delaware
Engelhard DT, Inc. Delaware
Engelhard EM Holding Company Delaware
Engelhard Energy Corporation Delaware
Engelhard MC, Inc. Delaware
Engelhard Metal Plating, Inc. Delaware
Engelhard Pollution Control, Inc. Delaware
Engelhard Power Marketing, Inc. Delaware
Engelhard Strategic Investments, Inc. Delaware
Engelhard Supply Corporation Delaware
Mustang Property Corporation Delaware
Porocel Corporation Delaware
Engelhard Pigments OY Finland
Engelhard Pyrocontrole S.A. France
Engelhard S.A. France
Engelhard Holdings GmbH Germany
Engelhard Process Chemicals GmbH Germany
Engelhard Technologies GmbH Germany
Engelhard Technologies Verwaltsung GmbH Germany
Engelhard Italiana S.P.A. Italy
Engelhard S.R.L. Italy
Engelhard Metals Japan, Ltd. Japan
Engelhard DeMeern, B.V. The Netherlands
Engelhard Netherlands, B.V. The Netherlands
Engelhard Terneuzen, B.V. The Netherlands
Harshaw Chemical Company New Jersey
Engelhard South Africa, Ltd. South Africa
Engelhard Metals A.G. Switzerland
Engelhard International, Ltd. United Kingdom
Engelhard Limited United Kingdom
Engelhard Metals, Ltd. United Kingdom
Engelhard Sales, Ltd. United Kingdom
Engelhard Technologies, Ltd. United Kingdom
Sheffield Smelting Co., Ltd. United Kingdom
Engelhard Export Corporation U.S. Virgin Islands
Name of Affiliate
- -----------------
Engelhard-CLAL, Ltd. Partnership Delaware
Heraeus Engelhard Electrochemistry Delaware
Metreon Delaware
Engelhard-CLAL SAS France
NE Chemcat Corporation Japan
Engelhard/Colortronics New Jersey
Engelhard/ICC Pennsylvania
Hankuk-Engelhard Corporation South Korea
Acreon Catalysts Texas
The names of other subsidiaries have been omitted since such subsidiaries, if
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary as that term is defined in Rule 12b-2 (17 CFR 240.12b-2)
promulgated under the Securities Exchange Act of 1934.
134
EXHIBIT 23:
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
135
Consent of Independent Accountants
----------------------------------
We consent to the incorporation by reference in the registration statements
of Engelhard Corporation on Form S-8 (File Nos. 2-72830, 2-81559, 2-84477, 2-
89747, 33-28540, 33-37724, 33-40365, 33-40338 and 33-43934) of our report dated
February 6, 1996, on our audits of the consolidated financial statements of
Engelhard Corporation and Subsidiaries, as of December 31, 1995 and 1994, and
for the years ended December 31, 1995, 1994 and 1993, which report is included
in this Annual Report on Form 10-K.
COOPERS & LYBRAND, L.L.P.
New York, New York
March 22, 1996
136
EXHIBIT 24:
POWERS OF ATTORNEY
------------------
137
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
NOW, THEREFORE, the undersigned in his capacity as a director of ENGELHARD
CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R. Smith, or either
of them individually, his true and lawful attorney to execute in his name, place
and stead, in his capacity as a director of ENGELHARD CORPORATION, said Form
10-K and any and all amendments to said Form 10-K and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorney shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person. The undersigned hereby ratifies and approves the acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
March 22, 1996.
/s/ Linda G. Alvarado
_____________________________
Linda G. Alvarado
138
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
NOW, THEREFORE, the undersigned in his capacity as a director of ENGELHARD
CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R. Smith, or either
of them individually, his true and lawful attorney to execute in his name, place
and stead, in his capacity as a director of ENGELHARD CORPORATION, said Form
10-K and any and all amendments to said Form 10-K and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorney shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person. The undersigned hereby ratifies and approves the acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
March 22, 1996.
/s/ Marion H. Antonini
________________________________
Marion H. Antonini
139
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
NOW, THEREFORE, the undersigned in his capacity as a director of ENGELHARD
CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R. Smith, or either
of them individually, his true and lawful attorney to execute in his name, place
and stead, in his capacity as a director of ENGELHARD CORPORATION, said Form
10-K and any and all amendments to said Form 10-K and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorney shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person. The undersigned hereby ratifies and approves the acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
March 22, 1996.
/s/ L. Donald LaTorre
________________________________
L. Donald LaTorre
140
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
NOW, THEREFORE, the undersigned in his capacity as a director of ENGELHARD
CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R. Smith, or either
of them individually, his true and lawful attorney to execute in his name, place
and stead, in his capacity as a director of ENGELHARD CORPORATION, said Form
10-K and any and all amendments to said Form 10-K and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorney shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person. The undersigned hereby ratifies and approves the acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
March 22, 1996.
/s/ Anthony W. Lea
________________________________
Anthony W. Lea
141
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
NOW, THEREFORE, the undersigned in his capacity as a director of ENGELHARD
CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R. Smith, or either
of them individually, his true and lawful attorney to execute in his name, place
and stead, in his capacity as a director of ENGELHARD CORPORATION, said Form
10-K and any and all amendments to said Form 10-K and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorney shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person. The undersigned hereby ratifies and approves the acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
March 22, 1996.
/s/ James V. Napier
______________________________
James V. Napier
142
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
NOW, THEREFORE, the undersigned in his capacity as a director of ENGELHARD
CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R. Smith, or either
of them individually, his true and lawful attorney to execute in his name, place
and stead, in his capacity as a director of ENGELHARD CORPORATION, said Form
10-K and any and all amendments to said Form 10-K and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorney shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person. The undersigned hereby ratifies and approves the acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
March 22, 1996.
/s/ Norma T. Pace
________________________________
Norma T. Pace
143
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
NOW, THEREFORE, the undersigned in his capacity as a director of ENGELHARD
CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R. Smith, or either
of them individually, his true and lawful attorney to execute in his name, place
and stead, in his capacity as a director of ENGELHARD CORPORATION, said Form
10-K and any and all amendments to said Form 10-K and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorney shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person. The undersigned hereby ratifies and approves the acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
March 22, 1996.
/s/ Reuben F. Richards
_________________________________
Reuben F. Richards
144
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
NOW, THEREFORE, the undersigned in his capacity as a director of ENGELHARD
CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R. Smith, or either
of them individually, his true and lawful attorney to execute in his name, place
and stead, in his capacity as a director of ENGELHARD CORPORATION, said Form
10-K and any and all amendments to said Form 10-K and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorney shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person. The undersigned hereby ratifies and approves the acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
March 22, 1996.
/s/ Henry R. Slack
_______________________________
Henry R. Slack
145
ENGELHARD CORPORATION
Form 10-K
Power of Attorney
WHEREAS, ENGELHARD CORPORATION intends to file with the Securities and
Exchange Commission under the Securities Act of 1934 an Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
NOW, THEREFORE, the undersigned in his capacity as a director of ENGELHARD
CORPORATION hereby appoints Arthur A. Dornbusch, II and Orin R. Smith, or either
of them individually, his true and lawful attorney to execute in his name, place
and stead, in his capacity as a director of ENGELHARD CORPORATION, said Form
10-K and any and all amendments to said Form 10-K and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Said attorney shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable to be done in the
premises, as fully to all intents and purposes as the undersigned might or could
do in person. The undersigned hereby ratifies and approves the acts of said
attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
March 22, 1996.
/s/ Douglas G. Watson
_________________________________
Douglas G. Watson
146
EXHIBIT 99(a):
ANNUAL REPORT ON FORM 11-K OF THE
SALARY DEFERRAL SAVINGS PLAN OF ENGELHARD CORPORATION
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
147
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
--- TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____ to _____
_______________
SALARY DEFERRAL SAVINGS PLAN OF ENGELHARD CORPORATION
-----------------------------------------------------
(Full title of the plan)
ENGELHARD CORPORATION
(Exact name of issuer as specified in its charter)
101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
- ----------------------------------- ---------
(Address of principal executive offices) (Zip code)
DELAWARE 22-1586002
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
148
Salary Deferral Savings Plan
of Engelhard Corporation
Table of Contents
Page
----
Report of Independent Accountants 150
Statements of Financial Condition 151-154
at December 31, 1995 and 1994
Statements of Income and Changes in Plan Equity 155-160
for each of the three years in the period
ended December 31, 1995
Notes to Financial Statements 161-165
Supplemental Schedule
Schedule of Investments at December 31, 1995 and 1994 166-167
149
Report of Independent Accountants
To the Pension and Employee Benefit Plans Committee of Engelhard Corporation:
We have audited the financial statements and the financial statement
schedule of the Salary Deferral Savings Plan of Engelhard Corporation listed in
the index on Page 149 of this Form 11-K. These financial statements and the
financial statement schedule are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these financial statements and
the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Salary Deferral Savings
Plan of Engelhard Corporation as of December 31, 1995 and 1994, and the results
of its operations for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles. In addition,
in our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND, L.L.P.
New York, New York
March 22, 1996
150
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Financial Condition
at December 31, 1995
(Page 1 of 2)
Company Fixed Equity
Stock Income Growth Balanced Index
Fund Fund Fund Fund Fund
----------- ----------- ------------ ----------- -----------
Assets:
Investments, at fair value
(combined cost of $85,942,063) $46,246,875 $26,317,093 $17,593,710 $6,167,856 $6,062,770
Interest Receivable - - - - -
Contributions Receivable:
Participants 151,244 132,029 119,096 37,258 41,370
Engelhard Corporation 153,549 - - - -
Promissory notes from participants 79,450 64,332 42,556 10,968 12,357
----------- ----------- ----------- ---------- ----------
Total assets $46,631,118 $26,513,454 $17,755,362 $6,216,082 $6,116,497
=========== =========== =========== ========== ==========
Plan Equity:
Plan equity $46,631,118 $26,513,454 $17,755,362 $6,216,082 $6,116,497
=========== =========== =========== ========== ==========
See Accompanying Notes to Financial Statements
151
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Financial Condition
at December 31, 1995
(Page 2 of 2)
International Small Short-Term
Growth Cap Bond Loan
Fund Fund Fund Fund Combined
------------- -------- ---------- --------- ----------
Assets:
Investments, at fair value
(combined cost of $85,942,063) $1,913,421 $991,499 $431,943 $ - $105,725,167
Interest Receivable - - - 44,142 44,142
Contributions Receivable:
Participants 14,404 8,636 6,496 - 510,533
Engelhard Corporation - - - - 153,549
Promissory notes from participants 3,445 1,074 860 6,735,711 6,950,753
---------- -------- -------- ---------- ------------
Total assets $1,931,270 $1,001,209 $439,299 $6,779,853 $113,384,144
========== ========== ======== ========== ============
Plan Equity:
Plan equity $1,931,270 $1,001,209 $439,299 $6,779,853 $113,384,144
========== ========== ======== ========== ============
See Accompanying Notes to Financial Statements
152
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Financial Condition
at December 31, 1994
(Page 1 of 2)
Company Fixed Equity
Stock Income Growth Balanced Index
Fund Fund Fund Fund Fund
----------- ----------- ------------ ----------- -----------
Assets:
Investments, at fair value
(combined cost of $73,997,123) $34,108,513 $24,825,964 $12,805,735 $3,613,654 $3,917,960
Interest Receivable - - - - -
Contributions Receivable:
Participants 145,296 173,960 121,295 39,043 43,141
Engelhard Corporation 162,752 - - - -
Promissory notes from participants 66,461 64,625 42,836 8,393 11,302
----------- ----------- ----------- ---------- ----------
Total assets $34,483,022 $25,064,549 $12,969,866 $3,661,090 $3,972,403
=========== =========== =========== ========== ==========
Plan Equity:
Plan equity $34,483,022 $25,064,549 $12,969,866 $3,661,090 $3,972,403
=========== =========== =========== ========== ==========
See Accompanying Notes to Financial Statements
153
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Financial Condition
at December 31, 1994
(Page 2 of 2)
International Small Short-Term
Growth Cap Bond Loan
Fund Fund Fund Fund Combined
------------- -------- ---------- --------- ----------
Assets:
Investments, at fair value
(combined cost of $73,997,123) $1,319,115 $575,560 $129,389 $ - $81,295,890
Interest Receivable - - - 37,337 37,337
Contributions Receivable:
Participants 14,245 7,251 3,086 - 547,317
Engelhard Corporation - - - - 162,752
Promissory notes from participants 4,119 858 138 6,101,494 6,300,226
---------- -------- -------- ---------- -----------
Total assets $1,337,479 $583,669 $132,613 $6,138,831 $88,343,522
========== ======== ======== ========== ===========
Plan Equity:
Plan equity $1,337,479 $583,669 $132,613 $6,138,831 $88,343,522
========== ======== ======== ========== ===========
See Accompanying Notes to Financial Statements
154
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Income and Changes in Plan Equity
for the Year Ended December 31, 1995
(Page 1 of 2)
Company Fixed Equity
Stock Income Growth Balanced Index
Fund Fund Fund Fund Fund
----------- --------- ---------- ----------- ----------
Net Investment Income:
Dividends $ 683,039 $ - $ 2,013,963 $ 409,498 $ 335,464
Interest - 1,636,089 - - -
----------- ---------- ----------- ----------- -----------
683,039 1,636,089 2,013,963 409,498 335,464
Contributions and Other Receipts:
Participants 2,210,503 2,705,387 2,122,363 737,191 749,363
Engelhard Corporation 2,022,021 - - - -
----------- ---------- ----------- ----------- -----------
4,232,524 2,705,387 2,122,363 737,191 749,363
Net realized gain on disposition
of investments 7,957,850 - 488,866 152,986 180,313
Unrealized appreciation
of investments 8,611,633 - 1,636,933 897,851 1,030,133
Transaction fees (1,419) (2,150) (1,870) (1,199) (468)
Distributions (3,238,715) (2,854,171) (1,265,670) (551,976) (318,675)
Engelhard-CLAL transfer (2,234,380) (1,129,363) (560,518) (151,684) (185,833)
Other transfers (3,862,436) 1,093,113 351,429 1,062,325 353,797
------------ ------------ ----------- ----------- -----------
12,148,096 1,448,905 4,785,496 2,554,992 2,144,094
Plan equity, beginning of year 34,483,022 25,064,549 12,969,866 3,661,090 3,972,403
============ =========== =========== =========== ===========
Plan equity, end of year $46,631,118 $26,513,454 $17,755,362 $6,216,082 $6,116,497
=========== =========== =========== =========== ===========
See Accompanying Notes to Financial Statements
155
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Income and Changes in Plan Equity
for the Year Ended December 31, 1995
(Page 2 of 2)
International Small Short-Term
Growth Cap Bond Loan
Fund Fund Fund Fund Combined
----------- ----------- --------- ----------- ------------
Net Investment Income:
Dividends $ 50,844 $ 34,996 $ 23,037 $ - $ 3,550,841
Interest - - - 459,759 2,095,848
--------- ----------- -------- ----------- ------------
50,844 34,996 23,037 459,759 5,646,689
Contributions and Other Receipts:
Participants 368,645 232,027 107,594 - 9,233,073
Engelhard Corporation - - - - 2,022,021
--------- ----------- -------- ----------- ------------
368,645 232,027 107,594 - 11,255,094
Net realized gain on disposition
of investments 19,830 20,017 7,499 - 8,827,361
Unrealized appreciation
of investments 157,174 139,051 11,562 - 12,484,337
Transaction fees (403) (4,666) (88) - (12,263)
Distributions (69,464) (18,616) (12,697) (289,692) (8,619,676)
Engelhard-CLAL transfer (100,247) (26,574) (12,330) (139,991) (4,540,920)
Other transfers 167,412 41,305 182,109 610,946 -
----------- ----------- --------- ----------- ------------
593,791 417,540 306,686 641,022 25,040,622
Plan equity, beginning of year 1,337,479 583,669 132,613 6,138,831 88,343,522
---------- ---------- --------- ----------- ------------
Plan equity, end of year $1,931,270 $1,001,209 $439,299 $6,779,853 $113,384,144
========== ========== ========= =========== ============
See Accompanying Notes to Financial Statements
156
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Income and Changes in Plan Equity
for the Year Ended December 31, 1994
(Page 1 of 2)
Company Fixed Equity
Stock Income Growth Balanced Index
Fund Fund Fund Fund Fund
----------- --------- ---------- ----------- ----------
Net Investment Income:
Dividends $ 608,346 $ - $ 1,213,105 $ 151,352 $ 189,845
Interest - 1,398,526 - - -
----------- ---------- ----------- ----------- ----------
608,346 1,398,526 1,213,105 151,352 189,845
Contributions and Other Receipts:
Participants 1,803,369 2,660,700 1,876,428 677,426 673,552
Engelhard Corporation 1,936,926 - - - -
----------- ---------- ----------- ----------- ----------
3,740,295 2,660,700 1,876,428 677,426 673,552
Net realized gain (loss) on disposition
of investments 2,634,392 - 130,567 (6,196) (23,868)
Unrealized depreciation
of investments (5,724,239) - (1,390,755) (240,578) (193,126)
Transaction fees - - - - -
Distributions (1,965,498) (1,287,496) (777,796) (242,086) (197,125)
Transfers 1,178,464 (1,597,562) (413,787) (656,820) (325,891)
----------- ----------- ----------- ---------- ----------
471,760 1,174,168 637,762 (316,902) 123,387
Plan equity, beginning of year 34,011,262 23,890,381 12,332,104 3,977,992 3,849,016
=========== =========== =========== ========== ==========
Plan equity, end of year $34,483,022 $25,064,549 $12,969,866 $3,661,090 $3,972,403
=========== =========== =========== ========== ==========
See Accompanying Notes to Financial Statements
157
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Income and Changes in Plan Equity
for the Year Ended December 31, 1994
(Page 2 of 2)
International Small Short-Term
Growth Cap Bond Loan
Fund Fund Fund Fund Combined
------------- -------- ---------- ---------- ----------
Net Investment Income:
Dividends $ 17,377 $ 21,781 $ 9,597 $ - $ 2,211,403
Interest - - - 406,575 1,805,101
--------- -------- -------- ---------- -----------
17,377 21,781 9,597 406,575 4,016,504
Contributions and Other Receipts:
Participants 205,629 98,611 39,441 - 8,035,156
Engelhard Corporation - - - - 1,936,926
--------- -------- -------- ---------- -----------
205,629 98,611 39,441 - 9,972,082
Net realized gain (loss) on disposition
of investments 17,532 (6,140) (6,195) - 2,740,092
Unrealized depreciation
of investments (47,882) (24,161) (4,245) - (7,624,986)
Transaction fees - (4,507) - - (4,507)
Distributions (32,704) (3,571) (55) (234,573) (4,740,904)
Transfers 441,663 193,458 (647) 1,181,122 -
---------- -------- -------- ---------- -----------
601,615 275,471 37,896 1,353,124 4,358,281
Plan equity, beginning of year 735,864 308,198 94,717 4,785,707 83,985,241
---------- -------- -------- ---------- -----------
Plan equity, end of year $1,337,479 $583,669 $132,613 $6,138,831 $88,343,522
========== ======== ======== ========== ===========
See Accompanying Notes to Financial Statements
158
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Income and Changes in Plan Equity
for the Year Ended December 31, 1993
(Page 1 of 2)
Company Fixed Equity
Stock Income Growth Balanced Index
Fund Fund Fund Fund Fund
----------- ---------- ----------- ------------ ------------
Net Investment Income:
Dividends $ 584,067 $ - $ 1,031,656 $ 253,323 $ 426,995
Interest - 1,448,963 - - -
------------ ---------- ----------- ------------ ------------
584,067 1,448,963 1,031,656 253,323 426,995
Contributions and Other Receipts:
Participants 1,713,424 2,796,904 1,897,508 694,171 679,466
Engelhard Corporation 1,894,785 - - - -
------------ ---------- ----------- ------------ ------------
3,608,209 2,796,904 1,897,508 694,171 679,466
Net realized gain (loss) on disposition
of investments 5,249,467 - 244,480 49,311 50,364
Unrealized appreciation
(depreciation) of investments (3,244,954) - 608,307 93,192 (63,307)
Transaction fees - - - - -
Distributions (3,606,977) (3,486,635) (898,613) (246,877) (156,276)
Transfers (2,007,764) (1,479,828) 382,003 765,068 292,475
----------- ----------- ----------- ---------- ----------
582,048 (720,596) 3,265,341 1,608,188 1,229,717
Plan equity, beginning of year 33,429,214 24,610,977 9,066,763 2,369,804 2,619,299
----------- ----------- ----------- ---------- ----------
Plan equity, end of year $34,011,262 $23,890,381 $12,332,104 $3,977,992 $3,849,016
=========== =========== =========== ========== ==========
See Accompanying Notes to Financial Statements
159
Salary Deferral Savings Plan
of Engelhard Corporation
Statement of Income and Changes in Plan Equity
for the Year Ended December 31, 1993
(Page 2 of 2)
International Small Short-Term
Growth Cap Bond Loan
Fund Fund Fund Fund Combined
------------- --------- -------- ----------- -----------
Net Investment Income:
Dividends $ 4,951 $ 18,255 $ 1,000 $ - $ 2,320,247
Interest - - - 313,424 1,762,387
--------- -------- ------- ----------- -----------
4,951 18,255 1,000 313,424 4,082,634
Contributions and Other Receipts:
Participants 15,673 5,675 1,066 - 7,803,887
Engelhard Corporation - - - - 1,894,785
--------- -------- ------- ----------- -----------
15,673 5,675 1,066 - 9,698,672
Net realized gain (loss) on disposition
of investments 930 - (557) - 5,593,995
Unrealized appreciation
(depreciation) of investments 50,206 (9,632) (6) - (2,566,194)
Transaction fees - (3,012) - - (3,012)
Distributions - - - (161,198) (8,556,576)
Transfers 664,104 296,912 93,214 993,816 -
--------- -------- ------- ---------- -----------
735,864 308,198 94,717 1,146,042 8,249,519
Plan equity, beginning of year - - - 3,639,665 75,735,722
--------- -------- ------- ---------- -----------
Plan equity, end of year $735,864 $308,198 $94,717 $4,785,707 $83,985,241
========= ======== ======= ========== ===========
See Accompanying Notes to Financial Statements
160
Notes to Financial Statements
Note 1 - Description of the Plan
The Salary Deferral Savings Plan of Engelhard Corporation (the Plan), as
amended and restated as of January 1, 1995, is designed to provide eligible
employees of Engelhard Corporation (the Company) an opportunity to save part of
their income by having the Company reduce their compensation and contribute the
amount of the reduction to the Plan on a tax deferred or post-tax basis.
The following plan description is provided for general information
purposes. Participants of the Plan should refer to the plan document for more
detailed and complete information.
Eligibility
- -----------
Except as specifically included or excluded by the Board of Directors of the
Company (the Board), United States salaried employees of the Company and its
wholly-owned (directly or indirectly) domestic subsidiaries and all non-
collectively bargained hourly employees who have completed at least one year of
service, as defined, are eligible to participate in the Plan as of the first day
of the month in which they meet the year of service requirement.
Contributions
- -------------
The Plan permits eligible employees participating in the Plan the opportunity
to defer up to 15 percent of their compensation, as defined, subject to certain
restrictions and limitations, and to have that amount contributed to the Plan
and the related taxes deferred. Effective January 1, 1995 employees may
contribute, subjected to certain restrictions and limitations, up to 10 percent
of compensation to the Plan on a post-tax basis.
Matching Contributions
- ----------------------
The Company will contribute, on a monthly basis, subject to certain limitations
and exclusions, either cash or common stock of the Company in an amount equal to
50 percent of the first 6 percent contributed by the Participants.
Investments
- -----------
All contributions to the Plan are held and invested by Vanguard Fiduciary Trust
Company (the Trustee). The Trustee maintains eight separate investment funds
within the Plan:
a) The Company Stock Fund, consists of assets invested or held
for investment in the common stock of the Company. In the
event the assets cannot be immediately invested in Company
common stock, the funds are invested in short-term securities
pending investment in Company common stock.
b) The Fixed Income Fund, consists of assets invested in shares
of the Vanguard Variable Rate Investment Contract Trust.
In the event the assets cannot be immediately invested in
such shares or deposited as specified above, the assets are
invested in direct obligations of the United States
Government or agencies thereof or in obligations guaranteed
as to the payment of principal and interest by the United
States Government.
161
c) The Growth Fund, consists of assets invested in the
Vanguard Windsor Fund, which invests primarily in common
stocks for the purpose of realizing long-term growth of
capital and income.
d) The Balanced Fund, consists of assets invested in the
Vanguard Asset Allocation Fund, which invests in stocks,
bonds and cash reserves for the purpose of maximizing long-
term total return with less volatility than a portfolio of
common stock.
e) The Equity Index Fund, consists of assets invested in
the Vanguard Quantitative Portfolio, which invests primarily
in common stocks for the purpose of realizing a total return
greater than the Standard & Poor's 500 Index while
maintaining fundamental investment characteristics similar to
such Index.
f) The International Growth Fund, consists of assets
invested in shares of the Vanguard International Growth
Portfolio or such other mutual fund or funds which invest
primarily in common stocks of companies based outside the
United States that have above-average growth potential for
the purpose of realizing long-term capital growth.
g) The Small Cap Fund, consists of assets invested in
shares of the Vanguard Small Capitalization Stock Fund or
such other mutual fund or funds which invest primarily in
common stocks of small-sized companies for the purpose of
providing a comparatively low-cost method of passively
capturing the investment returns of small-sized companies and
attempting to provide investment results that parallel the
performance of the unmanaged Russell 2000 Small Stock Index.
h) The Short-Term Bond Fund, consists of assets invested
in shares of the Short-Term Corporate Portfolio of the
Vanguard Fixed Income Securities Fund or such other mutual
fund or funds which invest primarily in relatively short
maturity investment-grade bonds for the purpose of providing
a level of current income consistent with a two to three year
average maturity while helping to preserve capital.
Participants have the right to elect, subject to restrictions, the
investment fund or funds in which their contributions are invested. All matching
contributions are initially invested in the Company Stock Fund and participants
are restricted from transferring these contributions to other funds for one
year. Participants at their discretion may elect to transfer to another fund
their unrestricted balance. Their unrestricted balance is determined as the sum
of all prior year's unrestricted balances plus 25 percent of the prior year's
restricted balance after the addition of the prior year's restricted matching
contributions.
162
The number of Participants in each fund was as follows at December 31:
Participants
1995 1994
----- -----
Company Stock Fund 1,954 1,958
Fixed Income Fund 1,267 1,377
Growth Fund 1,074 1,069
Balanced Fund 550 532
Equity Index Fund 560 546
International Growth Fund 227 169
Small Cap Fund 139 93
Short-Term Bond Fund 97 42
The total number of Participants in the Plan was less than the sum of the
number of Participants shown above because many were participating in more than
one fund.
The number of units representing Participant interests in each fund and the
related net asset value per unit were as follows at December 31:
Participant Interests
Company Fixed Equity Int'l Small Short-Term
Stock Income Growth Balanced Index Growth Cap Bond
Fund Fund Fund Fund Fund Fund Fund Fund
--------- ---------- --------- --------- --------- -------- -------- ---------
1995:
Units 1,263,716 26,513,454 1,221,979 364,794 306,591 128,580 53,800 40,303
Value per unit $36.90 $1.00 $14.53 $17.04 $19.95 $15.02 $18.61 $10.90
1994:
Units 1,365,664 25,064,549 1,030,172 270,391 255,295 99,589 38,937 12,875
Value per unit $25.25 $1.00 $12.59 $13.54 $15.56 $13.43 $14.99 $10.30
Vesting
- -------
Participants at all times have a fully vested and non-forfeitable interest in
their contributions and in the matching contributions allocated to their
account.
Loan Provision
- --------------
The Plan allows Participants who have participated in the Plan for at least one
year to borrow funds from their accounts, subject to certain terms and
conditions, at a reasonable interest rate as determined by the Company in
accordance with applicable laws and regulations.
163
Termination
- -----------
The Company, although it expects and intends to continue the Plan indefinitely,
has reserved the right of the Board to terminate or amend the Plan.
Distributions and Withdrawals
- -----------------------------
All distributions and withdrawals from the Plan are made to Participants in a
lump sum cash payment except those amounts distributed from the Company Stock
Fund which may, at the Participant's election, be paid in full shares of the
Company's Common Stock with cash paid in lieu of fractional shares.
Note 2 - Accounting Policies
The accounts of the Plan are maintained on an accrual basis. Purchases and
sales of investments are reflected on a trade date basis. Assets of the Plan are
valued at fair value. Gains and losses on distributions to participants and
sales of investments are based on average cost.
Note 3 - Income Tax Status
The Plan and the Trust created thereunder are intended to qualify under
Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended (the
Code) and the Plan includes a cash or deferred arrangement intended to meet the
requirements of Section 401(k) of the Code. The Internal Revenue Service has
issued a favorable determination letter as to the Plan's qualified status under
the Code. Amounts contributed to and earned by the Plan are not taxed to the
employee until a distribution from the Plan is made. In addition, the unrealized
appreciation on any shares of common stock of the Company distributed to an
employee is not taxed until the time of disposition of such shares.
Note 4 - Administrative Expenses
All expenses of the Plan are paid for by the Company. Investment advisory
fees for portfolio management of the Vanguard funds are paid directly from fund
earnings. Advisory fees are included in the fund expense ratio and will not
reduce the assets of the Plan. Brokerage commissions paid to purchase Engelhard
Corporation common stock are being charged against each participant's fund unit
value.
Note 5 - Concentrations of Credit Risk
Financial instruments which potentially subject the Plan to concentrations
of credit risk consist principally of investment contracts with insurance and
other financial institutions. The Plan places its investment contracts with
high-credit quality institutions and, by policy, limits the amount of credit
exposure to any one financial institution.
Note 6 - Investments
Investments in the Common Stock of the Company are valued at the
readily-available, quoted market price as of the valuation date and investments
in Vanguard Funds are valued based on the quoted net asset value (redemption
value) of the respective investment company as of the valuation date.
164
The net realized gain (loss) on disposition of investments was computed as follows:
Net realized gain (loss)
Company Equity Int'l Small Short-term
Stock Growth Balanced Index Growth Cap Bond
Fund Fund Fund Fund Fund Fund Fund Combined
----------- ---------- ---------- ---------- ---------- -------- ---------- -----------
Year ended December 31, 1995 -
Amount realized $24,124,107 $8,054,704 $1,643,052 $2,510,943 $ 978,933 $241,891 $3,870,866 $41,424,496
Cost-average 16,166,257 7,565,838 1,490,066 2,330,630 959,103 221,874 3,863,367 32,597,135
Net realized gain 7,957,850 488,866 152,986 180,313 19,830 20,017 7,499 8,827,361
Year ended December 31, 1994 -
Amount realized $11,272,424 $3,528,936 $1,484,485 $ 905,598 $1,108,288 $173,577 $2,798,485 $21,271,793
Cost-average 8,638,032 3,398,369 1,490,681 929,466 1,090,756 179,717 2,804,680 18,531,701
Net realized gain (loss) 2,634,392 130,567 (6,196) (23,868) 17,532 (6,140) (6,195) 2,740,092
Year ended December 31, 1993 -
Amount realized $13,588,122 $4,719,228 $ 766,445 $ 618,340 $ 129,032 $ 3,013 $ 463,549 $20,287,729
Cost-average 8,338,655 4,474,748 717,134 567,976 128,102 3,013 464,106 14,693,734
Net realized gain (loss) 5,249,467 244,480 49,311 50,364 930 - (557) 5,593,995
The net unrealized appreciation (depreciation) of investments held was computed as follows:
Net unrealized appreciation (depreciation)
Company Equity Int'l Small Short-term
Stock Growth Balanced Index Growth Cap Bond
Fund Fund Fund Fund Fund Fund Fund Combined
--------- ---------- ---------- ---------- -------- --------- ---------- -----------
Year ended December 31, 1995 -
Balance, beginning of year $ 8,110,942 $ (721,758) $ 18,391 $ (73,088) $ 2,324 $(33,793) $(4,251) $ 7,298,767
Net change 8,611,633 1,636,933 897,851 1,030,133 157,174 139,051 11,562 12,484,337
Balance, end of year 16,722,575 915,175 916,242 957,045 159,498 105,258 7,311 19,783,104
Year ended December 31, 1994 -
Balance, beginning of year $13,835,181 $ 668,997 $ 258,969 $ 120,038 $ 50,206 $ (9,632) $ (6) $14,923,753
Net change (5,724,239) (1,390,755) (240,578) (193,126) (47,882) (24,161) (4,245) (7,624,986)
Balance, end of year 8,110,942 (721,758) 18,391 (73,088) 2,324 (33,793) (4,251) 7,298,767
Year ended December 31, 1993 -
Balance, beginning of year $17,080,135 $ 60,690 $ 165,777 $ 183,345 - - - $17,489,947
Net change (3,244,954) 608,307 93,192 (63,307) $ 50,206 $ (9,632) $ (6) (2,566,194)
Balance, end of year 13,835,181 668,997 258,969 120,038 50,206 (9,632) (6) 14,923,753
Note 7 - Engelhard-CLAL Transfer
In connection with the formation of a joint venture (Engelhard-CLAL) on
June 21, 1995, the Plan transferred assets of $4,540,920 to the
Engelhard-CLAL-LP Salary Deferral Savings Plan.
165
Schedule I
Salary Deferral Savings Plan
of Engelhard Corporation
Schedule of Investments
at December 31, 1995
Approximate
Cost Market Value
----------- ------------
Company Stock Fund
- ------------------
Common Stock of $29,299,124 $46,021,699
Engelhard Corporation
(2,115,940 shares)
Cash equivalents 225,176 225,176
Fixed Income Fund
- -----------------
Vanguard Variable Rate 26,317,093 26,317,093
Investment Contract Trust
Growth Fund
- -----------
Vanguard Windsor Fund 16,678,535 17,593,710
Balanced Fund
- -------------
Vanguard Asset Allocation Fund 5,251,614 6,167,856
Equity Index Fund
- -----------------
Vanguard Quantitative Portfolio 5,105,725 6,062,770
International Growth Fund
- -------------------------
Vanguard International Growth Portfolio 1,753,923 1,913,421
Small Cap Fund
- --------------
Vanguard Small Capitalization Stock Fund 886,241 991,499
Short-term Bond Fund
- --------------------
Vanguard Fixed Income Securities Fund 424,632 431,943
----------- -----------
Total $85,942,063 $105,725,167
166
Schedule I
Salary Deferral Savings Plan
of Engelhard Corporation
Schedule of Investments
at December 31, 1994
Approximate
Cost Market Value
----------- ------------
Company Stock Fund
- ------------------
Common Stock of $25,694,373 $33,805,315
Engelhard Corporation
(1,519,340 shares)
Cash equivalents 303,198 303,198
Fixed Income Fund
- -----------------
Vanguard Variable Rate 24,825,964 24,825,964
Investment Contract Trust
Growth Fund
- -----------
Vanguard Windsor Fund 13,527,493 12,805,735
Balanced Fund
- -------------
Vanguard Asset Allocation Fund 3,595,263 3,613,654
Equity Index Fund
- -----------------
Vanguard Quantitative Portfolio 3,991,048 3,917,960
International Growth Fund
- -------------------------
Vanguard International Growth Portfolio 1,316,791 1,319,115
Small Cap Fund
- --------------
Vanguard Small Capitalization Stock Fund 609,353 575,560
Short-term Bond Fund
- --------------------
Vanguard Fixed Income Securities Fund 133,640 129,389
----------- -----------
Total $73,997,123 $81,295,890
167
EXHIBIT 99(b):
ANNUAL REPORT ON FORM 11-K OF THE
ENGELHARD CORPORATION SAVINGS PLAN FOR HOURLY PAID EMPLOYEES
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
168
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____ to _____
------------------
ENGELHARD CORPORATION SAVINGS PLAN FOR HOURLY PAID EMPLOYEES
------------------------------------------------------------
(Full title of the plan)
ENGELHARD CORPORATION
---------------------
(Exact name of issuer as specified in its charter)
101 WOOD AVENUE, ISELIN, NEW JERSEY 08830
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
DELAWARE 22-1586002
- ------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
169
Engelhard Corporation Savings Plan for Hourly Paid Employees
Table of Contents
Page
----
Report of Independent Accountants 171
Statements of Financial Condition 172-173
at December 31, 1995 and 1994
Statements of Income and Changes in 174-176
Plan Equity for each of the three years
in the period ended December 31, 1995
Notes to Financial Statements 177-181
Supplemental Schedule
Schedule of Investments at December 31, 1995 and 1994 182-183
170
Report of Independent Accountants
---------------------------------
To the Pension and Employee Benefit Plans Committee of Engelhard Corporation:
We have audited the financial statements and the financial statement
schedule of the Engelhard Corporation Savings Plan for Hourly Paid Employees
listed in the index on Page 170 of this Form 11-K. These financial statements
and the financial statement schedule are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Engelhard Corporation
Savings Plan for Hourly Paid Employees as of December 31, 1995 and 1994, and the
results of its operations for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
In addition, in our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND, L.L.P.
New York, New York
March 22, 1996
171
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statement of Financial Condition
at December 31, 1995
Company Stock Fixed Income Explorer Balanced Equity Index
Fund Fund Fund Fund Fund Combined
------------- ------------ -------- --------- ----------- ----------
Assets:
- ------
Investments, at fair value
(combined cost of $5,565,821) $3,268,979 $1,896,933 $ - $534,471 $534,274 $6,234,657
Contributions Receivable:
Participants 94,432 50,779 240 15,589 16,217 177,257
Engelhard Corporation 14,143 - - - - 14,143
---------- ---------- ---- -------- -------- ----------
Total assets $3,377,554 $1,947,712 $240 $550,060 $550,491 $6,426,057
========== ========== ==== ======== ======== ==========
Plan Equity:
- -----------
Plan equity $3,377,554 $1,947,712 $240 $550,060 $550,491 $6,426,057
========== ========== ==== ======== ======== ==========
See Accompanying Notes to Financial Statements
172
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statement of Financial Condition
at December 31, 1994
Company Stock Fixed Income Balanced Equity Index
Fund Fund Fund Fund Combined
------------- ------------ --------- ------------ --------
Assets:
- ------
Investments, at fair value
(combined cost of $4,320,203) $1,776,767 $1,791,769 $339,848 $370,627 $4,279,011
Contributions Receivable:
Participants 65,023 61,281 14,710 15,832 156,846
Engelhard Corporation 10,896 - - - 10,896
---------- ---------- -------- -------- ----------
Total assets $1,852,686 $1,853,050 $354,558 $386,459 $4,446,753
========== ========== ======== ======== ==========
Plan Equity:
- -----------
Plan equity $1,852,686 $1,853,050 $354,558 $386,459 $4,446,753
========== ========== ======== ======== ==========
See Accompanying Notes to Financial Statements
173
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statement of Income and Changes in Plan Equity
for the Year Ended December 31, 1995
Company Stock Fixed Income Explorer Balanced Equity Index
Fund Fund Fund Fund Fund Combined
------------- ------------ -------- -------- ------------ ----------
Net Investment Income:
Dividends $ 44,408 $ - $ - $ 37,551 $ 29,920 $ 111,879
Interest - 116,203 - - - 116,203
---------- ---------- ---- -------- -------- ----------
44,408 116,203 - 37,551 29,920 228,082
Contributions and Other Receipts:
Participants 844,731 612,871 240 158,253 171,213 1,787,308
Engelhard Corporation 157,288 - - - - 157,288
---------- ---------- ---- -------- -------- ----------
1,002,019 612,871 240 158,253 171,213 1,944,596
Net realized gain on disposition
of investments 271,164 - - 19,410 20,555 311,129
Unrealized appreciation
of investments 541,991 - - 76,481 91,556 710,028
Distributions (176,911) (99,178) - (22,520) (23,575) (322,184)
Engelhard-CLAL transfer (413,389) (314,571) - (71,269) (93,118) (892,347)
Other transfers 255,586 (220,663) - (2,404) (32,519) -
---------- ---------- ---- ------- -------- ----------
1,524,868 94,662 240 195,502 164,032 1,979,304
Plan equity, beginning of year 1,852,686 1,853,050 - 354,558 386,459 4,446,753
---------- ---------- ---- -------- -------- ----------
Plan equity, end of year $3,377,554 $1,947,712 $240 $550,060 $550,491 $6,426,057
========== ========== ==== ======== ======== ==========
See Accompanying Notes to Financial Statements
174
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statement of Income and Changes in Plan Equity
for the Year Ended December 31, 1994
Company Stock Fixed Income Balanced Equity Index
Fund Fund Fund Fund Combined
------------- ------------ -------- ------------ ----------
Net Investment Income:
Dividends $ 29,296 $ - $ 13,253 $ 15,197 $ 57,746
Interest - 89,922 - - 89,922
---------- ---------- -------- -------- ----------
29,296 89,922 13,253 15,197 147,668
Contributions and Other Receipts:
Participants 588,339 600,822 136,847 143,867 1,469,875
Engelhard Corporation 102,931 - - - 102,931
---------- ---------- -------- -------- ----------
691,270 600,822 136,847 143,867 1,572,806
Net realized gain (loss) on disposition
of investments 35,474 - (449) (764) 34,261
Unrealized depreciation
of investments (227,285) - (17,786) (14,913) (259,984)
Distributions (81,296) (174,062) (5,232) (23,285) (283,875)
Transfers 19,306 (8,855) (8,905) (1,546) -
---------- ---------- -------- -------- ----------
466,765 507,827 117,728 118,556 1,210,876
Plan equity, beginning of year 1,385,921 1,345,223 236,830 267,903 3,235,877
---------- ---------- -------- -------- ----------
Plan equity, end of year $1,852,686 $1,853,050 $354,558 $386,459 $4,446,753
========== ========== ======== ======== ==========
See Accompanying Notes to Financial Statements
175
Engelhard Corporation Savings Plan for Hourly Paid Employees
Statement of Income and Changes in Plan Equity
for the Year Ended December 31, 1993
Company Stock Fixed Income Balanced Equity Index
Fund Fund Fund Fund Combined
------------- ------------ ---------- ------------ ----------
Net Investment Income:
Dividends $ 19,236 $ - $ 14,212 $ 28,382 $ 61,830
Interest - 60,754 - - 60,754
---------- ---------- -------- -------- ----------
19,236 60,754 14,212 28,382 122,584
Contributions and Other Receipts:
Participants 499,512 570,358 102,059 115,863 1,287,792
Engelhard Corporation 91,659 - - - 91,659
---------- ---------- -------- -------- ----------
591,171 570,358 102,059 115,863 1,379,451
Net realized gain on disposition
of investments 9,261 - 891 1,785 11,937
Unrealized appreciation (depreciation)
of investments 5,899 - 5,214 (5,111) 6,002
Distributions (29,484) (35,054) (3,370) (9,479) (77,387)
Transfers 60,345 (48,051) (3,909) (8,385) -
---------- ---------- -------- -------- ----------
656,428 548,007 115,097 123,055 1,442,587
Plan equity, beginning of year 729,493 797,216 121,733 144,848 1,793,290
---------- ---------- -------- -------- ----------
Plan equity, end of year $1,385,921 $1,345,223 $236,830 $267,903 $3,235,877
========== ========== ======== ======== ==========
See Accompanying Notes to Financial Statements
176
Notes to Financial Statements
Note 1 - Description of the Plan
The Engelhard Corporation Savings Plan for Hourly Paid Employees (the
Plan), effective as of January 1, 1991, is designed to provide eligible
employees of Engelhard Corporation (the Company) an opportunity to save part of
their income by having the Company reduce their compensation and contribute the
amount of the reduction to the Plan on a tax deferred basis.
The following plan description is provided for general information
purposes. Participants of the Plan should refer to the Plan document for more
detailed and complete information.
Eligibility
- -----------
Except as specifically included or excluded by the Board of Directors of the
Company (the Board), the hourly paid employees of Engelhard Corporation
represented by Locals 223, 237 and 238, Independent Workers of North America,
Local 1668 of the United Automobile Workers, Local 170 of the United Steel
Workers of America, Local 8-406 of the Oil, Chemical and Atomic Workers
International Union, Local 663 of the International Chemicals Workers Union and
as of January 1, 1996 Local 73 of the International Chemical Workers Union who
have completed at least one year of service, as defined, are eligible to
participate in the Plan as of the first day of the month in which they meet the
year of service requirement.
Contributions
- -------------
The Plan permits eligible employees participating in the Plan (the Participants)
to elect to reduce their compensation, as defined, by a whole percentage
thereof, subject to limitations, and to have that amount contributed to the Plan
and the related taxes deferred.
Matching Contributions
- ----------------------
The Company will contribute, on a monthly basis and subject to limitations and
exclusions, either cash or common stock of the Company in an amount, ranging
from 10 percent to 25 percent, depending on the union contract, of the amount
contributed by the Participants. Effective January 1, 1996 the maximum Company
contribution was increased to 50 percent, depending on the union contract, of
the amount contributed by the Participants.
Investments
- -----------
All contributions to the Plan are held and invested by Vanguard Fiduciary Trust
Company (the Trustee). The Trustee maintains five separate investment funds
within the Plan:
a) The Company Stock Fund consists of assets invested or
held for investment in the common stock of the Company. In
the event the assets cannot be immediately invested in
Company common stock, the funds are invested in short-term
securities pending investment in Company common stock.
177
b) The Fixed Income Fund consists of assets invested in
shares of the Vanguard Variable Rate Investment Contract
Trust. In the event the assets cannot be immediately
invested in such shares or deposited as specified above, the
assets are invested in direct obligations of the United
States Government or agencies thereof, or obligations
guaranteed as to the payment of principal and interest by the
United States Government.
c) The Explorer Fund consists of assets invested in shares of the
Vanguard Explorer Fund, which invests in common stocks of
small companies with favorable prospects for above-average
growth in market value.
d) The Balanced Fund consists of assets invested in the
Vanguard Asset Allocation Fund, which invests in stocks,
bonds and cash reserves for the purpose of maximizing long-
term total return with less volatility than a portfolio of
common stock.
e) The Equity Index Fund consists of assets invested in
the Vanguard Quantitative Portfolio, which invests primarily
in common stocks for the purpose of realizing a total
return greater than the Standard & Poor's 500 Index while
maintaining fundamental investment characteristics similar to
such Index.
Participants have the right to elect, subject to restrictions, the
investment fund or funds in which their contributions are invested. All matching
contributions are initially invested in the Company Stock Fund and participants
are restricted from transferring these contributions to other funds for one
year. Participants at their discretion may elect to transfer to another fund
their unrestricted balance. Their unrestricted balance is calculated as the sum
of all prior year's unrestricted balances plus 25 percent of the prior year's
restricted balance after the addition of the prior year's restricted matching
contribution.
The number of Participants in each fund was as follows at December 31:
Participants 1995 1994
---- ----
Company Stock Fund 705 633
Fixed Income Fund 396 413
Explorer Fund 1 -
Balanced Fund 192 163
Equity Index Fund 199 172
The total number of Participants in the Plan was less than the sum of the
number of Participants shown above because many were participating in more than
one fund.
178
The number of units representing Participant interests in each fund and the
related net asset value per unit were as follows at December 31:
Participant interests
Company Stock Fixed Income Balanced Equity Index
Fund Fund Fund Fund
------------- ------------ -------- ------------
1995:
Units 91,532 1,947,712 32,262 27,593
Value per unit $36.90 $1.00 $17.05 $19.95
1994:
Units 73,373 1,853,050 26,186 24,837
Value per unit $25.25 $1.00 $13.54 $15.56
Vesting
- -------
Participants at all times have a fully vested and non-forfeitable interest in
their contributions and in the matching contributions allocated to their
account.
Termination
- -----------
Although it expects and intends to continue the Plan indefinitely, the Company
has reserved the right of the Board to terminate or amend the Plan.
Distributions and Withdrawals
- -----------------------------
All distributions and withdrawals from the Plan are made to Participants in a
lump sum cash payment except those amounts distributed from the Company Stock
Fund which may, at the Participant's election, be paid in full shares of the
Company's Common Stock with cash paid in lieu of fractional shares.
Note 2 - Accounting Policies
The accounts of the Plan are maintained on an accrual basis. Purchases and
sales of investments are reflected on a trade date basis. Assets of the Plan are
valued at fair value. Gains and losses on distributions to participants and
sales of investments are based on average cost.
Note 3 - Income Tax Status
The Plan and the Trust created thereunder are intended to qualify under
Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended (the
Code) and the Plan includes a cash or deferred arrangement intended to meet the
requirements of Section 401(k) of the Code. The Internal Revenue Service has
issued a favorable determination letter as to the Plan's qualified status under
the Code. Amounts contributed to and earned by the Plan are not taxed to the
employee until a distribution from the Plan is made. In addition, any unrealized
appreciation on any shares of common stock of the Company distributed to an
employee is not taxed until the time of disposition of such shares.
Note 4 - Administrative Expenses
All expenses of the Plan are paid for by the Company. Investment advisory
fees for portfolio management of Vanguard funds are paid directly from fund
earnings. Advisory fees are included in the fund expense ratio and will not
reduce the assets of the Plan. Brokerage commissions paid to purchase Engelhard
Corporation common stock are being charged against each participant's fund unit
value.
179
Note 5 - Concentrations of Credit Risk
Financial instruments which potentially subject the Plan to concentrations
of credit risk consist principally of investment contracts with insurance and
other financial institutions. The Plan places its investment contracts with
high-credit quality institutions and, by policy, limits the amount of credit
exposure to any one financial institution.
Note 6 - Investments
Investments in the Common Stock of the Company are valued at the
readily-available, quoted market price as of the valuation date and investments
in the Vanguard Funds are valued based on the quoted net asset value (redemption
value) of the respective investment company as of the valuation date.
The net realized gain (loss) on disposition of investments was computed as
follows:
Common Equity
Stock Balanced Index
Net realized gain (loss) Fund Fund Fund Combined
------- --------- -------- --------
Year ended December 31, 1995 -
Amount realized $695,731 $153,120 $176,717 $1,025,568
Cost-average 424,567 133,710 156,162 714,439
Net realized gain 271,164 19,410 20,555 311,129
Year ended December 31, 1994 -
Amount realized $181,313 $ 17,714 $ 28,297 $ 227,324
Cost-average 145,839 18,163 29,061 193,063
Net realized gain (loss) 35,474 (449) (764) 34,261
Year ended December 31, 1993 -
Amount realized $ 45,185 $ 12,115 $ 19,261 $ 76,561
Cost-average 35,924 11,224 17,476 64,624
Net realized gain 9,261 891 1,785 11,937
180
The net unrealized appreciation (depreciation) of investments held was
computed as follows:
Company Equity
Net unrealized appreciation Stock Balanced Index
(depreciation) Fund Fund Fund Combined
--------- --------- -------- ----------
Year ended December 31, 1995 -
Balance, beginning of year $ (15,981) $(8,473) $(16,738) $ (41,192)
Net change 541,991 76,481 91,556 710,028
Balance, end of year 526,010 68,008 74,818 668,836
Year ended December 31, 1994 -
Balance, beginning of year $ 211,304 $ 9,313 $ (1,825) $ 218,792
Net change (227,285) (17,786 (14,913) (259,984)
Balance, end of year (15,981) (8,473) (16,738) (41,192)
Year ended December 31, 1993 -
Balance, beginning of year $ 205,405 $ 4,099 $ 3,286 $ 212,790
Net change 5,899 5,214 (5,111) 6,002
Balance, end of year 211,304 9,313 (1,825) 218,792
Note 7 - Engelhard-CLAL Transfer
In connection with the formation of a joint venture (Engelhard-CLAL) on
June 21, 1995, the Plan transferred assets of $892,347 to the Engelhard-CLAL-LP
Plan for Hourly Paid Employees.
Note 8 - Subsequent Events
Effective January 1, 1996 the Plan was amended and restated to allow
participants who have participated in the plan for at least one year to borrow
funds from their accounts, subject to certain terms and conditions, at a
reasonable rate of interest as determined by the Company in accordance with
applicable laws and regulations.
Effective January 1, 1996, the Vanguard Money Market reserves will be
available as an investment option.
181
Schedule I
Engelhard Corporation Savings Plan for Hourly Paid Employees
Schedule of Investments
at December 31, 1995
Approximate
Cost Market Value
---------- ------------
Company Stock Fund
- ------------------
Common Stock of $2,727,052 $3,253,062
Engelhard Corporation
(149,566 shares)
Cash equivalents 15,917 15,917
Fixed Income Fund
- -----------------
Vanguard Variable Rate 1,896,933 1,896,933
Investment Contract Trust
Balanced Fund
- -------------
Vanguard Asset Allocation 466,463 534,471
Fund
Equity Index Fund
- -----------------
Vanguard Quantitative 459,456 534,274
Portfolio
---------- ----------
Total $5,565,821 $6,234,657
========== ==========
182
Schedule I
Engelhard Corporation Savings Plan for Hourly Paid Employees
Schedule of Investments
at December 31, 1994
Approximate
Cost Market Value
---------- ------------
Company Stock Fund
- ------------------
Common Stock of $1,776,935 $1,760,954
Engelhard Corporation
(79,144 shares)
Cash equivalents 15,813 15,813
Fixed Income Fund
- -----------------
Vanguard Variable Rate 1,791,769 1,791,769
Investment Contract Trust
Balanced Fund
- -------------
Vanguard Asset Allocation 348,321 339,848
Fund
Equity Index Fund
- -----------------
Vanguard Quantitative 387,365 370,627
Portfolio
---------- ----------
Total $4,320,203 $4,279,011
========== ==========
183