<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
GREAT LAKES CHEMICAL CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
- - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- - --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
GREAT LAKES CHEMICAL CORPORATION
WEST LAFAYETTE, INDIANA
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 1997
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of GREAT
LAKES CHEMICAL CORPORATION (the "Corporation") will be held at the University
Place Conference Center and Hotel, 850 W. Michigan, Indianapolis, Indiana, on
Thursday, May 1, 1997, at 11:00 a.m. (Eastern Standard Time) for the following
purposes:
1. To elect three directors to serve until the 2000 Annual Meeting; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed March 3, 1997, as the date of record for
the meeting, and only shareholders of record at the close of business on that
date will be entitled to vote at the meeting or any adjournment thereof.
A proxy statement, form of proxy and a copy of the annual report of the
Corporation for the year 1996 are enclosed.
By Order of the Board of Directors,
MARY P. MCCLANAHAN
Secretary
March 28, 1997
YOUR VOTE IS IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, YOU ARE URGED TO INDICATE YOUR VOTE ON THE ENCLOSED PROXY,
DATE, SIGN AND RETURN IT PROMPTLY IN THE ENCLOSED REPLY ENVELOPE WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 3
GREAT LAKES CHEMICAL CORPORATION
ONE GREAT LAKES BOULEVARD, P.O. BOX 2200, WEST LAFAYETTE, INDIANA 47906-0200
------------------------
PROXY STATEMENT
March 28, 1997
For
Annual Meeting of Shareholders
To be Held on May 1, 1997
------------------------
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Great Lakes Chemical Corporation (the "Corporation"). It is for use
only at the Annual Meeting of the Shareholders to be held on May 1, 1997, and at
any adjournment thereof.
As of March 3, 1997, the record date of the meeting, 60,124,619 shares of
Common Stock of the Corporation were outstanding, and each share is entitled to
one vote. Only shareholders of record at the close of business on that date will
be entitled to vote at the meeting.
Any shareholder executing a proxy retains the right to revoke it at any
time prior to its use at the Annual Meeting. A proxy may be revoked by delivery
of written notice of revocation to the corporate secretary, by execution and
delivery of a later proxy or by voting the shares in person at the Annual
Meeting. If not revoked, all shares represented by properly executed proxies
will be voted as specified therein.
The election of Directors requires a plurality of the votes actually cast
by the shareholders present (in person or by proxy) at the meeting and entitled
to vote. A withheld vote will have no effect on the outcome of the election. If
no voting instruction is given, the accompanying proxy will be voted FOR such
election. Under the New York Stock Exchange rules, brokers who hold street name
shares can vote in their discretion in the election of Directors. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL OF THESE NOMINEES AS
DIRECTORS.
A quorum will exist if the shares present (including broker non-votes)
constitute a majority of the outstanding shares.
PROPOSAL ONE: ELECTION OF DIRECTORS
The Certificate of Incorporation of the Corporation provides that the
number of directors shall be not less than three nor more than eleven, and shall
be divided into three classes of equal size (to the extent possible), with one
class to be elected each year, in rotation, for a term of three years. The Board
is currently comprised of nine members, divided equally into three classes.
Unless otherwise instructed the proxy holders will vote the proxies received by
them for the three nominees, Martin M. Hale, Richard H. Leet and Jay D. Proops,
for three-year terms to expire at the Annual Meeting in 2000 and until their
successors are duly elected and qualified. Nominees Hale, Leet and Proops are
currently serving as directors and have consented to serve for the new term.
Although the nominees are not expected to decline or be unable to serve as
directors, in each such event, the persons named in the enclosed proxy will vote
for another candidate nominated by the Board, and discretionary authority to do
so is included in the proxy.
Information in the biographies that follow is current as of March 1, 1997.
None of the business organizations, other than Great Lakes Chemical Corporation,
with which the named individuals maintain their principal occupation or
employment, is a parent, subsidiary or affiliate of the Corporation.
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NOMINEES TO SERVE UNTIL THE 2000 ANNUAL MEETING
MARTIN M. HALE Director since 1978. (1), (4), (5), (6)
Mr. Hale, 56, nonexecutive chairman of the Board, is executive vice
president and director of Hellman Jordan Management Co. Inc., a registered
investment advisor specializing in asset management and a wholly owned
subsidiary of United Asset Management Company. Prior to 1983, he was president
and chief executive officer of Marsh & McLennan Asset Management Company. He
also serves as a director of the Student Conservation Association; as chairman
of the Board of Governors of the School of The Museum of Fine Arts, Boston; and
as a trustee of The Museum of Fine Arts.
RICHARD H. LEET Director since 1994. (2), (3), (4)
Dr. Leet, 70, retired as vice chairman and director of Amoco Corporation in
1991 following a lifelong career with Amoco which included service as president
of Amoco Chemicals Company. Dr. Leet serves as a director of Illinois Tool Works
Inc. and Vulcan Materials Company, as vice chairman of the Foundation Board of
The Ohio State University, and as a trustee of Brenau University, Gainesville,
Georgia. He is also currently a member of the Executive Board of the National
Council of The Boy Scouts of America which he led as president in 1990-1992.
Previously he served as chairman of the board of both The Industrial Health
Council and the YMCA of Metropolitan Chicago.
JAY D. PROOPS Director since 1996. (2), (5), (6)
Mr. Proops, 55, is the retired co-founder and former vice chairman of The
Vigoro Corporation, a leading North American manufacturer and distributor of
fertilizers and related products. During his career with Vigoro, he served as
its president and chief financial officer and as a director. Prior to founding
Vigoro, Mr. Proops held a number of senior management positions with Emerson
Electric Company and Esmark Inc. He currently serves as a member of the Board of
Trustees of The Allendale Association, as a director of The Lincoln Park
Zoological Society, as a trustee of Daniel Webster College and as a board member
of AMCOL International.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES.
DIRECTORS SERVING UNTIL THE 1999 ANNUAL MEETING
EVAN BAYH Director since February 1997.
Mr. Bayh, 41, a partner in the law firm of Baker & Daniels in Indianapolis,
Indiana, served as Governor of Indiana for two consecutive terms, stepping down
in February 1997. He also served as Secretary of State for Indiana prior to his
election as governor. Mr. Bayh currently serves on the boards of Eli Lilly and
Company, Indianapolis Life Insurance Company, Fortis Inc. and Dominick's Finer
Foods Inc.
THOMAS M. FULTON Director since 1995. (2), (3), (5)
Mr. Fulton, 63, serves as president and chief executive officer of Landauer
Inc., a provider of radiation monitoring services. Prior to joining Landauer in
1978, his career included various management positions at Union Carbide
Corporation, BASF Corporation and ICN Pharmaceuticals Inc. Mr. Fulton also
serves on the boards of The Advocate South Suburban Hospital and the Bethel
Community Facility and as chair of the board of the Chicago Theological
Seminary.
ROBERT B. MCDONALD Director since 1994. (3), (4), (5), (6)
Mr. McDonald, 60, was named chief executive officer and president of the
Corporation in 1994. During his 29-year career with Great Lakes, he has served
in a number of senior management positions. He is involved with several
professional organizations, including The Chemical Manufacturers Association,
and serves on Purdue University's Advisory Board for The Institute of Applied
Neurology and the Dean's Advisory Council for the Krannert School of Management.
Mr. McDonald also serves as a director of The Lafayette
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<PAGE> 5
Life Insurance Company, is affiliated with the Cystic Fibrosis Foundation and is
active in local and civic philanthropic organizations.
DIRECTORS SERVING UNTIL THE 1998 ANNUAL MEETING
WILLIAM H. CONGLETON Director since 1973. (1), (5), (6)
Mr. Congleton, 75, is a general partner of Palmer Partners L.P., a private
investment partnership. Mr. Congleton also serves as a trustee of The Lahey
Hitchcock Clinic, and as an overseer of the Boston Symphony Orchestra, the New
England Conservatory of Music, the WGBH Educational Foundation and the Newell
Health Care System.
JOHN S. DAY Director since 1975. (1), (2), (4), (6)
Dr. Day, 79, is vice president and dean emeritus of Purdue University,
having previously been the Herman C. Krannert Professor of Management. Until
1983, he served as vice president for Development of Purdue University and until
1979 served as dean of the Krannert School of Management at Purdue University.
LOUIS E. LATAIF Director since 1995. (1), (2), (3)
Mr. Lataif, 58, is dean of the School of Management at Boston University, a
position he assumed in 1991 after a distinguished 27-year career with Ford Motor
Company which included positions as vice president and general manager of Ford
Division, vice president North American Sales Operations, president of Ford of
Europe and corporate vice president of Worldwide Quality and Marketing. Dean
Lataif also serves on the boards of Bank Audi USA, Autocraft Industries,
Unitrode Corporation, The Lahey-Hitchcock Clinic and TAD Resources
International.
- - -------------------------
(1) Audit Committee
(2) Compensation and Incentive Committee
(3) Environmental, Safety and Health Committee
(4) Executive Committee
(5) Finance Committee
(6) Succession Planning Committee
DIRECTORS' COMPENSATION
RETAINER, COMMITTEE AND MEETING FEES
Nonemployee directors receive compensation for their services in the form
of an annual retainer, committee chair and meeting fees, and, until January 1,
1997, were entitled to payments following retirement under the Directors'
Retirement Plan.
All directors, except Mr. McDonald, receive an annual retainer of $26,000.
An additional $2,000 is paid annually to directors chairing one or more
committees. The nonexecutive chairman of the Board also receives an annual
retainer of $100,000 in recognition of his expanded responsibilities. All
nonemployee directors receive $1,000 per day for attendance at Board or
committee meetings and, with the exception of the chairman, for special
assignments. Nonemployee directors also receive $1,000 per day for participating
in telephone conference meetings of the Board or of its committees. The fees
paid to directors are reviewed each year based on industry surveys of fees paid
to directors in similarly sized industrial and specialty chemical companies.
RETIREMENT
In January 1997, the Board voluntarily resolved to replace the existing
cash Directors' Retirement Plan for nonemployee directors with a new Nonemployee
Directors' Deferred and Long-Term Compensation Plan ("Deferred and Long-Term
Compensation Plan") pursuant to which phantom stock units will be issued. The
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<PAGE> 6
Board made this decision to align director compensation more closely with
shareholder interests. Two long-service, nonemployee directors were given the
option to elect to continue to be covered by the Directors' Retirement Plan, or
to convert the present value of their retirement benefits accrued under the
Directors' Retirement Plan into phantom stock units under the Deferred and
Long-Term Compensation Plan. Dr. Day elected to continue under the old plan and
will not receive any phantom stock units under the new plan. All of the other
nonemployee directors serving in 1996 elected to have the present value of their
accrued retirement rights under the old plan converted to phantom stock units
under the Deferred and Long-Term Compensation Plan. The present value of these
accrued benefits were converted to phantom stock units based on the closing
price of the Corporation's Common Stock on December 31, 1996. Cash dividends,
stock dividends, stock splits and similar distributions will apply to the
phantom stock units and be credited to a director's account. All phantom stock
units become fully vested after five years of service. All directors who elected
to participate in the Deferred and Long-Term Compensation Plan were credited for
service as a director prior to their enrollment in the new plan. Upon a change
in control of the Corporation, the value of each director's phantom stock
account (in full, if vested, or prorated if held for less than five years) will
be distributed in cash. Upon retirement or resignation, each nonemployee
director can elect to receive vested benefits either as a single lump-sum
payment, or in annual installments over 10 years. The value of each phantom
stock unit will be determined on the relevant date by the fair market value of
the Corporation's Common Stock. Directors who have already retired will continue
to receive their retirement benefits.
DEFERRED COMPENSATION PLAN
Under the Deferred and Long-Term Compensation Plan, each nonemployee
director may elect, at the time he joins the Board or prior to the commencement
of subsequent calendar years, to have all or some of his cash compensation
credited to a deferred compensation account. Amounts credited to this account
will accrue interest equal to 90 percent of the prime interest rate of The Chase
Manhattan Bank, or at such other rate as may be adopted from time to time by the
Compensation and Incentive Committee of the Board. Such deferrals will be
distributed to the director at the time he retires or resigns from the Board.
OTHER PROGRAMS
The Corporation provides each nonemployee director with a term life
insurance policy of $50,000 and accidental death and dismemberment insurance of
$200,000.
DIRECTORS' MEETINGS AND COMMITTEES
The Corporation has Audit; Compensation and Incentive; Environmental,
Safety and Health; Executive; Finance; and Succession Planning Committees, the
members of which are as shown in the preceding presentation. During 1996, the
Board met eight times. Each of the directors attended more than 98.3 percent of
the aggregate of the total number of Board and committee meetings he was
required to attend.
The Audit Committee, which met twice during 1996, reviews the adequacy of
internal controls and the work of the independent and internal auditors,
consults with the independent public accountants concerning the audit report and
the related management letter, and makes recommendations to the Board concerning
the selection of independent accountants.
The Compensation and Incentive Committee, which met five times during 1996,
makes recommendations to the Board with respect to compensation for the
Corporation's executives and administers the Corporation's employee stock option
plans.
The Environmental, Safety and Health Committee, which met three times
during 1996, assesses the Corporation's environmental, safety and health
policies and performance, and makes recommendations to the Board and management
regarding promoting and maintaining standards of performance.
The Executive Committee, which met twice during 1996, is empowered to act
for the Board, with certain restrictions, on behalf of the Corporation.
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<PAGE> 7
The Finance Committee, which met once during 1996, and includes officers
Jeffares and Ferguson in addition to Board members, reviews the financial
affairs of the Corporation and presents recommendations for action to the Board.
The Succession Planning Committee, which met four times during 1996,
monitors and evaluates the Corporation's management resources, structure,
succession planning, executive development and selection processes; recommends
to the Board criteria for Board membership; and identifies candidates for
election as directors. It also considers candidates recommended by shareholders
for election as directors. Any such recommendation should be sent to the
corporate secretary.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
Corporation's Common Stock beneficially owned by holders of more than five
percent of its Common Stock; the directors of the Corporation; the executive
officers of the Corporation included in the Summary Compensation Table ("Named
Executives") set forth under the caption "Executive Compensation and Other
Information" who were employed by the Corporation as of such date; and all
directors and executive officers of the Corporation as a group.
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<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP (1)(2)(3)(4)(5) OUTSTANDING
- - --------------------------------------------------------------------------------------------------
<S> <C> <C>
T. Rowe Price Associates Inc........................... 4,601,153 7.7%
Investment Advisor(6)
100 E. Pratt Street
Baltimore, Maryland 21202
State Farm Mutual Automobile Insurance Company......... 4,543,600 7.6%
and Related Entities(7)
One State Farm Plaza
Bloomington, Illinois 61710-0001
Robert B. McDonald(8).................................. 136,939 *
Robert T. Jeffares(9).................................. 183,058 *
L. Donald Simpson(10).................................. 32,150 *
David A. Hall(11)...................................... 60,822 *
Robert L. Hollier(12).................................. 83,820 *
Evan Bayh.............................................. -0- *
William H. Congleton(13)............................... 16,000 *
John S. Day(14)........................................ 4,300 *
Thomas M. Fulton....................................... 1,000 *
Martin M. Hale(15)..................................... 215,348 *
Louis E. Lataif........................................ 2,000 *
Richard H. Leet........................................ 1,000 *
Jay D. Proops.......................................... 2,000 *
Directors and executive officers as a group............ 1.6%
</TABLE>
* Less than 1%
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(1) Information concerning persons known to the Corporation to be beneficial
owners of more than five percent of its Common Stock is based upon the most
recently available reports furnished by the companies or on Schedule 13G's
filed with the Securities and Exchange Commission.
(2) Information concerning ownership of Common Stock by directors of the
Corporation, Named Executives, and directors and executive officers as a
group, as of March 1, 1997.
(3) Unless otherwise indicated, beneficial ownership is direct, and the person
indicated has sole voting and investment power.
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(4) In addition to the shares listed in the table as beneficially owned, the
following directors have phantom stock units: W. H. Congleton, 3,332; T. M.
Fulton, 2,875; M. M. Hale, 2,238; L. E. Lataif, 2,398; R. H. Leet, 2,941;
and J. D. Proops, 2,163. These stock units do not have any voting rights.
(5) Ownership of executive officers includes shares of stock options
exercisable within 60 days as disclosed in the table on options exercised
and value of options at end of fiscal year.
(6) These securities are owned by various individual and institutional
investors which T. Rowe Price Associates Inc. ("Price Associates") serves
as investment advisor with power to direct investments and/or sole power to
vote the securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates expressly disclaims that
it is, in fact, the beneficial owner of such securities.
(7) Each of the following State Farm entities has reported sole voting power
and sole disposition power and disclaims "beneficial ownership" as to all
shares as to which each has no right to receive the proceeds of sale of the
security and disclaims that it is part of a group: State Farm Mutual
Automobile Insurance Company reported 3,484,800 shares; State Farm Life
Insurance Company has 53,000 shares; State Farm Investment Management
Corporation has 462,300 shares; and State Farm Insurance Companies Savings
and Thrift Plan for U.S. Employees reported 543,500 shares. State Farm Life
Insurance Company is a wholly owned subsidiary of State Farm Mutual
Automobile Insurance Company. State Farm Investment Management Corporation
is a wholly owned subsidiary of State Farm Fire and Casualty Company which,
in turn, is a wholly owned subsidiary of State Farm Life Insurance Company.
(8) Includes 7,000 shares through spousal ownership.
(9) Includes 158 shares held indirectly by Mr. Jeffares in the Corporation's
401(k) Plan, 4,966 shares through spousal ownership, and 400 shares owned
by his stepchildren, for which he disclaims beneficial ownership.
(10) Includes 1,216 shares held indirectly by Mr. Simpson through the
Corporation's 401(k) and Supplemental Savings Plans and 2,000 shares
through spousal ownership.
(11) Includes 400 shares held by Mr. Hall's minor children in Universal Gifts to
Minors Trusts in which Mr. Hall disclaims any beneficial ownership and 839
shares held indirectly through the Corporation's 401(k) Plan.
(12) Includes 696 shares held indirectly by Mr. Hollier through the
Corporation's Supplemental Savings Plan.
(13) Includes 4,400 shares held indirectly by Mr. Congleton through a trust for
Mr. Congleton's grandchildren. Mr. Congleton disclaims beneficial ownership
of these shares.
(14) Includes 1,600 shares owned indirectly through spousal ownership.
(15) Includes 190,840 shares held by Mr. Hale as co-trustee and 1,000 shares
held by his wife as trustee for his children. Mr. Hale disclaims beneficial
ownership of these 191,840 shares.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the Corporation's last three years to Robert B. McDonald,
who served as chief executive officer and president of the Corporation in 1996,
and to each of the Corporation's four other most highly compensated executive
officers.
SUMMARY COMPENSATION TABLE
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<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION ALL OTHER
ANNUAL-COMPENSATION(1) AWARDS COMPENSATION
SECURITIES
ALL UNDERLYING
SALARY BONUS OTHER ANNUAL OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION ($)(2) (#)(3) ($)(4)(5)
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert B. McDonald......... 1996 $645,192 $165,000 35,000 $57,160
President and 1995 608,846 325,000 57,500 7,961
Chief Executive Officer 1994 350,900 250,000 10,000 1,125
Robert T. Jeffares......... 1996 380,000 78,000 20,000 29,856
Executive Vice President 1995 376,769 142,000 19,500 4,523
and Chief Financial
Officer 1994 319,500 115,000 12,000 1,125
L. Donald Simpson (2)...... 1996 303,077 55,000 12,204 12,000 20,538
Executive Vice President 1995 267,861 146,000 10,400 1,850
1994 228,592 70,000 4,000 1,125
David A. Hall.............. 1996 295,000 55,000 11,000 2,284
Group Vice President 1995 292,577 86,000 13,000 2,457
1994 254,115 75,000 10,000 1,125
Robert L. Hollier (5)...... 1996 264,990 38,000 7,500 8,215
Vice President 1995 262,500 67,000 9,750 9,674
1994 250,000 52,000 7,500 8,427
</TABLE>
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(1) The Corporation has a deferred compensation plan whereby certain named
executives can defer salary and bonus payments. For 1996, Mr. Simpson
deferred $106,000; Mr. Hall deferred $189,250; and Mr. Hollier deferred
$93,499.
(2) Compensation to Mr. Simpson while he was in foreign service for taxes in
excess of those that would be incurred in the U.S. None of the executives
listed received perquisites or other personal benefits that exceeded the
lesser of $50,000, or 10 percent of the salary and bonus for such
executive.
(3) Options to acquire shares of Common Stock. There were no restricted stock
option grants, and the Corporation does not have a long-term incentive plan
(LTIP).
(4) Includes two components: a) employer matching contributions under the
Corporation's 401(k) and Supplemental Savings Plans and b) actuarially
determined value of Corporation-paid premiums on "split-dollar" life
insurance. The respective amounts for each of the Named Executives are as
follows: Mr. McDonald $10,160, $47,000; Mr. Jeffares, $5,856, $24,000; Mr.
Simpson, $3,138, $17,400; Mr. Hall, $2,284, $-0-; and Mr. Hollier, $ 2,470,
$-0-.
(5) As an employee of OSCA Inc., a wholly owned subsidiary of the Corporation,
Mr. Hollier does not participate in the Great Lakes Chemical Pension Plan.
OSCA employees participate in a defined contribution plan. OSCA contributed
$5,745, $7,679 and $7,302 to this plan on behalf of Mr. Hollier in 1996,
1995 and 1994, respectively.
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STOCK OPTION PLANS
The Corporation has two stock option plans which provide for grants of
options to key employees. Plan provisions allow grants of incentive stock
options, non-qualified stock options or other stock-based awards, with terms not
to exceed 10 years, at an option price which is not less than the market value
of the Corporation's Common Stock on the date of grant.
OPTION GRANTS DURING 1996 FISCAL YEAR
The following table provides information related to options granted to the
Named Executives during the year 1996:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(3)(4)
- - ------------------------------------------------------------------------------ --------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED #(1) 1996 ($/SH)(2) DATE 0%($)(4) 5%($) 10%($)
- - ------------------------------------------------------------------------------ --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert B. McDonald.... 35,000 13.4 $71.625 3/04/06 $0 $1,579,331 $3,985,931
Robert T. Jeffares.... 20,000 7.7 76.25 2/10/06 0 960,750 2,424,750
L. Donald Simpson..... 12,000 4.6 76.25 2/10/06 0 576,450 1,454,850
David A. Hall......... 11,000 4.2 76.25 2/10/06 0 528,413 1,333,613
Robert L. Hollier..... 7,500 2.9 76.25 2/10/06 0 360,281 909,281
Increase in Market Value to Shareholders(5).............................................. $3.0 Billion $7.6 Billion
</TABLE>
- - --------------------------------------------------------------------------------
(1) All options were granted pursuant to the 1993 Employee Stock Compensation
Plan and have a term of 10 years. Each Named Executive received only a
single grant in 1996. These grants are exercisable in cumulative 33 percent
installments commencing no less than one year from date of grant, with full
vesting occurring on the third anniversary date or on the retirement of an
employee over 62 years of age. For additional information regarding
options, see "Employment and Change-of-Control Agreements."
(2) The exercise price may be paid for by remitting cash or already owned shares
of the Corporation's Common Stock, or by a combination thereof. The related
tax withholding obligations may be paid by remitting cash, already owned
shares of the Corporation's Common Stock, or by having the Corporation
withhold a portion of the shares deliverable upon exercise, or by a
combination thereof.
(3) The potential realizable value portion of the foregoing table indicates the
value that might be realized upon exercise of options immediately prior to
the expiration of their term, assuming the specified amount of compounded
rates of appreciation on the Corporation's Common Stock over the terms of
the options. This calculation does not take into account that any shortfall
between the current stock price and the option exercise price will have to
be made up before any value can be realized.
(4) Without an appreciation in stock price, the optionees will not realize any
gain. A zero percent increase in stock price would result in zero dollars
for the optionee.
(5) Calculated by using a Common Stock price of $74.25 and the average shares
outstanding for February 1996, assuming five and 10 percent compounded
growth rates, the increase in market value to common shareholders is shown
for comparative purposes only. It is not a prediction of future stock
performance.
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<PAGE> 11
OPTION EXERCISES IN FISCAL YEAR 1996 AND VALUE OF OPTIONS AT DECEMBER 31, 1996
The following table provides information related to options exercised by
the Named Executives during the 1996 fiscal year and the number and value of
options held at the fiscal year end. The Corporation does not have any stock
appreciation rights.
OPTION EXERCISES IN FISCAL YEAR 1996 AND VALUE OF OPTIONS AT END OF FISCAL YEAR
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARE DECEMBER 31, 1996 (#) DECEMBER 31, 1996 ($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert B. McDonald...... -- -- 82,794 76,666 $ 812,206 $--
Robert T. Jeffares...... 16,000 900,000 115,500 37,000 2,111,500 --
L. Donald Simpson....... -- -- 20,134 20,266 -- --
David A. Hall........... -- -- 46,437 22,999 243,930 --
Robert L. Hollier....... 4,000 269,500 64,250 16,500 914,250 --
</TABLE>
- - --------------------------------------------------------------------------------
(1) Value based on market value of the Corporation's Common Stock at date of
exercise or end of fiscal year minus the exercise price multiplied by the
number of shares to which the exercise relates.
PENSION PLAN
The Corporation has a noncontributory defined benefit pension plan
("Pension Plan") covering substantially all U.S. employees. The Corporation also
has non-qualified Supplemental Retirement Plans ("SERPs"). These SERPs provide
for benefits which, except for the application of the limits of Section 415 and
Section 401(a)(17) of the Internal Revenue Code, would have been payable to
executives under the Pension Plan, and gives an executive approximately the same
retirement benefits he would have received had he been with the Corporation 35
years at the time of his retirement. The retirement benefits of the Named
Executives are computed using the average of the compensation for the highest
three consecutive years. Payments under the SERPs will be paid by the
Corporation out of its general assets. The table below shows the estimated
annual straight life annuity benefits payable to participants of both the
defined benefit plan and the SERPs upon retirement at age 65. The benefits
indicated in the table reflect a reduction for Social Security benefits, as
provided in the plan benefit formula.
The following table shows the estimated annual benefits payable upon normal
retirement under the Pension Plan as augmented by SERPs.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------
ESTIMATED ANNUAL BENEFITS
NUMBER OF YEARS OF SERVICE
-----------------------------------------
ANNUAL COMPENSATION 15 20 25 30
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000............................................. $ 46,643 $ 62,190 $ 77,738 $ 93,286
300,000............................................ 71,393 95,190 118,988 142,786
400,000............................................ 96,143 128,190 160,238 192,286
500,000............................................ 120,893 161,190 201,488 241,786
600,000............................................ 145,643 194,190 242,738 291,286
700,000............................................ 170,393 227,190 283,988 340,786
800,000............................................ 195,143 260,190 325,238 390,286
900,000............................................ 219,893 293,190 366,488 439,786
1,000,000............................................ 244,643 326,190 407,738 489,286
- - -------------------------------------------------------------------------------------------------
</TABLE>
Annual compensation covered by the Pension Plan is defined as gross pay,
which is essentially identical to the total salary and bonus compensation
reported for the Named Executives as shown in the Summary Compensation Table.
Credited years of service under the plans as of December 31, 1996, were: Mr.
McDonald, 28; Mr. Jeffares, 13; Mr. Simpson, 5; and Mr. Hall 13. Mr. Hollier is
not a participant in the Corporation's Pension Plan.
9
<PAGE> 12
SAVINGS PLANS
Substantially all U.S. employees of the Corporation are eligible to
participate in the Great Lakes Savings Plan [401(k)] (the "Plan") beginning the
first of the quarter following the completion of one year of employment.
Employees may elect to contribute up to 15 percent of their pay into the Plan,
subject to certain limits prescribed by Section 402(g) of the Internal Revenue
Code. The Corporation makes a matching contribution of $.50 for each dollar of
an employee's contribution up to the first two percent of pay. Employees
determine how their salary deferrals and matching contributions are invested by
selecting from several investment alternatives, including the Corporation's
Common Stock. All deferrals and contributions are recorded in individual
accounts and held in trust.
A non-qualified Supplemental Savings Plan provides participants with
benefits which, except for the limitations of OBRA '93, they would have received
under the Great Lakes Savings Plan, as amended. Payments under this supplemental
plan are paid by the Corporation out of its general assets.
CHANGE-IN-CONTROL AND SEVERANCE AGREEMENTS
The Corporation recognizes that establishing and maintaining a strong
management team is essential to protecting and enhancing the interests of the
Corporation and its shareholders. In order to ensure management stability and
the continuity of key management personnel, the Corporation has entered into
Change-in-Control Agreements with each of the Named Executives and with certain
other executives of the Corporation.
The material terms and conditions of the Change-in-Control Agreements
provide that if, following a change in control of the Corporation (as defined in
that agreement), the Corporation or a successor terminates the employment of any
covered executive other than for cause, or any such executive terminates his
employment with the Corporation for good reason, then such executive will, with
certain limitations, receive a payment equal to three times the sum of (i) his
annual salary at time of termination or time of change in control, whichever is
higher, and (ii) the highest annual bonus paid or awarded to him in the year in
which such termination occurs or the two full calendar years immediately
preceding the year of termination. In addition, all stock options issued to such
executive will become vested and immediately exercisable, and the executive can
receive the cash value of any or all such options that exceed the exercise price
thereof. An additional payment may also be made by the Corporation to the
executive to compensate the executive for any excise taxes imposed on certain
severance payments under the agreement. The Corporation will also continue the
participation of such executive in the Corporation's or a successor's life,
disability, health and other benefit plans (or provide equivalent benefits) for
a maximum period of three years after termination. These Change-In-Control
Agreements may be terminated by the Corporation at any time except in the event
there is a change in control of the Corporation.
The Corporation has a Severance Plan ("Plan") for the Named Executives and
certain other employees (the "Executives"). In order to receive any payments or
benefits under the Plan, an Executive is required to sign an Agreement and
Release Form which prohibits the disclosure of confidential information and any
engagement in certain competitive activities for a specified period of time
after termination of employment. The Plan provides that in the event of a
covered termination of employment (which includes, among other things,
termination of employment other than for cause, as defined in the Plan), the
Executive will receive (a) payments equal to the Executive's then annual salary
("Severance Payments") and (b) reimbursement of certain medical and dental
benefit premiums ("Benefits") for a period of up to 18 months. The Executive
will also receive one additional week of Severance Payments and Benefits for
each year of service. The Plan also provides for certain outplacement services.
All Severance Payments and Benefits will terminate at the time any such
Executive obtains new employment. In the event of death, any remaining Severance
Payments will be paid to the Executive's estate and, if applicable, Benefits
will be payable to the Executive's dependents. If compensation becomes due under
any eligible Executive's Change-in-Control Agreement, no Severance Payments,
Benefits or outplacement services will be provided under this Plan.
10
<PAGE> 13
SPLIT-DOLLAR LIFE INSURANCE
A split-dollar life insurance arrangement ("Arrangement") was approved by
the Board as an alternative to increasing the existing group life insurance for
key executives, which was found to be uncompetitive with the life insurance
benefits provided to executives in the Corporation's peer group. An agreement
was entered into with each executive who elected to participate to purchase
split-dollar life insurance at a minimal cost to the executive and with complete
cost recovery to the Corporation. This Arrangement provides pre-retirement life
insurance to the designated individuals on the basis of three times salary for
the chief executive officer and two times salary for the other participants. In
addition, each participating executive will receive post-retirement life
insurance equal to one times salary at retirement, decreasing by 10 percent per
year until the end of the fifth post-retirement year. Life insurance equal to
the remaining 50 percent of salary will be provided each year thereafter. The
Corporation retains a collateral assignment of the cash value in each of the
policies. Upon the death of an insured executive, the Corporation will receive
all proceeds of the insured's policy in excess of the stated death benefit,
which amount will be not less than the premiums paid for the policy, plus a
return to the Corporation of four percent of the premiums paid. If a policy is
surrendered, which cannot occur before the earlier of the insured's 65th
birthday or termination of employment from the Corporation, the Corporation will
recover either the cash surrender value or the premiums paid for that policy
accumulated at four percent interest.
REPORT OF THE COMPENSATION AND INCENTIVE COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation and Incentive Committee (the "Committee") of the Board,
comprised of five independent nonemployee directors, is responsible for
establishing executive compensation programs designed to attract and retain
performance-oriented key executives committed to the long-term success of the
Corporation and to the enhancement of shareholder value. The Corporation's
executive compensation program provides a strong link between executive and
shareholder interests while recognizing individual contributions as well as
overall financial results. The Committee meets periodically with compensation
consultants.
The Committee approves all compensation programs, including the setting of
annual performance goals, target guidelines and award levels. In conjunction
with the full Board, the Committee reviews corporate and individual performance,
administers and grants awards under all executive compensation plans, and
ensures that compensation levels are externally competitive and internally
equitable. It is also responsible for determining the overall compensation of
the chief executive officer and other key executives.
The Committee conducts a full review of the Corporation's executive
compensation program each year. This includes a review of various external
compensation surveys of similarly sized industrial companies, as well as a
comprehensive evaluation of the executive compensation practices of a benchmark
group of peer chemical companies.
COMPENSATION COMPONENTS
Corporate and individual performances are recognized through both short-and
long-term incentive compensation plans designed to align and satisfy the
interests of executives and shareholders. The total compensation program
consists of three components: base salary, which reflects the executive's level
of responsibility and individual performance; annual incentive compensation
awards in the form of cash bonuses, which reflect both corporate and individual
performance; and long-term incentive compensation in the form of stock options,
which create value for the executive only if the price of the Corporation's
stock appreciates. The latter two components provide at-risk compensation which
is linked directly to financial results and shareholder returns. The Committee
considers all elements of compensation when determining an individual's total
compensation.
11
<PAGE> 14
SHORT-TERM INCENTIVE COMPENSATION
Each year the Committee reviews the base salary of the chief executive
officer and, in conjunction with the chief executive officer, reviews the base
salaries of other corporate officers. However, the Committee makes the final
compensation decisions concerning such officers. The median and 75th percentile
levels of the executive market as assessed by external surveys are used as
criteria in determining base salary. The level and scope of responsibility,
experience, and corporate and business unit performances, as well as individual
performance, are also key criteria in base salary determination.
A Management Incentive Compensation Plan provides incentive compensation in
the form of cash bonuses to executive officers, managers and other selected key
employees who have a broad impact on performance. The awards granted in 1996
were based on corporate pre-tax earnings per share, business unit pre-tax
earnings, return on assets and individual achievement.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentive compensation is comprised of annual grants of stock
options which are designed to encourage key employees to remain with the
Corporation by providing them with a long-term interest in the Corporation's
overall performance and to motivate them to maximize long-term shareholder
value. Stock options are generally granted annually and cannot be exercised for
at least one year from the date of grant. Options expire after 10 years.
A Stock Option Grant Guideline provides clear and consistent guidance for
the granting of stock options, participation eligibility and administration of
the program. Stock option awards are based on corporate and individual
performance and the degree of impact which the Committee feels the individual
can have on future performance. The Grant Guideline was developed based on
competitive surveys. The Committee does not take into consideration options
already outstanding in determining the number of stock options granted to a
particular employee in any year.
CHIEF EXECUTIVE COMPENSATION
Consistent with all other executive officers, the chief executive's
compensation was based on a combination of corporate and individual performance.
Mr. McDonald's compensation includes base salary, incentive compensation and
stock options.
In 1996, Mr. McDonald's base compensation was increased to $650,000
reflecting both the Corporation's record operating results in 1995 and the
challenge of leadership he has assumed as chief executive officer. Mr.
McDonald's bonus of $165,000, granted on February 10, 1997, was substantially
below that of the prior year. An option to purchase 35,000 shares of the
Corporation's Common Stock was granted to Mr. McDonald on March 5, 1996, based
on the 1996 Stock Option Grant Guidelines. This option was granted at an
exercise price equal to the fair market value of the Common Stock on the date of
grant and has a term of 10 years with a three-year vesting period.
The Committee considered the effect the Revenue Reconciliation Act of 1993
had on executive compensation. Neither the chief executive officer nor any of
the Corporation's other officers received covered compensation in excess of $1
million in 1996. The Committee will continue to review the deductibility of the
Corporation's compensation program on a year-by-year basis.
SUMMARY
With a significant portion of the Corporation's executive compensation
linked directly to individual and corporate performance and stock price
appreciation over the long term, the above programs closely align the long-term
interests of management with those of the shareholders. While recognizing that
fluctuations of the business cycle may negatively impact financial performance
from time to time, the Committee believes that the strong leadership provided by
the Corporation's senior executives and the infrastructure that they have put in
place has positioned the Corporation to capitalize on the opportunities that lie
ahead.
12
<PAGE> 15
This report is submitted by the members of the Compensation and Incentive
Committee, none of whom is or has been a former employee of the Corporation.
Compensation and Incentive Committee
--------------------------------------
John S. Day
Thomas M. Fulton
Louis E. Lataif
Richard H. Leet
Jay D. Proops
13
<PAGE> 16
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return to shareholders on the
Common Stock of the Corporation for the last five years to the cumulative total
return on the S&P 500 Composite and S&P Specialty Chemical Indices over the same
period.
GREAT LAKES CHEMICAL CORPORATION VS. S&P EQUITY INDICES
TOTAL RETURN TO SHAREHOLDERS OVER FIVE YEARS
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P 500 S&P CHEMICALS GREAT LAKES
(FISCAL YEAR COVERED) COMPOSITE INDEX (SPECIALTY) INDEX CHEMICAL
CORPORATION
(GLK)
<S> <C> <C> <C>
12/91 100 100 100
12/92 108 106 122
12/93 118 121 132
12/94 120 105 101
12/95 165 139 129
12/96 203 142 84
GREAT LAKES
VALUE OF $100
INVESTMENT MADE
DECEMBER 31, 1991**
-----------------------------------------------
S&P 500 CHEMICAL
COMPOS- S&P CHEMICALS CORPORA-
ITE INDEX (SPECIALTY) INDEX TION (GLK)
12/31/91 100.00 100.00 100.00
12/31/92 107.62 105.94 121.68
12/31/93 118.46 120.79 131.75
12/31/94 120.03 105.45 101.29
12/31/95 165.13 138.60 128.81
12/31/96 203.05 142.16 84.48
</TABLE>
** Year-end Total Return to Shareholders with dividends reinvested and no
purchase commissions.
14
<PAGE> 17
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's directors and officers, and persons who own more than 10
percent of a registered class of the Corporation's equity securities, to file
initial reports of ownership and reports of changes in ownership of the
Corporation's equity securities with the Securities and Exchange Commission (the
"SEC") and the New York Stock Exchange. Such persons are required by SEC
regulations to furnish the Corporation with copies of all Section 16(a) forms
they file.
Based upon a review of the copies of the Forms 3,4 and 5, furnished to the
Corporation, and written representations from certain reporting persons that no
Forms 5 were required, the Corporation believes that during the fiscal 1996 year
all filing requirements applicable to its officers and directors were met.
INFORMATION RESPECTING THE CORPORATION'S
INDEPENDENT PUBLIC ACCOUNTANTS
The principal independent public accountants of the Corporation, selected
by the Board for 1997, are Ernst & Young LLP, Indianapolis, Indiana.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting and will have the opportunity to make a statement if they should desire
to do so. They are also expected to be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
The Corporation anticipates holding its 1998 Annual Meeting of Shareholders
on Thursday, May 7, 1998.
Under the regulations of the Securities and Exchange Commission, any
shareholder desiring to make a proposal to be acted upon at the 1998 Annual
Meeting of Shareholders must present such proposal to the secretary of the
Corporation at its principal office in West Lafayette, Indiana, not later than
November 28, 1997, in order for the proposal to be considered for inclusion in
the Corporation's proxy statement.
Shareholder proposals or director nominations not included in a proxy
statement for an annual meeting must comply with the advance notice procedures
and information requirements set forth in the Bylaws of the Corporation in order
to be properly brought before that Annual Meeting of Shareholders.
OTHER MATTERS
As of the date of this proxy statement, management is not aware of any
matters to be presented at the meeting other than the matters specifically
stated in the Notice of Meeting and discussed in the proxy statement. If any
other matter or matters are properly brought before the meeting, the persons
named in the enclosed proxy have discretionary authority to vote the proxy on
each such matter in accordance with their judgment.
15
<PAGE> 18
The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers or other persons holding stock in their names or in the
names of their nominees for their expenses in sending proxy material to the
beneficial owners will be borne by the Corporation. Solicitations may be made by
officers and regular employees of the Corporation, without additional
compensation, by use of the mails, telephone, facsimile or personal calls.
By order of the Board of Directors,
MARY P. MCCLANAHAN
Secretary
March 28, 1997
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD
16
<PAGE> 19
PROXY PROXY
1997 1997
GREAT LAKES CHEMICAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT B. MCDONALD, ROBERT T. JEFFARES,
AND MARY P. MCCLANAHAN, an each of them with full power of substitution, as the
proxies of the undersigned, to attend the Annual Meeting of Shareholders to be
held on Thursday, May 1, 1997, at 11:00 a.m. and any adjournment thereof, and
to vote the stock the undersigned would be entitled to vote, if present, on the
items listed on the reverse side of this proxy card.
THIS PROXY WILL BE VOTED AS SPECIFIED; OR IF NO CHOICE IS SPECIFIED,
IT WILL BE VOTED FOR THE ELECTION OF ALL THREE DIRECTOR NOMINEES.
ELIMINATE DUPLICATE MAILINGS
SEC rules require the Corporation to mail an annual report to every
shareholder even if there are multiple shareholders in the same household. If
you are a shareholder of record and have the same address as other shareholders
of record, you may authorize the Corporation to discontinue mailings of
multiple annual reports. To do so, mark the appropriate box (see over) on each
proxy card for which you do not wish to receive an annual report. Applicable
law requires the Company to send separate proxy statements and proxy cards for
all of your accounts.
[]
Mark here for address change
________________________________
New Address
________________________________
(PLEASE SIGN ON THE REVERSE SIDE)
________________________________
GREAT LAKES CHEMICAL CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
The board recommends a VOTE FOR ITEM 1.
For Withhold
All All Except
1. Election of Director Nominees: / / / / / / _________________
Martin M. Hale, Richard H. Nominee Exception
Leet and Jay D. Proops.
2. In their discretion, the Please check here to
Proxies are authorized to vote discontinue the annual / /
upon any other matter which report mailing for this
may properly come before the account.
meeting.
, 1997
_____________________________
Signature Date
, 1997
_____________________________
Signature Date
Please sign exactly as your
name appears. Joint owners
should each sign personally.
Where applicable, indicate
your official position or
representation capacity.
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
