<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission file number 1-6450
GREAT LAKES CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-1765035
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
ONE GREAT LAKES BOULEVARD
P. O. BOX 2200
WEST LAFAYETTE, INDIANA 47996
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 765-497-6100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common stock, $1.00 par value New York Stock Exchange
Pacific 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, and (2) has been subject to the 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.
[ ]
As of March 9, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $2,807,722,770.
As of March 9, 1998, 59,032,279 shares of the registrant's stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1997 Annual Report to Stockholders are incorporated by reference
into Parts I, II and IV. Portions of the annual proxy statement expected to be
filed on March 30, 1998 are incorporated by reference into Part III.
<PAGE> 2
PART I
Item 1. BUSINESS
GENERAL
Great Lakes Chemical Corporation is a Delaware corporation incorporated in 1933,
having its principal executive offices in West Lafayette, Indiana. The Company's
operations consist of one dominant industry-segment chemicals and allied
products. Within this segment the Company focuses on performance chemicals,
water treatment chemicals, and specialized services and manufacturing. In 1997,
the Company took a number of actions that will enable it to focus on its core
specialty chemicals operations. These include the announced spin off of the
petroleum additives business (Octel), and the decision to exit the furfural and
derivatives, Eastern European trading (Chemol) and environmental services
businesses. These businesses are reported as discontinued operations. Unless
otherwise indicated, the information herein refers to the continuing business of
the Company. The Business Profile on page 6 and the Review of Operations on
pages 8 through 17 of the 1997 Annual Report to Stockholders are incorporated
herein by reference.
The term "Great Lakes" as used herein means Great Lakes Chemical Corporation and
its Subsidiaries unless the context indicates otherwise.
Net sales by Business Unit are set forth in the following table (dollars in
millions):
<TABLE>
<CAPTION>
Years - ended December 31 1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Flame Retardants $ 309 $ 294 $ 300
Intermediates and Fine Chemicals 211 196 197
Polymer Stabilizers 245 242 224
Specialized Services and Manufacturing 194 190 152
Water Treatment 352 430 419
------ ------ ------
Total Net Sales $1,311 $1,352 $1,292
------ ------ ------
</TABLE>
PRODUCTS AND SERVICES
The following is a list of the principal products and services provided by Great
Lakes:
<TABLE>
<CAPTION>
FLAME RETARDANTS
Products & Services Principal Markets Facilities Major Raw Materials
- - ------------------- ----------------- ---------- -------------------
<S> <C> <C> <C>
Brominated, intumescent Computer and Business Equipment, El Dorado, AR Bromine
and antimony based flame Consumer Electronics, Textiles, Newport, TN Bisphenol A
retardants Urethanes and Construction Laredo, TX Diphenyl Oxide
Materials Reynosa, Mexico Antimony
Aycliffe, U.K.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
POLYMER STABILIZERS
Products & Services Principal Markets Facilities Major Raw Materials
- - ------------------- ----------------- ---------- -------------------
<S> <C> <C> <C>
Antioxidants, UV absorbers Computer and Business Equipment, Newport, TN Alkylated Phenols,
and Light Stabilizers Consumer Appliances, Packaging, Catenoy, France Methyl Acrylate,
Textiles, Building and Persan, France Phosphorus Trichloride
Construction, Transportation Waldkraiburg, Germany
Pedrengo, Italy
Ravenna, Italy
Pyongtaek, Korea
<CAPTION>
INTERMEDIATES AND FINE CHEMICALS
<S> <C> <C> <C>
Bromine, Bromine derivatives Pharmaceutical Industry, ElDorado, AR Bromine
and Bromine-based specialty Agrochemical Industry, Marysville, AR Chlorine
chemicals, and Methyl Bromide Electronics, Soil Crop and Newport, TN
Structural Pest Control, Konstanz, Germany
Photographic Papers and Films Amlwch, U.K.
and Rubber Compounds Halebank, U.K.
<CAPTION>
WATER TREATMENT CHEMICALS
RECREATIONAL
<S> <C> <C> <C>
Water sanitizers - Pool and Spa Dealers and Conyers, GA BCDMH,
BioGuard(R),OMNI(R), Distributors, Mass Market Decatur, GA Chlorinated
Guardex(R) Pool Time(R), Retailers, Builders Lake Charles, LA Isocyanurates, Calcium
AquaChem(R), Vantage(R), Adrian, MI Hypochlorite, Cyanuric
AquaBrom(R), Bayrol(R), Victoria, Australia Acid
Hydrotech(R), Ontario, Canada
Algicides, oxidizers, pH Mundolsheim, France
balancers, mineral balancers Munich, Germany
and specialty chemicals Barbera Del Valles, Spain
Kyalami, South Africa
Glouchester, U.K.
<CAPTION>
INDUSTRIAL
<S> <C> <C> <C>
BromiCide(R) and Industrial Cooling Water Adrian, MI Sodium Bromide
LiquiBrom(TM) Specialty Treatment, Industrial and ElDorado, AR Bromine
Biocides, Biocide dispensing Municipal Wastewater Treat-
equipment ment, Pulp and Paper and
Food Processing
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
SPECIALIZED SERVICES AND MANUFACTURING
<S> <C> <C> <C>
OIL FIELD SERVICES
Completion products and Worldwide Oil and Gas Lafayette, LA Calcium Bromide
services, including Industry New Orleans, LA Sodium Bromide
reservoir analysis, Houston, TX Zinc Bromide
solids-free fluids, sand Milan, Italy
control, filtration, Villahermosa, Mexico
downhole tools, stimulation Stravanger, Norway
and marine well services Aberdeen, U.K.
Anaco, Venezuela
TOXICOLOGICAL SERVICES
All phases of nonclinical Pharmaceutical, Chemical, Ashland, OH
toxicological testing and Veterinary, Medical, Agri-
bioanalytical services, cultural, Food and Consumer
Design of specialized Products Industries
toxicological, metabolic and
analytical chemistry programs
FLUORINE CHEMISTRY
Fire extinguishing agent Data Processing ElDorado, AR Fluorine
FM-200(R), Organo-fluorine Telecommunications
compounds, Fluorinated Military
intermediates
</TABLE>
BUSINESS RISKS
Great Lakes Chemical Corporation is including the following cautionary statement
in this Annual Report of Form 10-K to make applicable and take advantage of the
new "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to any forward-looking statement made by, or on behalf of, the
Company. The factors identified in this cautionary statement are important
factors (but do not necessarily constitute all important factors) that could
cause actual results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company.
Where any such forward-looking statement includes a statement of the assumptions
or bases underlying such forward-looking statement, the Company cautions that,
while it believes such assumptions or basis to be reasonable and makes them in
good faith, assumed facts or bases almost always vary from actual results, and
the differences between assumed facts or basis and actual results can be
material, depending upon the circumstances. Where, in any forward-looking
statement, the Company, or its management, expresses an expectation or belief as
to future results, such expectation or belief is expressed in good faith and
believed to have a reasonable basis, but there can be no assurance that the
statement of expectation or belief will result or be achieved or accomplished.
Taking into account the foregoing, certain factors, including but not limited
to, those listed below may cause actual results to differ materially from those
expressed in any forward-looking statement made by, or on behalf of, the
Company.
Economic factors over which the Company has no control, including changes
in inflation, tax rates, interest rates and foreign currency exchange
rates.
<PAGE> 5
Competitive factors such as pricing pressures on key products and the
cost and availability of key raw materials.
Governmental factors including laws and regulations and judicial
decisions related to the production or use of key products such as
bromine and bromine derivatives.
The difficulties and uncertainties inherent in new product development.
New product candidates that appear promising in development may fail to
reach the market because of safety concerns, inability to obtain
necessary regulatory approvals, difficulty or excessive costs to
manufacture, or infringements of the patents or intellectual property
rights of others.
Legal factors, including unanticipated litigation of product liability
claims, antitrust litigation; environmental matters, and patent disputes
with competitors which could preclude commercialization of products or
negatively affect the profitability of existing products.
Inability to obtain existing levels of product liability insurance or
denial of insurance coverage following a major product liability claim.
Changes in tax laws, including future changes in tax laws related to the
remittance of foreign earnings or investments in foreign countries with
favorable tax rates.
Changes in accounting standards promulgated by the Financial Accounting
Standards Board, the Securities and Exchange Commission, and the American
Institute of Certified Public Accountants which are adverse to the
Company.
Internal factors such as changes in business strategies and the impact of
cost control efforts and business combinations.
Loss of brine leases or inability to produce bromide ion in required
quantities due to depletion of resources or other causes beyond the
Company's control.
1997 DEVELOPMENTS
The Business Profile on page 6 and the Review of Operations on pages 8 through
17 of the 1997 Annual Report to Stockholders are incorporated herein by
reference.
Raw Materials
The sources of essential raw materials for bromine are the brine from
company-owned wells in Arkansas and sea water extraction plants in Europe. The
Arkansas properties are located atop the Smackover lime deposits, which
constitute a vast underground sea of bromine-rich brine. The area between
ElDorado and Magnolia, Arkansas, (located about 35 miles west of ElDorado)
provides the best known geological location for bromine production and both
major domestic bromine manufacturers are located there. Based on projected
production rates, the Company's brine reserves are estimated to be adequate for
the foreseeable future.
Other materials used in the chemical processes are obtained from outside
suppliers through purchase contracts. Supplies of these materials are believed
to be adequate for the Company's future operations.
<PAGE> 6
International Operations
Great Lakes has a substantial presence in foreign markets. The Company's
investment in foreign countries is principally in Western Europe and represents
$482 million or 31 percent of total assets, excluding discontinued operations.
Sales to customers in foreign countries (primarily Europe and the Far East)
amount to 46, 46 and 45 percent of total sales for the years ended December 31,
1997, 1996, and 1995, respectively. Approximately 35, 36 and 34 percent of these
foreign sales, respectively for the three years shown, are attributable to
products exported from the U.S., with the balance of the Company's international
sales primarily being products manufactured and sold by the Company's European
subsidiaries and branches. The profitability on foreign sales (including U.S.
exports and foreign manufactured products) approximates those for domestic
operations.
The geographic segment data contained in the note "Industry Segments and Foreign
Operations" of Notes to Consolidated Financial Statements on page 36 of the 1997
Annual Report to Stockholders is incorporated herein by reference.
Customers and Distribution
During the last three years, no single customer accounted for more than 10
percent of Great Lakes' total consolidated sales. The Company has no material
contracts or subcontracts with government agencies. A major portion of the
Company's sales are sold to industrial or commercial users for use in the
production of other products. Some products, such as recreational water
treatment chemicals and supplies, are sold to a large number of retail pool
stores, mass merchandisers and distributors. Some export sales are marketed
through distributors and brokers.
The Company's business does not normally reflect any material backlog of orders
at year-end.
Competition
Great Lakes is in competition with businesses producing the same or similar
products as well as businesses producing products intended for similar use.
There is one other major bromine producer in the United States which competes
with the Company in varying degrees, depending on the product involved, with
respect to the sale of bromine and bromine derivatives. There is also one major
overseas manufacturer of bromine and brominated products which competes with the
Company in the United States and elsewhere. There are several small producers in
the U.S. and overseas which are competitors in several individual products. In
addition, there are numerous manufacturers of alternatives that compete with the
Company. In the polymer stabilizers area, the Company competes with a
significantly larger supplier across this entire product line and with a number
of smaller companies in individual product areas. The Company competes with
several manufacturers and distributors of swimming pool and spa chemicals and
equipment.
Principal methods of competition are price, product quality and purity,
technical services and ability to deliver promptly. The Company is able to move
quickly in providing new products to meet identified market demands, and
believes its production costs are among the lowest in the world. These factors,
combined with high technical skills, allow the Company to compete effectively.
Seasonality and Working Capital
The products which the Company sells to the agricultural and swimming pool
markets, exhibit some seasonality; however, the quarterly effect on overall
Company sales and profits is not material. Seasonality results in the need to
build inventories for rapid delivery at certain times of the year. The pool
product season is strongest during the first six months, requiring a build-up of
inventory at the beginning of
<PAGE> 7
the year. Except for certain arrangements with distributors and dealers of
swimming pool and spa products, customers are not permitted to return unsold
material at the end of a season. Extended credit terms are granted only in cases
where the Company chooses to do so to meet competition.
The effect of the above items on working capital requirements is not material.
Research and Development and Patents
Research and development expenditures are included in the note "Research and
Development Expense" of the Notes to Consolidated Financial Statements on page
35 of the 1997 Annual Report to Stockholders and is incorporated herein by
reference. The Company holds no patents, licenses, franchises or concessions
which are essential to its operations.
Environmental and Toxic Substances Control
The Company recognizes its responsibility for the sound environmental management
of its businesses and operations. In addressing this responsibility, the
Company's domestic chemical manufacturing operations subscribe to the
comprehensive environmental stewardship program developed by the Chemical
Manufacturers Association known as Responsible Care.
The Company is in material compliance with all environmental laws and
regulations to which it is subject.
Employees
The Company has approximately 5,100 employees.
Item 2. PROPERTIES
Great Lakes has plants at 11 locations in 7 states and 16 plants in 9 foreign
countries. Most principal plants are owned. Listed under Item 1 above in a table
captioned Products and Services are the principal locations at which products
are manufactured, distributed or marketed.
The Company leases warehouses, distribution centers and space for offices
throughout the world. All of the Company's facilities are in good repair,
suitable for the Company's businesses, and have sufficient space to meet present
marketing demands at an efficient operating level.
Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings involving the Company, its
subsidiaries or any of its properties. Furthermore, no director, officer or
affiliate of the Company, or any associate of any director or officer is
involved, or has a material interest in, any proceeding which would have a
material adverse effect on the Company.
Item 103 of Regulation S-K requires disclosure of administrative or judicial
proceedings arising under any federal, state or local provisions dealing with
protection of the environment, if the monetary sanctions might exceed $100,000.
There are currently no such proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the quarter ended
December 31, 1997.
<PAGE> 8
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of March 9, 1998, there were approximately 3,700 registered holders of Great
Lakes Common Stock. Additional information is contained in the 1997 Annual
Report to Stockholders, under the captions "Stock Price Data" and "Cash
Dividends Paid" on page 37 all of which are incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
This information is contained in the 1997 Annual Report to Stockholders, under
the caption "Financial Review" on page 19 and is incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 20 through 24 of the 1997 Annual Report to Stockholders, is
incorporated herein by reference.
Item 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
This information is included in the "Market Risks" section of "Management's
Discussion and Analysis of Results of Operations and Financial Condition" on
pages 23 and 24 of the 1997 Annual Report to Stockholders and is incorporated
herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements together with the report thereon of Ernst
& Young LLP dated February 3, 1998, appearing on pages 25 through 36 and the
"Quarterly Results of Operations" on page 37 of the 1997 Annual Report to
Stockholders, are incorporated herein by reference.
Item 9. DISAGREEMENT OF ACCOUNTING AND FINANCIAL DISCLOSURE
No change of auditors or disagreements on accounting methods have occurred which
would require disclosure hereunder.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers
<TABLE>
<CAPTION>
Officer
Name and Age Office Since
- - ------------ ------ -----
<S> <C> <C>
Robert B. McDonald, 61(1) Chief Executive Officer and President. Mr. McDonald joined 1981
the Company in 1970. He received the B.E. in Chemical
Engineering from Yale University and the M.S. in the same
field from the University of Washington.
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C>
Robert T. Jeffares, 62 Executive Vice President and Chief Financial Officer. Mr. 1983
Jeffares joined the Company in 1983. He received the B.S.
in Accounting from the University of Alabama.
L. Donald Simpson, 62 Executive Vice President. He joined the Company in 1992. 1992
He is a graduate of Rose Hulman Institute of Technology
with the B.S. in Chemical Engineering.
Marshall E. Bloom, 60 Vice President, Water Treatment. Mr. Bloom is a graduate 1994
of the University of Georgia receiving his B.B.A. He
joined Bio-Lab in 1955 and Great Lakes in 1990.
David R. Bouchard, 54 Vice President, Bromine and Bromine Derivatives. He joined 1990
the Company in 1982. He received the B.S. in Chemical
Engineering from the University of Michigan and the M.S. in
Industrial Administration from Purdue University.
Stephen D. Clark, 52 Vice President, Corporate R&D. He joined the Company in 1995
1995. He holds the B.S. in Chemistry from Seattle
University and the Ph.D. in Organic Chemistry from the
Massachusetts Institute of Technology.
Mark Esselman, 41 Vice President, Human Resources. Mr. Esselman came to 1997
Great Lakes from U.S. Robotics in 1997 with nearly 20 years
of human resources experience. He received his B.S. and
M.S. degrees from the University of Wisconsin.
Richard R. Ferguson, 46 Vice President, Treasurer and Assistant Secretary. He 1991
joined the Company in 1977. He graduated from Ball State
University with the B.S. in Accounting.
Otto K. Furuta, 54 Vice President, Purchasing and Logistics. He joined the 1996
Company in 1980. He earned the B.S. degree in Chemistry
from the University of California, Berkeley, and the Ph.D.
in Organic Fluorine Chemistry from the University of
Colorado.
Robert L. Hollier, 55 Vice President, and President of OSCA, Inc. He joined the 1991
Company in 1982. He graduated from the University of
Southwestern Louisiana with the B.S. in Business
Administration.
John V. Lacci, 46 Vice President, General Counsel. He has been with the 1994
Company for 11 years. He received his B.A. from Georgetown
University and the J.D. from Georgetown University School
of Law.
J. Larry Robertson, 49 Vice President, LINX. He joined the Company in 1974. He 1994
graduated from the University of Arkansas with the B.S. in
Chemical Engineering.
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C>
John B. Talpas, 54 Vice President, Manufacturing. He joined the Company in 1988
1988 and is a graduate of Carnegie-Mellon Institute with
the B.S. in Chemical Engineering.
Robert J. Smith, 51 Vice President, Controller. He joined the Company in 1993 1993
and received the B.A. in Economics from Fairfield
University.
David C. Sanders, 54 Associate Vice President, New Product Development. He 1990
joined the Company in 1972. He received the B.S. in
Chemistry from Butler University and the Ph.D. in Organic
Chemistry from Ohio State University.
Mary P. McClanahan, 54 Corporate Secretary. She joined the Company in 1978 and 1994
was educated in England.
Stephen E. Brewer, 49 Assistant Treasurer He joined the Company in 1991. He 1994
received the B.S. in Chemical Engineering from Purdue
University and the M.B.A. from Northwestern University
</TABLE>
(1)
On March 23, 1998, Mr. McDonald announced his intention to retire effective
April 6, 1998. Mark Bulriss has been appointed to succeed Mr. McDonald. Mr.
Bulriss joins Great Lakes from AlliedSignal, Inc. where he was president of
the Polymers Division since 1996. He joined AlliedSignal in 1993 as
president of the Laminates business unit, moving to president of the
Electronic Materials Division in 1995. Prior to AlliedSignal, Mr. Bulriss
spent 16 years with GE Plastics.
Information with respect to directors of the Company is contained under the
heading "Proposal One: Election of Directors" in the Great Lakes' Proxy
Statement relating to the 1998 Annual Meeting of Stockholders expected to be
filed on March 30, 1998, which is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information under the heading "Executive Compensation and Other Information"
in the 1998 Proxy Statement is incorporated by reference in this report.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the heading "Security Ownership of Certain Beneficial
Owners and Management" in the 1998 Proxy Statement is incorporated by reference
in this report.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the heading "Compensation Committee Interlocks and Insider
Participation" in the 1998 Proxy Statement is incorporated by reference in this
report.
<PAGE> 11
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following Consolidated Financial Statements of Great Lakes Chemical
Corporation and Subsidiaries and related notes thereto, together with the report
thereon of Ernst & Young LLP dated, February 3, 1998, appearing on pages 25
through 36 of the 1997 Annual Report to Stockholders, are incorporated by
reference in Item 8:
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income and Retained Earnings -
Years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows -
Years ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
The following additional information is filed as part of this report and should
be read in conjunction with the 1997 financial statements.
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore, have been omitted.
(a)(3) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
(3)(i) Articles of Incorporation
(3)(ii) By-Laws
(4) Shareholders Rights Plan amended and restated
December 7, 1995 (filed on Form 8K (No. I-06450),
and incorporated herein by reference)
(10)(i) Supplemental Retirement Plan
(10)(ii) Deferred Compensation Plan
(10)(iii) Supplemental Savings Plan
(10)(iv) Severance Agreements
(10)(v) Deferred Compensation Plan Supplement for one
executive
(10)(vi) Non Employee Directors' Deferred and Long Term
Compensation Plan
(10)(vii) Split-Dollar Life Insurance
(10)(viii) Change in Control Agreements
(10)(ix) Directors Retirement Plan
(10)(x) 1993 Employee Stock Compensation Plan
(10)(xi) 1984 Employee Stock Option Plan
(13) 1997 Annual Report to Stockholders
(21) Subsidiaries - Incorporated herein by reference is
the list of subsidiaries appearing on the inside of
the back cover of the 1997 Annual Report to
Stockholders
</TABLE>
<PAGE> 12
<TABLE>
<S> <C>
(23) Consent of Independent Auditors
(27.1) Financial Data Schedules December 31, 1997, and
March 31, 1997, June 30, 1997 and September 30,
1997 Restated
(27.2) Financial Data Schedules March 31, 1996, June 30,
1996, September 30, 1996 and December 31, 1996
Restated
(27.3) Financial Data Schedule December 31, 1995 Restated
</TABLE>
Exhibit No. 23 is included herewith. All other exhibits except
exhibit No. 4 are included herewith as part of the electronic filing.
(b) Reports on Form 8-K
The Company filed a Form 8-K on December 31, 1997 in connection with the
restructuring of the Company's operations.
(c) Exhibits
The response to this section of Item 14 is submitted as a separate section of
this report.
(d) Financial Statement Schedules
The response to this section of Item 14 is submitted as a separate section of
this report.
<PAGE> 13
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.
GREAT LAKES CHEMICAL CORPORATION
(Registrant)
Date February 17, 1998 /s/ Robert B. McDonald
------------------------------- ----------------------
Robert B. McDonald, President 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:
<TABLE>
<S> <C>
Date February 17, 1998 /s/ Robert T. Jeffares
------------------------------- ----------------------
Robert T. Jeffares,
Executive Vice President
and Chief Financial Officer
Date February 17, 1998 /s/ Robert J. Smith
------------------------------- -------------------
Robert J. Smith, Vice President -
Controller
(Principal Accounting Officer)
Date February 17, 1998 /s/ Evan Bayh
------------------------------- -------------
Evan Bayh, Director
Date February 17, 1998 /s/ William H. Congleton
------------------------------- ------------------------
William H. Congleton, Director
Date February 17, 1998 /s/ John S. Day
------------------------------- ---------------
John S. Day, Director
Date February 17, 1998 s/ Thomas M. Fulton
------------------------------- -------------------
Thomas M. Fulton, Director
Date February 17, 1998 /s/ Martin M. Hale
------------------------------- ------------------
Martin M. Hale, Director
Date February 17, 1998 /s/ Louis E. Lataif
------------------------------- -------------------
Louis E. Lataif, Director
Date February 17, 1998 /s/ Richard H. Leet
------------------------------- -------------------
Richard H. Leet, Director
Date February 17, 1998 /s/ Robert B. McDonald
------------------------------- ----------------------
Robert B. McDonald, Director
Date February 17, 1998 /s/ Jay D. Proops
------------------------------- -----------------
Jay D. Proops, Director
</TABLE>
<PAGE> 14
SCHEDULE II
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Balance at Additions Balance
Beginning Charges to Costs Charged to at End
Description of Period and Expenses Other Accounts Deductions of Period
- - ----------- --------- ------------ -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1997:
Reserve deducted from asset:
Allowance for doubtful accounts
receivable
$ 7,321,000 $ (352,000) $-0- $ 1,166,000(A) $ 5,803,000
------------ ------------ ------------ ------------ ------------
Accumulated amortization of
goodwill $ 10,712,000 $ 2,645,000 $-0- $ 712,000(B) $ 12,645,000
------------ ------------ ------------ ------------ ------------
1996:
Reserve deducted from asset:
Allowance for doubtful accounts
receivable $ 5,998,000 $ 1,931,000 $-0- $ 608,000(A) $ 7,321,000
------------ ------------ ------------ ------------ ------------
Accumulated amortization of
goodwill $ 8,166,000 $ 2,805,000 $-0- $ 259,000(B) $ 10,712,000
------------ ------------ ------------ ------------ ------------
1995:
Reserve deducted from asset:
Allowance for doubtful accounts
receivable $ 6,305,000 $ 648,000 $-0- $ 955,000(A) $ 5,998,000
------------ ------------ ------------ ------------ ------------
Accumulated amortization of
goodwill $ 5,416,000 $ 2,750,000 $-0- $ -0- $ 8,166,000
------------ ------------ ------------ ------------ ------------
</TABLE>
(A) Uncollectible accounts receivable written off, net of recoveries and foreign
currency translation.
(B) Foreign currency translation.
<PAGE> 1
Exhibit No. (3)(i)
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATION
FILED 11:00 AM 10/25/1993
932985163 - 741228
RESTATED CERTIFICATE OF INCORPORATION
OF
GREAT LAKES CHEMICAL CORPORATION
(formerly Great Lakes Delaware, Inc.,
incorporated on January 26, 1970)
This Certificate as duly adopted in accordance with the provisions of Section
245 of the Delaware General Corporation Law and only restates and integrates and
does not further amend the provisions of the Corporation's Certificate of
Incorporation as theretofore amended or supplemented, and there is no
discrepancy between those provisions and the provisions of the Restated
Certificate of Incorporation.
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FIRST. The name of the Corporation is Great Lakes Chemical Corporation.
SECOND. The address of its registered office in the State of Delaware is 229
South State Street in the City of Dover, County of Kent. The name of
its registered agent at such address is United States Corporation
Company.
THIRD. The nature of the business to be conducted or promoted and the purposes
of the Corporation are to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law
of Delaware.
FOURTH. The total number of shares of capital stock which the Corporation shall
have authority to issue is two hundred million shares (200,000,000) of
Common Stock with a par value of $1.00 per share.
No holder of stock of any class, now or hereafter authorized, shall
have any preemptive right to subscribe for or purchase, or have offered
to him for subscription or purchase, stock of any class, securities
convertible into stock of any class, or warrants or other evidences of
optional rights to purchase stock of any class, whether issued for cash
or other consideration.
FIFTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
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(a) To make, alter or repeal the By-laws of the
Corporation; and
(b) To authorize and cause to be executed mortgages and
liens upon the real and personal property of the
Corporation.
SIXTH. (a) The number of directors shall be not less than 3 nor
more than 11. The exact number of directors shall be
such as from time to time shall be fixed by, and in a
manner set forth in, the By-laws of the Corporation.
No decrease in the number of directors shall shorten
the term of any incumbent director.
(b) The directors shall be classified with respect to the
time for which they shall hold office by dividing
them into three classes, each consisting, as nearly
as may be possible, of one-third of the whole number
of the Board of Directors. At each annual meeting of
the stockholders, the successors to the directors
whose terms shall expire that year shall be elected
to hold office for the term of three years, so that
the term of office of one class of the directors
shall expire in each year. In any event, each
director of the Corporation shall hold office until
his successor is duly elected and qualified, subject,
however, to prior death, resignation, retirement, or
removal from office. If the number of directors is
changed, any increase or decrease shall be
apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as
possible, but in no case shall a decrease in the
number of directors shorten the term of any incumbent
director. Any vacancy in the Board of Directors or
newly created directorship resulting from any
increase in the number of directors may be filled by
a majority of the directors then in office, excluding
any directors who shall theretofore have resigned
effective as of a future date, although less than a
quorum.
(c) No director shall be removed from the Board of
Directors by action of the stockholders of the
Corporation during his appointed term other than for
cause.
(d) Advance notice of stockholder nominations for the
election of directors shall be given in the manner
provided by the By-laws.
SEVENTH. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the
application in a summary way of the Corporation or of any creditor or
stockholder thereof, or on the application of any receiver or receivers
appointed for the Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code or on the application of
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trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section
279 of Title 8 of the Delaware Code, order a meeting of the
creditors or class of creditors, and/or of the stockholders or
class of stockholders, of the Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the
creditors, or class of creditors, and/or of the stockholders
or class of stockholders, of the Corporation, as the case may
be, agree to any compromise or arrangement and to any
reorganization of the Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement
and the said reorganization shall, if sanctioned by the court
to which the said application has been made, be binding on all
the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as
the case may be, and also on the Corporation.
EIGHTH. The books of the Corporation may be kept (except as may be
otherwise required by law) outside the State of Delaware at
such place or places as may be designated from time-to-time by
the Board of Directors or in the By-laws of the Corporation.
Election of directors need not be by written ballot unless the
By-laws of the Corporation shall so provide.
NINTH. The Corporation shall indemnify the directors and the officers
to the fullest extent permitted by the Delaware General
Corporation law. Directors of the Corporation, to the fullest
extent permitted by the Delaware General Corporation law,
shall not be liable to the Corporation of its stockholders for
monetary damages for breach of their fiduciary duty as a
director.
TENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by
statute and all rights conferred upon stockholders herein are
granted subject to this reservation.
ELEVENTH. None of the following transactions may be effectuated unless a
meeting of stockholders of the Corporation is held to act
thereon and the votes of the stockholders of its voting
securities representing at least two-thirds of the votes
entitled to be cast are cast in favor thereof:
(a) An acquisition by the Corporation of stock of an
Interested Party;
(b) A sale, lease or exchange of all or the major portion
of the assets of the Corporation or an Interested
Party to the other;
(c) A merger or consolidation to which the Corporation
and an Interested Party are parties; or
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(d) An amendment or repeal of this Article.
As used in this Article, "Interested Party" means any person,
firm or corporation, or any group thereof acting in concert,
which owns of record or beneficially, directly or indirectly,
more than 10% of any class of the stock of the Corporation.
TWELFTH. Notwithstanding any provision of Delaware Law, or any other
provision of this Certificate of Incorporation, any action
required or permitted to be taken by the stockholders of the
Corporation, whether voting as a class of otherwise, must be
taken at a duly called annual or special meeting of the
stockholders of the Corporation and may not be taken by
consent in writing of such stockholders.
No amendment to this Certificate of Incorporation shall amend,
alter, change or repeal any of the provisions of this Article
Twelfth unless such amendment, in addition to receiving any
stockholder vote or consent required by the laws of the State
of Delaware in effect at the time, shall receive the
affirmative vote or consent of the holders of 80% of the
outstanding shares of stock of the Corporation entitled to
vote in elections of directors, considered separately for
purposes of this Article Twelfth.
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Exhibit No. (3)(ii)
BY-LAWS OF
GREAT LAKES CHEMICAL CORPORATION
ADOPTED BY ACTION OF THE
BOARD OF DIRECTORS
(ADOPTED MARCH 14, 1975,
AS AMENDED THROUGH FEBRUARY 16, 1998)
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the
stockholders of the Corporation shall be held at the registered office of the
Corporation in the State of Delaware or at such other place within or without
the State of Delaware, as may be determined by the Board of Directors and as may
be stated in the notice of the meeting. The annual meeting shall be held on such
date and at such time as shall be designated from time to time by the Board of
Directors. The business to be transacted at such meeting shall be the election
of directors and such other business as shall properly be brought before the
meeting.
No business may be transacted at an annual meeting of
stockholders, other than business that is (a) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
at the direction of the Board of Directors (or any duly authorized committee
thereof) or (c) otherwise properly brought before the annual meeting by any
stockholder of the Corporation (i) who is a stockholder of record on the date of
the giving of the notice provided for in this Section 1 and on the record date
for the determination of stockholders entitled to vote at such annual meeting
and (ii) who complies with the notice procedures set forth in this Section 1.
In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than one hundred twenty (120) days nor more than one
hundred fifty (150) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting called for a date that is not within thirty (30) days
before or after such anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
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of business on the tenth (10th) day following the day on which notice of the
date of the annual meeting was mailed or public announcement of the date of the
annual meeting was made, whichever first occurs. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the giving of a stockholder's notice as described above.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such stockholder, (iv)
a description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 1; provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 1 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an annual
meeting determines that business was not properly brought before the annual
meeting in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the business was not properly brought before the meeting and
such business shall not be transacted.
The term "public announcement" shall mean an announcement in a
press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
SECTION 2. SPECIAL MEETINGS. Special meetings of the
stockholders may be called by the Board of Directors, by the Chairman, or by the
President. At any time, upon the written request of any person or persons
entitled to call a special
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GREAT LAKES CHEMICAL CORPORATION
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meeting, it shall be the duty of the Secretary to send out notices of such
meeting, to be held within or without the State of Delaware and at such time,
but not less than fifteen days nor more than thirty days after receipt of the
request, as may be fixed by the Board of Directors. If the Board of Directors
shall fail to fix a time or place, the meeting shall be held at the registered
office of the Corporation in the State of Delaware at such time as shall be
fixed by the Secretary within the above limits.
SECTION 3. NOTICE OF MEETINGS AND ADJOURNED MEETINGS.
(a) A written or printed notice of each meeting or
stockholders shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. The written or printed notice of any meeting shall
be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meetings. If mailed, notice
shall be deemed given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation. No publication of the notice of meetings shall be required. An
affidavit of the Secretary or an Assistant Secretary or of the Transfer Agent of
the Corporation that the notice has been given
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein. Any previously scheduled meeting of the stockholders may be postponed,
and (unless the Certificate of Incorporation provides otherwise) any special
meeting of the stockholders may be canceled, by resolution of the Board of
Directors upon public notice given prior to the date previously scheduled for
such meeting of stockholders.
(b) Whether or not a quorum is present, any annual,
regular or special meeting of the stockholders may be adjourned to another date
by the Chairman of the meeting or by a majority vote by the shares represented
at such meeting. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
(c) Whenever a notice of a meeting is required to be
given to stockholders, a written waiver thereof, signed by the person entitled
to notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting, either in person or
by proxy, shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of a meeting, to the transaction of any business because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders need be specified
in any written waiver of notice.
SECTION 4. QUORUM. Except as otherwise provided by law, a
quorum at all meetings of stockholders shall consist of the holders of record of
a majority of the shares entitled to vote thereat.
SECTION 5. CONDUCT OF MEETING. Meetings of the stockholders
shall be presided over by the Chairman, or if he is not present, by the
President, or if he is not present, by a Vice President or other person chosen
at the meeting. The Secretary or an Assistant Secretary of the Corporation, or
in their absence, a person chosen at the meeting, shall act as Secretary of the
meeting.
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
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SECTION 6. INSPECTORS OF ELECTION. Whenever any stockholder
present at a meeting of the stockholders shall request the appointment of
inspectors, the Chairman of the meeting shall appoint inspectors who need not be
stockholders. If the right of any person to vote at such meeting shall be
challenged, the inspectors of election shall determine such right. The
inspectors shall receive and count the votes either upon an election or for the
decision of any question, and shall determine the result. Their certificate of
any vote shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
SECTION 7. VOTING. All elections of directors shall be by
written ballot. Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the Corporation,
except as may be otherwise provided in the Restated Certificate of Incorporation
of the Corporation. Nominations of persons for election to the Board of
Directors may be made at any annual meeting of stockholders (a) by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
or (b) by any stockholder of the Corporation (i) who is a stockholder of record
on the date of the giving of the notice provided for in this Section 7 and on
the record date for the determination of
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
stockholders entitled to vote at such annual meeting and (ii) who complies with
the notice procedures set forth in this Section 7.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than one hundred and twenty (120) days nor more than one
hundred fifty (150) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting called for a date that is not within thirty (30) days
before or after such anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close of business on the tenth
(10th) day following the day on which notice of the date of the annual meeting
was mailed or public announcement (as defined in Section 1) of the date of the
annual meeting was made, whichever first occurs. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the giving of a stockholder's notice as described above.
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act, and the rules and regulations promulgated
thereunder; and (b) as to the stockholder giving the notice (i) the name and
record address of such stockholder, (ii) the class or series and number of
shares of capital stock of the Corporation which are owned beneficially or of
record by such stockholder, (iii) a description of all arrangements or
understandings between such stockholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s)
are to be made by such stockholder, (iv) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to nominate the
persons named in its notice and (v) any other
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to be named as
a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 7. If the Chairman of the annual meeting determines that a nomination
was not made in accordance with the foregoing procedures, the Chairman shall
declare to the meeting that the nomination was defective and such defective
nomination shall be disregarded.
At every meeting of the stockholders, each stockholder
entitled to vote at such meeting shall have, as to each matter submitted to a
vote, one vote for each share of stock having voting rights registered in his
name on the stock books of the Corporation.
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
At all meetings of stockholders, a stockholder may vote by
proxy appointed by a written instrument signed by the stockholder or his duly
authorized attorney in fact and delivered to the Secretary of the meeting, but
no proxy shall be voted or acted upon after three years from its date, unless
the proxy provided for a longer period.
A quorum being present, directors shall be elected by a plurality of
the votes of the shares present and in person or represented by proxy at the
meeting and entitled to vote.
In all matters, other than the election of directors, the affirmative
vote of the majority of shares present or in person or represented by proxy at
the meeting and entitled to vote on the subject matter, a quorum being present,
shall be the act of the shareholders.
SECTION 8. LIST OF STOCKHOLDERS. The Secretary or other officer of the
Corporation having charge of the stock ledger shall prepare and make or cause to
be prepared and made, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at said election, arranged in
alphabetical order, and showing the address of each such stockholder and the
number
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder or his proxy who may be
present. Upon the willful neglect or refusal of the directors then in office to
produce or cause to be produced such a list at any meeting for the election of
directors, they shall be ineligible to any office at such meeting. The original
or duplicate stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section, or to vote in person or by proxy at such meeting.
SECTION 9. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
thereof, or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.
(b) If no record date is fixed:
(i) The record date for determining
stockholders entitled to notice of or to vote at a meeting of
the stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next preceding
the day on which the meeting is held.
(ii) The record date for determining
stockholder for any other purpose shall be at the close of
business on the date on which the Board of Directors adopts
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BY-LAWS
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the resolution relating thereto.
(c) A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
ARTICLE II
DIRECTORS
SECTION 1. NUMBER, QUALIFICATIONS, CLASSES, TERMS AND QUORUM.
The business and affairs of the Corporation shall be managed under the direction
of a Board of Directors which shall consist of ten members, none of whom need be
stockholders. The directors shall be classified with respect to the time for
which they shall hold office by dividing them into three classes. The first
class shall consist of four directors whose term of office shall expire in 1998
and in every third year thereafter. The second class shall consist of three
directors whose terms of office shall expire in 1999 and in every third year
thereafter. The third class shall consist of three directors whose terms of
office shall expire in 2000 and in every third year
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GREAT LAKES CHEMICAL CORPORATION
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FEBRUARY 16, 1998
thereafter. At each annual meeting of the stockholders of the Corporation, or
any adjournment thereof, the successors to the directors whose terms shall
expire in that year shall be elected to hold office for a term of three years.
In any event, each director shall hold office until his successor is duly
elected and qualified or until his earlier resignation or removal. Any director
may resign at any time upon written notice to the Corporation. A majority of the
total number of directors shall constitute a quorum for the transaction of
business. The vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors. The Board of
Directors may elect a Chairman of the Board of Directors who shall preside at
all meetings of the stockholders and of the Board of Directors. The Chairman of
the Board of Directors shall have such other powers and perform such other
duties as are delegated to him by the Board of Directors or as are incidental to
his office.
SECTION 2. VACANCIES. Any vacancy and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, although less than
a quorum, or by a sole remaining director.
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BY-LAWS
FEBRUARY 16, 1998
SECTION 3. MEETINGS. The Board of Directors shall meet each
year immediately after the annual meeting of the shareholders, at the place
where the annual meeting of the shareholders is held, for the purpose of
electing officers and for the conduct of any other business that may be brought
before the meetings. Such meeting shall be held without notice. If such meeting
is not held as herein provided, the election of officers may be had at any
subsequent meeting of the Board of Directors. Regular meetings of the Board of
Directors may be held at such time and place within or without the State of
Delaware, as the Board of Directors may from time to time designate. Special
meetings of the Board of Directors may be held upon the call of the Chairman of
the Board, or two or more members of the Board of Directors, at any place,
within or without the State of Delaware, upon not less than 48 hours notice,
specifying the time, place and general purposes of the meeting, given to each
director either personally, or by telephone, telegram, or by mail. At any
meeting at which all of the directors are present, notice of the time, place and
purposes thereof shall be deemed waived. Notice of any meeting may be waived in
writing, either before, during, or after any meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
directors, or
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members of a committee of the directors, need be specified in any written waiver
of notice. A majority of the directors present at any meeting, whether or not a
quorum is present, may adjourn the meeting and no notice of such adjourned
meeting need be given.
SECTION 4. COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution
of the Board of Directors, shall have and may exercise the authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may
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authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution or amending the By-Laws of the Corporation; and, unless the
resolution expressly so provides, no such committee shall have the power or
authority to declare a dividend or authorize the issuance of stock.
An Executive Committee shall be formed, comprising at least
three directors, which shall have the authority and power to act on behalf of
the Board of Directors, except as restricted above, with the additional
authority to declare dividends on behalf of the Corporation.
SECTION 5. ACTION BY CONSENT WITHOUT A MEETING. Any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
are filed with the minutes of proceedings of the Board or committee.
SECTION 6. MEETINGS BY CONFERENCE TELEPHONE. Members of the
Board of Directors or of any committee designated by the Board may participate
in a meeting of such Board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS. The officers shall consist of a Chief
Executive Officer, a President, one or more Vice Presidents and/or Senior or
Executive Vice Presidents, a Secretary, one or more Assistant Secretaries, a
Treasurer, and one or more Assistant Treasurers. Such officers shall be elected
by the Board of Directors and each officer shall hold office until his successor
is elected and qualified or until his earlier resignation or removal. Any
officer may resign at any time upon written notice to the Corporation. Any
number of offices may be held by the same person,
20
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
but no officer shall execute, act or verify any instrument in more than one
capacity. The Corporation may have such other officers and agents as the Board
of Directors may determine, who shall be elected or appointed by the Board of
Directors and hold office for such terms as are prescribed by the Board of
Directors. Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise, shall be filled by the Board of Directors.
The Board of Directors may remove any officer with or without cause.
SECTION 2. CHIEF EXECUTIVE OFFICER. Subject to the authority
of the Board of Directors, the Chief Executive Officer shall administer the
affairs of the Corporation and shall have such other powers and perform such
other duties as are delegated to him by the Board of Directors, or by an
authorized committee thereof, or are incidental to his office. During the time
when the office of the Chairman of the Board is vacant, the Chief Executive
Officer shall perform the duties of that office.
SECTION 3. PRESIDENT. Subject to the authority of the Board of
Directors, the President shall, during the absence or disability of the Chief
Executive Officer, administer the affairs of the Corporation and shall have such
other powers
21
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
and perform such other duties as are incidental to his office or are delegated
to him by the Board of Directors, or an authorized committee thereof, or by the
Chief Executive Officer.
SECTION 4. VICE PRESIDENTS. Subject to the authority of the
Board of Directors, the Vice Presidents, in the order designated by the Board of
Directors, shall exercise the functions of the Chief Executive Officer and
President during the absence or disability of the Chief Executive Officer and
the President. Each Vice President shall have such other duties as are assigned
to him from time to time by the Board of Directors or the Chief Executive
Officer.
SECTION 5. OTHER OFFICERS. The Secretary and the Treasurer
shall perform such duties as are incidental to their offices, or are properly
required of them by the Board of Directors or the Chief Executive Officer. The
Assistant Secretaries shall, in the absence of the Secretary, perform the duties
and exercise the powers of the Secretary, and shall perform such other duties as
may be assigned by the Board of Directors or the Chief Executive Officer. Other
subordinate officers elected or appointed by the Board of Directors shall
exercise such powers and perform such duties as may be delegated to them.
22
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
SECTION 6. DELEGATION OF AUTHORITY. In the case of the absence
or incapacity of any officer, or for any other reason that the Board of
Directors may deem sufficient, the Board of Directors or, in the absence of any
action by the Board of Directors, the Chief Executive Officer may delegate any
or all of the duties or powers of such officer to any other officer or to any
other director or to any other person.
ARTICLE IV
CERTIFICATES OF STOCK
SECTION 1. FORM. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by the Chairman of the Board of
Directors, or the President or a Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation certifying the number of shares owned by him in such Corporation. If
such certificate is countersigned (1) by a Transfer Agent other than the
Corporation or its employee, or, (2) by a Registrar other than the Corporation
or its employee, any other signature on the certificate may be a facsimile. In
case any officer, Transfer Agent or Registrar who has signed or
23
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
whose facsimile signature has been placed upon a certificate who has ceased to
be such officer, Transfer Agent or Registrar before such certificate is issued,
it may be issued by the Corporation with the same effect as if he were such
officer, Transfer Agent or Registrar at the date of issue.
SECTION 2. TRANSFERS. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
owner thereof, or his duly authorized attorney, with a Transfer Clerk or
Transfer Agent appointed as specified in these By-Laws, and on surrender of the
certificate or certificates for such shares of stock properly endorsed and with
all taxes thereon paid. The person in whose name the shares of stock stand on
the books of the Corporation shall be deemed by the Corporation to be the holder
thereof for all purposes.
SECTION 3. TRANSFER AGENT AND REGISTRAR. The Board of
Directors may appoint one or more Transfer Agents or Transfer Clerks and one or
more Registrars, and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
SECTION 4. LOSS OR DESTRUCTION. In case of loss or destruction
of a certificate for shares, another certificate may be issued in lieu thereof
in such manner
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
and upon such terms as the Board of Directors shall authorize, either by general
resolution or by special resolution in each particular case.
ARTICLE V
FISCAL YEAR
SECTION 1. FISCAL YEAR. The fiscal year of the Corporation
shall begin on the first day of January of each year and shall end on the 31st
day of December following.
ARTICLE VI
SEAL
SECTION 1. CORPORATION SEAL. The Board of Directors shall
provide a suitable corporate seal for use by the Corporation.
ARTICLE VII
INDEMNIFICATION
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
SECTION 1. INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in or called as a
witness in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, and any appeal therefrom (hereinafter,
collectively a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is, was or had agreed to become a
director of the Corporation or is, was or had agreed to become an officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, shall be indemnified and held harmless by the
Corporation to the fullest extent permitted under the General Corporation Law of
the State of Delaware (the "DGCL"), as the same now exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
the DGCL permitted the Corporation to provide prior to such amendment), against
all expenses, liabilities and losses (including attorneys' fees, judgments,
fines, excise taxes or penalties pursuant to the Employee Retirement Income
Security Act of 1974,
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
as amended, and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith; provided, that except as
explicitly provided herein, prior to a Change in Control of the Corporation, as
defined herein, a person seeking indemnity in connection with a proceeding (or
part thereof) initiated by such person against the Corporation or any director,
officer, employee or agent of the Corporation shall not be entitled thereto
unless the Corporation has joined in or consented to such proceeding (or part
thereof). For purposes of this Article, a "Change in Control of the Corporation"
shall be deemed to have occurred if the conditions set forth in any one of the
following clauses shall have been satisfied: (a) any "person" (as such term is
used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (as in
effect as of December 7, 1995 (the "Exchange Act")) other than (i) the
Corporation, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of shares
of the Corporation (any such person is hereinafter referred to as a "Person"),
is or becomes the "beneficial owner" (as defined in Rule
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing more than 50% of the combined voting power of the
Corporation's then outstanding securities (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Corporation); (b) there is consummated a merger or consolidation of the
Corporation with or into any other corporation, other than a merger or
consolidation which would result in the holders of the voting securities of the
Corporation outstanding immediately prior thereto holding securities which
represent, in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation,
immediately after such merger or consolidation, more than 70% of the combined
voting power of the voting securities of either the Corporation or the other
entity which survives such merger or consolidation or the parent of the entity
which survives such merger or consolidation; (c) the stockholders of the
Corporation approve any plan or proposal for the liquidation or dissolution of
the Corporation or an agreement for the sale or disposition by the Corporation
of all or substantially all the Corporation's assets; or (d) during any period
of two consecutive years (not including any period prior to December 7, 1995),
individuals who at the beginning of such
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
period constitute the Board of Directors and any new director (other than a
director designated by a Person who has entered into an agreement with the
Corporation to effect a transaction described in clause (a), (b) or (c) of this
paragraph) whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof. For purposes of
this Article VII, where a Change in Control of the Corporation results from a
series of related transactions, the Change in Control of the Corporation shall
be deemed to have occurred on the date of the consummation of the first such
transaction. For purposes of clause (a) of this paragraph, the stockholders of
another corporation (other than the Corporation or a corporation described in
clause (iv)), in the aggregate, shall be deemed to constitute a Person.
Prior to a Change in Control of the Corporation, any
indemnification under Section 1 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he or she
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
has met the applicable standard of conduct set forth in the DGCL. Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel (who
may be the regular counsel of the Corporation) in a written opinion or (3) by
the stockholders.
Following a Change in Control of the Corporation, any
indemnification under this Section 1 (unless ordered by a court) shall be paid
by the Corporation unless within 60 days of such request for indemnification a
determination is made, in a written opinion, by special independent counsel
selected by the person requesting indemnification and approved by the
Corporation (which approval shall not be unreasonably withheld), which counsel
has not otherwise performed services (other than in connection with similar
matters) within the five years preceding its engagement to render such opinion
for such person or for the Corporation or any affiliates (as such term is
defined in Rule 405 under the Securities Act of 1933, as amended) of the
Corporation (whether or not they were affiliates when services were so
performed) ("Independent Counsel"), that indemnification of such person is not
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
proper under the circumstances because such person has not met the necessary
standard of conduct under the DGCL. Unless such person has theretofore selected
Independent Counsel pursuant to this Section 1 and such Independent Counsel has
been approved by the Corporation, legal counsel approved by a resolution or
resolutions of the Board of Directors prior to a Change in Control of the
Corporation shall be deemed to have been approved by the Corporation as
required. Such Independent Counsel shall determine as promptly as practicable
whether and to what extent such person would be permitted to be indemnified
under applicable law and shall render its written opinion to the Corporation and
such person to such effect. The Corporation agrees to pay the reasonable fees of
the Independent Counsel referred to above and to fully indemnify such
Independent Counsel against any and all expenses, claims, liabilities and
damages arising out of or relating to this Article or its engagement pursuant
hereto. In making a determination under this Section 1, the Independent Counsel
referred to above shall determine that indemnification is permissible unless
clearly precluded by this Article VII or the applicable provisions of the DGCL.
31
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
SECTION 2. PAYMENT OF EXPENSES IN ADVANCE. Expenses, including
attorneys' fees, incurred by a person referred to in Section 1 of this Article
in defending a proceeding shall be paid by the Corporation in advance of the
final disposition of such proceeding, including any appeal therefrom, upon
receipt of an undertaking (the "Undertaking") by or on behalf of such person to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Corporation.
SECTION 3. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under
Section 1 hereof is not paid in full by the Corporation within 60 days after a
written claim has been received by the Corporation or if expenses pursuant to
Section 2 hereof have not been advanced within 10 days after a written request
for such advancement, accompanied by the Undertaking, has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim or the advancement of
expenses. (If the claimant is successful, in whole or in part, in such suit or
any other suit to enforce a right for expenses or indemnification against the
Corporation or any other party under any other agreement, such claimant shall
also be entitled to be paid the
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
reasonable expense of prosecuting such claim.) It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
Undertaking has been tendered to the Corporation) that the claimant has not met
the standards of conduct which make it permissible under the DGCL for the
Corporation to indemnify the claimant for the amount claimed. After a Change in
Control of the Corporation, the burden of proving such defense shall be on the
Corporation, and any determination by the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant had
not met the applicable standard of conduct required under the DGCL shall not be
a defense to the action nor create a presumption that claimant had not met such
applicable standard of conduct.
SECTION 4. INDEMNITY NOT EXCLUSIVE. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other sections
of this Article VII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any statute, by-law, agreement, vote of stockholders or disinterested directors
or otherwise, both as to action in his or her official capacity and as to action
in another capacity while
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
holding such office. The Board of Directors shall have the authority, by
resolution, to provide for such other indemnification of directors, officers,
employees or agents as it shall deem appropriate.
SECTION 5. INSURANCE INDEMNIFICATION. The Corporation shall
have power to purchase and maintain insurance to protect itself and any
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise, against any expenses,
liabilities or losses, whether or not the Corporation would have the power to
indemnify such person against such expenses, liabilities or losses under the
provisions of this Article VII or the DGCL.
SECTION 6. CONTINUATION OF INDEMNIFICATION; ENFORCEABILITY.
The provisions of this Article shall be applicable to all proceedings commenced
after its adoption, whether such arise out of events, acts, omissions or
circumstances which occurred or existed prior or subsequent to such adoption,
and shall, unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
This Article shall be deemed to grant each person who, at any time that this
Article is in effect, serves or agrees to serve in any
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
capacity which entitles him to indemnification hereunder rights against the
Corporation to enforce the provisions of this Article, and any repeal or other
modification of this Article or any repeal or modification of the DGCL or any
other applicable law shall not limit any rights of indemnification then existing
or arising out of events, acts, omissions or circumstances occurring or existing
prior to such repeal or modification, including, without limitation, the right
to indemnification for proceedings commenced after such repeal or modification
to enforce this Article with regard to acts, omissions, events or circumstances
occurring or existing prior to such repeal or modification.
SECTION 7. SEVERABILITY. If this Article or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each director and officer of the
Corporation as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any proceeding,
whether civil, criminal, administrative or investigative, including an action by
or in the right of the Corporation, to the full extent permitted by any
applicable portion of this Article that shall not have been invalidated and to
the full extent permitted by applicable law.
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GREAT LAKES CHEMICAL CORPORATION
BY-LAWS
FEBRUARY 16, 1998
ARTICLE VIII
AMENDMENTS
SECTION 1. AMENDMENTS. The Board of Directors shall have the
power to make, alter or repeal the By-Laws of the Corporation at the annual or
any regular meeting of the Board of Directors or by unanimous written consent
without a meeting, or at any special meeting called for such purposes.
36
<PAGE> 1
Exhibit No. (10)(i)
GREAT LAKES CHEMICAL CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
(RESTATED EFFECTIVE JANUARY 1, 1993)
3/30/93
<PAGE> 2
GREAT LAKES CHEMICAL CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
(RESTATED EFFECTIVE JANUARY 1, 1993)
Table of Contents
<TABLE>
<CAPTION>
ARTICLE I
<S> <C>
ESTABLISHMENT 1
1.1 Establishment and Purpose 1
1.2 Applicability 1
ARTICLE II
PARTICIPATION 2
2.1 Eligibility and Participation 2
2.2 Duration 2
ARTICLE III
BENEFIT; PAYMENT 3
3.1 Accrued Benefit 3
3.2 Time and Method of Payment 3
ARTICLE IV
FUNDING 4
4.1 Funding 4
ARTICLE V
AMENDMENT, ADMINISTRATION 5
5.1 Amendment and Termination 5
5.2 Administration 5
5.3 Deduction of Taxes from Amounts Payable 5
5.4 Indemnification 5
5.5 Expenses 5
ARTICLE VI
MISCELLANEOUS 6
6.1 Interests not Transferable 6
6.2 Contract of Employment 6
6.3 Headings 6
6.4 Invalidity 6
6.5 Law Governing 6
APPENDIX A
</TABLE>
<PAGE> 3
GREAT LAKES CHEMICAL CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
(RESTATED EFFECTIVE JANUARY 1, 1993)
ARTICLE I
ESTABLISHMENT
1.1 Establishment and Purpose. Great Lakes Chemical Corporation (the
"Company") hereby restates the Great Lakes Chemical Corporation
Supplemental Retirement Plan (the "Plan"), effective January 1, 1993
(the "Restatement Date"). The Plan was ESTABLISHED EFFECTIVE JANUARY 1,
1983 (the "Effective Date"). The purpose of the Plan is to provide each
Participant in the Plan with the benefits the Participant would have
received under the Retirement Plan for Certain Employees of Great Lakes
Chemical Corporation, as amended, ("Pension Plan") except for the
limitations on compensation and benefits imposed by Sections 401(a)(17)
and 415 of the Internal Revenue Code of 1986, as amended, ("Code") or
any successor thereto. Any entity which, with the approval of the Board
of Directors of the Company, adopts the Plan and the Company shall be
referred to hereinafter as "Employer." The Plan is intended to benefit
a select group of management or highly compensated employees of the
Employer.
1.2 Applicability. The provisions of the Plan shall apply only to a person
who terminates employment with an Employer on or after the Effective
Date and shall not apply to any person not in the active employment of
an Employer on or after the Effective Date.
Page 1
<PAGE> 4
ARTICLE II
PARTICIPATION
2.1 Eligibility and Participation. Each person, who is both a participant
in the Pension Plan and whose accrued benefit under the Pension Plan is
reduced by the limitation on compensation imposed by Section 401(a)(17)
of the Code or by the limitations on benefits imposed by Section 415 of
the Code and has been named by the Board of Directors of the Company as
an eligible employee by having his or her name set forth in Appendix A
to the Plan, shall become a Participant in the Plan; provided that no
person shall be or become a Participant hereunder prior to January 1,
1983. (Each person who becomes a Participant shall be referred to
hereinafter as a "Participant.") The Board of Directors shall in its
sole and absolute discretion determine those persons eligible to
participate and shall take appropriate action to have Appendix A
appropriately revised as necessary.
2.2 Duration. Any person who became a Participant shall continue to be a
Participant as long as he is entitled to benefits hereunder.
Page 2
<PAGE> 5
ARTICLE III
BENEFIT; PAYMENT
3.1 Accrued Benefit.
(a) If at any time any benefit otherwise payable under the
provisions of the Pension Plan in respect of a Participant,
including any benefit payable with RESPECT THE PARTICIPANT'S
SPOUSE OR other beneficiary entitled thereto, shall be REDUCED
BY REASON OF THE LIMITATIONS on maximum benefits under Section
415 of the Code, and/or the limitation on the amount of
compensation of a PARTICIPANT that may be considered under
Section 401(a)( 17) of the Code, the Participant or his spouse
or other beneficiary shall be entitled to receive a retirement
benefit, subject to the terms and conditions of the Plan,
equal to the excess, if any, of - -
(1) the amount of the benefit under the Pension Plan,
calculated without regard to the limitations imposed
by Sections 401(a)(17) and 415 of the Code and
without regard to the restriction that limits the
years of service that may be recognized to 35 years;
over
(2) the amount of the benefit under the Pension Plan as
limited by Sections 401(a)(17) and 415 of the Code
and with regard to the restriction that limits the
years of service that may be recognized to 35 years.
(The benefit determined under this Section 3.1 shall be
referred to hereinafter as the "Accrued Benefit.")
(b) The Accrued Benefit under the Plan shall be paid only if, and
under the condition that, the benefit under the Pension Plan
described in subsection 3.1(a)(2) be and is paid to the
Participant, his surviving spouse, or other beneficiary; and
the forfeiture, for any cause, including death, of the benefit
under the Pension Plan as described in subsection 3.1(a)(2)
above shall cause the forfeiture of the Accrued Benefit under
the Plan.
3.2 Time and Method of Payment. The Accrued Benefit shall commence to be
paid with, and continue to be paid as long as, benefit payments to such
Participant or his spouse or beneficiary entitled thereto under the
Pension Plan, and shall be paid in the same form and manner as benefits
under the Pension Plan; provided, however, the Employer may convert the
benefits payable under the Plan into any actuarial equivalent form of
payment as determined by the Employer with the advice of an actuary.
Page 3
<PAGE> 6
ARTICLE IV
FUNDING
4.1 Funding. All benefits under this Plan shall be paid directly from the
general funds of the Employer, and no special or separate fund shall be
established and no other segregation of assets shall be made to assure
payment. No Participant, spouse, or beneficiary shall have any right,
title or interest whatever in or to any investments which Employer may
make to aid the Employer in meeting its obligation hereunder. Nothing
contained in this Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between an Employer and any Participant,
spouse, or beneficiary of a Participant. To the extent that any person
acquires a right to receive payments from the Employer hereunder, such
rights shall be no greater than the right of an unsecured creditor of
the Employer.
Page 4
<PAGE> 7
ARTICLE V
AMENDMENT, ADMINISTRATION
5.1 Amendment and Termination. The Company intends the Plan to be
permanent, but reserves the right at any time to modify, amend, or
terminate the Plan, provided that the Company shall not cancel,
reduce, or otherwise adversely affect the amount of benefits of any
Participant accrued as of the date of any such modification,
amendment, or termination, without the consent of the Participant.
5.2 Administration. The Plan shall be administered by the Board of
Directors of the Company, which shall be authorized to interpret the
Plan, to adopt rules and practices concerning the administration of the
Plan, to resolve questions concerning the eligibility for the amount of
the Accrued Benefit, and to delegate all or any portion of its
authority hereunder to a committee of the Board of Directors or to
designated officers or employees of any Employer.
5.3 Deduction of Taxes from Amounts Payable. The Employer may deduct from
the amount to be distributed such amount as the Employer, in its sole
discretion, deems proper for the payment of income, employment, death,
succession, inheritance, or other taxes with respect to benefits under
the Plan.
5.4 Indemnification. Each Employer shall indemnify and hold harmless each
employee, officer, or director of an Employer to whom is delegated
duties, responsibilities, and authority with respect to the Plan
against all claims, liabilities, fines and penalties, and all expenses
reasonably incurred by or imposed upon him (including but not limited
to reasonable attorney fees) which arise as a result of his actions or
failure to act in connection with the operation and administration of
the Plan to the extent lawfully allowable and to the extent that such
claim, liability, fine, penalty, or expense is not paid for by
liability insurance purchased or paid for by an Employer.
Notwithstanding the foregoing, an Employer shall not indemnify any
person for any such amount incurred through any settlement or
compromise of any action unless the Employer consents in writing to
such settlement or compromise.
5.5 Expenses. The expenses of administering the Plan shall be paid by the
Employers.
Page 5
<PAGE> 8
ARTICLE VI
MISCELLANEOUS
6.1 Interests not Transferable. Benefits payable under this Plan
shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, including any such liability which
is for alimony or other payments for the support of a spouse
or FORMER SPOUSE, OR for any other relative of a Participant
prior to actually being received by the person entitled to the
benefit under the terms OF THE PLAN, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge, or otherwise dispose of any right to
benefits payable hereunder SHALL be void. The EMPLOYER SHALL
NOT in any manner be liable for, or subject to, the debts,
contracts, liabilities, engagements, or torts of any person
entitled to benefits hereunder. If any person shall attempt
to, or shall alienate, sell, transfer, assign, pledge, or
otherwise encumber his benefits under this Plan, or if by any
reason of his bankruptcy or other event happening at any time,
such benefit would devolve upon any other person or would not
be enjoyed by the person entitled thereto under the Plan, the
Board of Directors of the Company, in its discretion, may
terminate the interest in any such benefits of the person
entitled thereof under the Plan and hold or apply them to or
for the benefit of such person entitled thereto under the Plan
or his spouse, children, or other dependents, or any of them,
in such manner as the Board of Directors of the Company may
deem proper.
6.2 Contract of Employment. Nothing contained herein shall be
construed to constitute a contract of employment between a
Participant and an Employer.
6.3 Headings. The headings of Articles and Sections are included
solely for convenience of reference, and if there is any
conflict between such headings and the text of this Plan, the
text shall control.
6.4 Invalidity. If any provision of this Plan shall be held
invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and the Plan
shall be construed and enforced as if such provisions, to the
extent invalid or unenforceable, had not been included.
6.5 Law Governing. The Plan shall be construed and enforced
according to the laws of Indiana other than its laws
respecting choice of law.
Page 6
<PAGE> 9
IN WITNESS, WHEREOF , the Company has executed this restated Plan this day of
, 1993.
GREAT LAKES CHEMICAL CORPORATION
By: ____________________________
ATTEST:
______________________________
Page 7
<PAGE> 10
GREAT LAKES CHEMICAL CORPORATION
Supplemental Retirement Plan
APPENDIX A
Eligible Employees
The Employees listed below compose a select group of management or highly
compensated Employees of the Employer who have been named by the Board of
Directors as an Eligible Employee for purposes of the Plan.
Name of Employee Date of Board Action
Emerson Kampen 03-09-93
<PAGE> 11
Great Lakes Chemical Corporation
Supplemental Retirement Plan
Appendix A
Eligible Employees
The Employees listed below compose a select group of management or highly
compensated Employees of the Employer who have been named by the Board of
Directors as an Eligible Employee for purposes of the Plan.
NAME OF EMPLOYEE DATE OF BOARD ACTION
John Little 05-04-94
Robert Jeffares 05-04-94
David Hall 05-04-94
Robert McDonald 05-04-94
John Talpas 05-04-94
Donald Simpson 05-04-94
Marshall Bloom 05-04-94
Larry Bloom 05-04-94
David Bouchard 05-04-94
Lowell Horwedel 05-04-94
Gerd Schue 05-04-94
<PAGE> 12
GREAT LAKES CHEMICAL CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
APPENDIX A
ELIGIBLE EMPLOYEES
The Employees listed below compose a select group of management or highly
compensated Employees of the Employer who have been named by the Chief Executive
Officer as an Eligible Employee for purposes of the Plan.
NAME OF EMPLOYEE DATE OF BOARD ACTION
Steve Clark March 1, 1995
John Lacci March 13, 1995
Bob Smith March 20, 1995
Joe Holson August 31, 1995
Dick Ferguson February 27, 1996
J. Larry Robertson February 28, 1996
<PAGE> 13
GREAT LAKES CHEMICAL CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
APPENDIX A
ELIGIBLE EMPLOYEES
The Employees listed below compose a select group of management or highly
compensated Employees of the Employer who have been named by the Chief Executive
Officer as an Eligible Employee for purposes of the Plan.
NAME OF EMPLOYEE DATE OF BOARD ACTION
Steve Clark March 1, 1995
John Lacci March 13, 1995
Bob Smith March 20, 1995
<PAGE> 14
GREAT LAKES CHEMICAL CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
APPENDIX A
ELIGIBLE EMPLOYEES
The Employees listed below compose a select group of management or highly
compensated Employees of the Employer who have been named by the Chief Executive
Officer as an Eligible Employee for purposes of the Plan.
NAME OF EMPLOYEE DATE OF BOARD ACTION
Steve Clark March 1, 1995
John Lacci March 13, 1995
Bob Smith March 20, 1995
Joe Holson August 31, 1995
Dick Ferguson February 27, 1996
J. Larry Robertson February 28, 1996
Yuichi Iikubo December 10, 1996
Richard Boehner June 2, 1997
<PAGE> 15
GREAT LAKES CHEMICAL CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
APPENDIX A
ELIGIBLE EMPLOYEES
The Employees listed below compose a select group of management or highly
compensated Employees of the Employer who have been named by the Chief Executive
Officer as an Eligible Employee for purposes of the Plan.
NAME OF EMPLOYEE DATE OF BOARD ACTION
Steve Clark March 1, 1995
John Lacci March 13, 1995
Bob Smith March 20, 1995
Joe Holson August 31, 1995
Dick Ferguson February 27, 1996
J. Larry Robertson February 28, 1996
Yuichi Iikubo December 10, 1996
Richard Boehner June 2, 1997
Mark Esselman September 1, 1997
<PAGE> 1
Exhibit No. (10)(ii)
GREAT LAKES CHEMICAL CORPORATION
DEFERRED COMPENSATION PLAN
(AMENDED AND RESTATED EFFECTIVE JANUARY 1,1997)
1. PURPOSE
The purpose of the Great Lakes Chemical Corporation Deferred
Compensation Plan (the "Plan") is to provide an opportunity for certain
employees of Great Lakes Chemical Corporation (the "Company"), to elect to defer
all or part of the compensation payable by the Company on account of service
rendered in the employ of the Company ("Compensation"). The Plan is intended as
a means of maximizing the effectiveness and flexibility of compensation
arrangements, and as an aid in attracting and retaining individuals of
outstanding abilities for employment as Executives with the Company.
2. EFFECTIVE DATE
The Plan was originally effective with respect to Compensation paid for
services performed after March 1, 1994. Certain employees have previously
deferred Compensation that was payable for services rendered prior to the
adoption of the Plan. With respect to such Deferred Compensation, the Plan
memorializes the understanding between the Company and the Participant. This
amendment and restatement of the Plan is effective for services rendered on or
after January 1, 1997. Election made to defer Compensation for services prior to
January 1, 1997 shall be governed by the terms of the Plan then in effect,
unless subsequent payment elections are made as provided therein.
3. PLAN ADMINISTRATION
The Plan will be administered by the Board of Directors of the Company
(the "Board"), which shall be authorized to interpret the Plan, to adopt rules
and practices concerning the administration of the Plan, to resolve questions
concerning eligibility for participation, and to delegate all or any portion of
its authority hereunder to a committee of the Board, or to designated officers
or employees of the Company. The Board's interpretations and construction
thereof, and actions hereunder, including any valuation of accounts, or
determination of amounts or recipients of any payment hereunder, shall be
binding and conclusive on all persons for all purposes. The expense of
administering the Plan shall be borne by the Company and shall not be charged
against amounts payable hereunder. No member of the Board shall be liable to any
person for any action taken or omitted in connection with the interpretation and
administration of the Plan unless attributable to his own willful misconduct or
lack of good faith.
4. ELIGIBILITY
Any officer or key employee of the Company to whom participation herein
is offered by the Board (each such individual hereinafter referred to as an
"Executive") is eligible to participate
<PAGE> 2
in the Plan. Any such Executive shall be a participant in the Plan
("Participant") as of the effective date of his or her first election to defer
Compensation in accordance with Section 5 hereof, and his or her status as a
Participant shall continue until the date of the last payment pursuant to
Section 7 hereof.
5. ELECTION TO DEFER
(a) In General. Each Executive shall be entitled to make an irrevocable
election (a "Deferral Election") to defer receipt of some or all of Compensation
otherwise payable to him or her after the date of such election. Such election
shall continue in effect for the period set forth therein until the Executive
delivers to the Board a written revocation or modification of such election with
respect to the Compensation that relates to services to be performed and are
payable thereafter. Compensation with respect to which a Deferral Election has
been made (and shall not have been revoked) shall be referred to hereinafter as
"Deferred Compensation".
(b) Manner of Election. Deferral Elections shall be made only with
respect to such amounts of Compensation as the Board shall in its sole
discretion determine. Deferral Elections shall be made in accordance with such
rules and procedures on such form(s) as the Board may prescribe, provided that
each Deferral Election shall set forth the amount to be deferred, expressed
either as a stated dollar amount or as a percentage of Compensation to be
payable, and may be made separately with respect to base pay and to the annual
bonus. All Deferral Elections must be made before the calendar year for which
the Compensation is payable; provided, however, that in the first year in which
an executive becomes eligible to participate in the Plan, the newly eligible
Executive may make the applicable Deferral Election for services to be formed
subsequent to such election within thirty (30) calendar days after the date on
which such Executive becomes eligible. Any Deferral Elections made after the
times specified in this Section 5(b) shall be effective for the following
calendar year. Each Deferral Election shall remain effective for all subsequent
calendar years unless and until revoked.
(c) Designation of Beneficiary. Participants shall designate in
writing, in accordance with such rules and procedures as the Board may
prescribe, the beneficiary or beneficiaries who are to receive the Participant's
Deferred Compensation Account in the event of the Participant's death.
6. RECORDS AND CREDITING OF DEFERRED AMOUNTS
(a) In General. The Company shall credit to a memorandum account for
the benefit of the Participant (his or her "Deferred Compensation Account") the
amount of any Deferred Compensation as of the date such Compensation would
otherwise have been payable to the Participant.
(b) Valuation of Account. Each Participant's Deferred Compensation
Account shall be valued each calendar quarter; it shall be increased by any
Deferred Compensation credited to the account, decreased by any distribution
made to the Participant from the account and credited with earnings based on 90%
of the prime rate of Chase Manhattan Bank as of the last business
<PAGE> 3
day of each calendar quarter, or at such other rate as may be adopted from time
to time by the Board. A change in the rate credited under this Plan shall not
require an amendment to this Plan.
(c) Unsecured Obligations. The obligation of the Company to make
payments of amounts credited to the Participant's Deferred Compensation Account
shall be a general obligation of the Company, and such payments shall be made
from general assets and property of the Company. The Participant's relationship
to the Company under the Plan shall be only that of a general unsecured creditor
and neither this Plan nor any agreement entered into hereunder or action taken
pursuant hereto shall create or be construed to create a trust or fiduciary
relationship of any kind.
(d) The credits in Deferred Compensation Accounts are bookkeeping
entries only, and do not represent actual assets or cash. The Company shall
furnish each Participant with quarterly statements of activity and balances in
his or her Deferred Compensation Account.
(e) Vesting of Deferred Compensation Account. A Participant shall be
one hundred. percent (100%) vested in his or her Deferred Compensation Account.
7. PAYMENT OF DEFERRED COMPENSATION ACCOUNT
(a) In General. No withdrawal or payment shall be made from the
Participant's Deferred Compensation Account except as provided in this Section
7.
(b) Payment Options. The value of a Participant's Deferred Compensation
Account shall be payable under two alternative options, at the election of the
Participant, as follows:
[OPTION ONE: in cash as a single sum payment as soon as practicable
following January 1 of the calendar year following the calendar year in which
the Participant separated from service, or in the case of a Participant who is
or was a covered employee within the meaning of Section 1 62(m)(3) of the
Internal Revenue Code as of the later of the date described above or as soon as
practicable following January 1 after such Participant is no longer
characterized as a covered employee.]
[OPTION TWO: in annual installments over 10 years, provided, however,
that the Board in its sole and absolute discretion may elect at any time after a
Participant separates from service to distribute the remaining balance in the
Participant's Deferred Compensation Account in a single sum in full settlement,
payments shall be payable annually and shall commence as soon as practicable
following January 1 of the calendar year following the calendar year in which
the Participant separated from service, or in the case of a Participant who is
or was a covered employee within the meaning of Section 162(m)(3) of the
Internal Revenue Code as of the later of the date described above or as soon as
practicable following the January 1 after such Participant is no longer
characterized as a covered employee.]
(c) Election of Payment Options. Each Participant shall make an
election in respect of payments from his or her Deferred Compensation Account (a
"Payment Election"). Payment Elections shall be effective on the beginning of
the calendar year commencing at least one year
<PAGE> 4
after the election is made; provided, however, that in the first year in which
an Executive becomes eligible to participate in the Plan, the newly eligible
Executive may make the Payment Election within thirty (30) calendar days after
the date on which such Executive becomes eligible, which election shall become
effective immediately. Any Payment Election made after the time specified in
this Section 7(c) shall be effective beginning the calendar year commencing at
least one year after the Payment Election is made. Each Payment Election shall
remain effective unless and until revoked or amended. Subject to the foregoing,
Payment Elections shall be made on such form(s) as the Board may prescribe. In
the absence of an Effective Payment Election, the Executive shall be deemed to
have elected Option One pursuant to Section 7(b).
(d) The Payment Date. The Payment Date for payment from the Deferred
Compensation Account shall commence on the date as provided in Section 7(b). The
amount of each installment elected under Option Two in Section 7(b) shall be
equal to the quotient obtained by dividing the Participant's account balance as
of the date of such installment payment by the number of installment payments
remaining to be made to such Participant at the time of calculation. The
remaining balance of the Deferred Compensation Account shall earn interest at
the rate specified in Section 6(b) until paid.
(e) Acceleration for Hardship. The Board in its sole discretion may
accelerate payments of amounts credited to a Participant's Deferred Compensation
Account if requested to do so and if the requirements of this paragraph (e) are
met. Such acceleration may occur only in the event of unforeseeable financial
emergency or severe hardship from one or more recent events beyond the control
of the Participant and is limited to the amount deemed reasonably necessary to
satisfy the emergency or hardship. Payments may not be made to the extent that
such hardship is or may be relieved: (i) through reimbursement or compensation
by insurance or otherwise, (ii) by liquidation of the Participant's assets (to
the extent the liquidation of such assets would not itself cause a severe
financial hardship), or (iii) by cessation of participation in the Plan.
(f) Death of Participant. In the event that a Participant shall die at
any time prior to distribution of his or her Deferred Compensation Account, the
unpaid balance of the Participant's Deferred Compensation Account shall be paid
in a lump sum to the Participant's designated beneficiary or beneficiaries (or,
in absence of such designation, to his or her heirs in accordance with his or
her last will and testament or, in the absence of a will, by the laws of
intestate succession).
(g) Disability of Participant. In the event of Disability of a
Participant before attainment of age 65 and prior to termination of service, a
Disabled Participant may petition the Board to receive a benefit equal to the
remaining balance, if any, of the Participant's Deferred Compensation Account
determined under Section 6(b). Such benefit shall be payable pursuant to
elections made by the Participant in the manner provided in Section 7(b). Such
benefit shall be paid until the earliest of the following events: (i) there is
no longer any balance in the Participant's Deferred Compensation Account; (ii)
the Participant ceases to be a Disabled Participant and resumes employment with
the Company; or (iii) the Participant dies. Disability benefits shall be treated
as distributions from the Participant's Deferred Compensation Account.
<PAGE> 5
For purposes of this paragraph (g), "Disability" means a condition, as
determined by the Board, that totally and continuously prevents the Participant,
for at least six consecutive months, from engaging in an "occupation" for
compensation or profit. During the first twenty-four (24) months of total
disability, "occupation" means the Participant's occupation at the time the
disability began. After that period, "occupation" means any occupation for which
the Participant is or becomes reasonably fitted by education, training or
experience.
8. EFFECT OF CHANGE IN CONTROL
If a single individual or entity acquires or offers to acquire more
than fifty percent of the outstanding stock of the Company, or if all or
substantially all of the assets of the Company are transferred (or the Company
agrees to transfer all or substantially all of its assets) to another entity by
way of a sale, merger, consolidation or other means (a "change in control"), the
entire unpaid balance of each Deferred Compensation Account then maintained by
the Company shall be paid in a lump sum to the Participant within 30 days after
the change in control
9. INTERESTS NOT TRANSFERABLE
Benefits payable under this Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution, or levy of any kind, either voluntary or
involuntary, including any such liability which is for alimony or other payments
for the support of a spouse or former spouse, or for any other relative of a
Participant prior to actually being received by the person entitled to the
benefit under the terms of the Plan and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any
right to benefits payable hereunder shall be void. The Company shall not in any
manner be liable for, or subject to, the debts, contracts, liabilities,
engagements, or torts of any person entitled to benefits hereunder. If any
person shall attempt to, or shall alienate, sell, transfer, assign, pledge, or
otherwise encumber his benefits under this Plan, or if by reason of his
bankruptcy or other event happening at any time, such benefit would devolve upon
any other person or would not be enjoyed by the person entitled hereto under the
Plan, the Board, in its sole and absolute discretion, may terminate the interest
in any such benefits of the person entitled thereof under the Plan and hold or
apply them to or for the benefit of such person entitled thereto under the Plan
in such manner as the Board may deem proper.
10. DESIGNATION OF BENEFICIARIES
Each Participant shall have the right to designate in writing, in
accordance with such rules and procedures as the Board may prescribe, the
beneficiary or beneficiaries who are to receive the payments from his or her
Deferred Compensation Account in the event of the Participant's death.
11. BINDING PROVISIONS
All of the provision of this Plan shall be binding upon all persons who
shall be entitled to any benefits hereunder and their heirs and personal
representatives. The Plan shall be binding
<PAGE> 6
upon and inure to the benefit of the Company, its successors and assigns and the
Participant and his heirs, executors, administrators and legal representatives.
12 INCAPACITY
If the Board shall find that any person to whom any payment is payable
under the plan is unable to care for his affairs because of illness or accident,
or is a minor, any payment due (unless a prior claim therefor shall have been
made by a duly appointed guardian, committee or other legal representative) may
be made to the spouse, a child, a parent, or a brother or sister, or to any
person deemed by the Board to have incurred expense for such person otherwise
entitled to payment, in such manner and proportions as the Board may determine.
Any such payment shall be a complete discharge of the liabilities of the Company
under the plan.
13. CONTINUED EMPLOYMENT
Nothing contained herein shall be construed as conferring upon the
Participant the right to continue in the employ of the Company as an executive
or in any other capacity.
14. CLAIMS FOR BENEFITS PROCEDURE
(a) Claims for Benefits Procedure. Any claim for benefits under the
Plan shall be made in writing to any member of the Board. If such claim for
benefit is wholly or partially denied by the Board, the Board shall, within a
reasonable period of time, but not later than sixty (60) days after receipt of
the claim, notify the claimant of the denial of the claim. Such notice of denial
shall be in writing and shall contain:
(i) The specific reason or reasons for
denial of the claim; (ii) A
reference to the relevant Plan
provisions upon which the denial is
based;
(iii) A description of any additional
material or information necessary
for the claimant to perfect the
claim, together with an explanation
of why such material or information
is necessary; and
(iv) an explanation of the Plan's claim
review procedure.
If no such notice is provided, the claim shall be deemed granted.
(b) REQUEST FOR REVIEW of a Denial of a Claim for Benefits. Upon the
receipt by the claimant of written notice of denial of the claim, the claimant
may within ninety (90) days file a written request to the Board, requesting a
review of the denial of the claim, which review shall include a hearing if
deemed necessary by the Board. In connection with the claimant's appeal of the
denial of his claim, he may review relevant documents and may submit issues and
comments in writing.
(c) Decision Upon Review of Denial of Claim for Benefits. The Board
shall render a decision on the claim review promptly, but no more than sixty
(60) days after the receipt of the
<PAGE> 7
claimant's request for review, unless special circumstances (such as the need to
hold a hearing) require an extension of time, in which case, the sixty (60) day
period shall be extended to one hundred-twenty (120) days. Such decision shall:
(i) Include specific reasons for the decision;
(ii) Be written in a manner to be understood by the
claimant; and
(iii) Contain specific references to the relevant Plan
provisions upon which the decision is based.
15. WITHHOLDING TAXES.
To the extent that the Company is required to withhold federal, state,
local or foreign taxes in connection with any payment made or benefit realized
by a Participant or other person under the Plan, and the amounts available to
the Company for such withholding are insufficient, it shall be a condition to
the receipt of such payment or the realization of such benefit that the
Participant or such other person make arrangements satisfactory to the Company
for payment of the balance of such taxes required to be withheld. At the
discretion of the Board, such arrangements may include relinquishment of a
portion of such benefit. The Company and any Participant or such other person
may also make similar arrangements with respect to the payment of any taxes with
respect to which withholding is not required.
16. CONTROLLING LAW.
The Plan shall be construed in accordance with and governed by the law of the
State of Indiana.
17. AMENDMENT AND TERMINATION
(a) Amendment. The Plan may be amended in whole or in part by the Board
at any time. Notice of any such amendment shall be given in writing to the Board
and to each Participant and each Beneficiary of a deceased Participant. No
amendment shall decrease the value of a Participant's Deferred Compensation
Account, the benefits to which a Participant may be entitled under Section 7 or
other benefit entitlements existing prior to any such amendment.
(b) Company's Right to Terminate. The Company reserves the sole right
to terminate the Plan and/or any Agreement pertaining to the Participant at any
time after the Plan Effective Date. In the event of any such termination, the
Participant shall be entitled to a Deferred Benefit equal to the amount of his
Deferred Compensation Account determined under Section 6(a) and payable in
accordance with Section 7.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by
its duly authorized officers as of the date first above written.
By: _____________________________________
Date: ___________________________________
__________________________________
Secretary
<PAGE> 1
Exhibit (10)(iii)
GREAT LAKES CHEMICAL CORPORATION
SUPPLEMENTAL SAVINGS PLAN
(EFFECTIVE JANUARY 1, 1995)
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I ................................................1
Establishment ................................................1
1.1 Establishment and Purpose.......................1
1.2 Applicability...................................1
1.3 Definitions.....................................1
ARTICLE II ................................................2
Participation ................................................2
2.1 Eligibility and Participation...................2
2.2 Duration........................................2
ARTICLE III ................................................3
Contributions ................................................3
3.1 Deferral Election...............................3
3.2 Matching Contribution...........................3
ARTICLE IV ................................................5
Participant's Accounts............................................5
4.1 Participant's Accounts..........................5
4.2 Interest on Accounts............................5
4.3 Valuation of Accounts...........................6
4.4 Quarterly Reports...............................6
4.5 Investments Funds...............................6
ARTICLE V ................................................8
Payment of Deferred Compensation..................................8
5.1 Payments Upon Retirement........................8
5.2 Payment Upon Disability.........................8
5.3 Payments Upon Death.............................8
5.4 Payments Upon Financial Emergency...............9
5.5 Small Payment...................................9
5.6 Beneficiaries...................................9
ARTICLE VI ...............................................11
Funding ...............................................11
6.1 Funding........................................11
ARTICLE V ...............................................12
Amendment, Administration........................................12
7.1 Amendment and Termination......................12
7.2 Administration.................................12
7.3 Deduction of Taxes from Amounts Payable........12
7.4 Indemnification................................12
7.5 Expenses.......................................12
7.6 Claims.........................................12
<PAGE> 3
ARTICLE VIII ...............................................13
Miscellaneous ...............................................13
8.1 Interests not Transferable.....................13
8.2 Contract of Employment.........................13
8.3 Headings.......................................13
8.4 Invalidity.....................................13
8.5 Law Governing..................................13
Appendix A ...............................................15
<PAGE> 4
GREAT LAKES CHEMICAL CORPORATION
SUPPLEMENTAL SAVINGS PLAN
(Effective January 1. 1995)
ARTICLE I
Establishment
1.1 Establishment and Purpose. Great Lakes Chemical Corporation (the
"Company") hereby adopts the Great Lakes Chemical Corporation
Supplemental Savings Plan (the "Plan"), effective January 1, 1995 (the
"Effective Date"). The purpose of the Plan is to provide each
Participant in the Plan with the benefits the Participant would have
received under the Great Lakes Savings Plan, as amended, ("Savings
Plan") except for the limitations on compensation and benefits imposed
by various sections of the Internal Revenue Code of 1986, as amended,
("Code") or any successor thereto. The Plan works in conjunction with
the Savings Plan to provide the Participants with the same benefits as
a percentage of compensation that are available under the Savings Plan
to those employees not affected by the Code Limitations. The Company
and any entity which, with the approval of the Board of Directors of
the Company, adopts the Plan shall be referred to hereinafter as
"Employer." The Plan is intended to benefit a select group of
management or highly compensated employees of the Employer.
1.2 Applicability. The provisions of the Plan shall apply only to a person
who terminates employment with an Employer on or after the Effective
Date and shall not apply to any person not in the active employment of
an Employer on or after the Effective Date.
1.3 Definitions. Capitalized terms herein shall have the same meaning as
the Savings Plan except as defined herein.
<PAGE> 5
ARTICLE II
Participation
2.1 Eligibility and Participation. Each person, who is (i) a Participant in
the Savings Plan and whose right to contribute to or receive an
allocation under the Savings Plan is reduced by the limitation on
compensation imposed by Section 401(a)(17) of the Code, by the
limitations on benefits imposed by Section 415(c) of the Code, by the
limitations on pre-tax deferrals imposed by Section 401(k) of the Code
and Section 402(g) of the Code, and by the limitations on matching
contributions and after-tax contributions under Section 401(m) of the
Code (such limitations are collectively referred to as the "Code
Limitations"); and (ii) has been named by the Board of Directors of the
Company as an eligible employee by having his or her name set forth in
Appendix A to the Plan, shall become a Participant; provided, however,
no person shall become a Participant prior to the date of execution of
the Plan. (Each person who becomes a Participant shall be referred to
hereinafter as a "Participant.") The Employer shall establish for each
Participant a Deferred Compensation Account.
2.2 Duration. Any person who became a Participant shall continue to be a
Participant as long as he is entitled to benefits hereunder.
<PAGE> 6
ARTICLE III
Contributions
3.1 Deferral Election.
(a) Each Participant shall be entitled to make an annual advance
written election to defer receipt of up to 15~o of the
Compensation otherwise payable to him by the Employer. Such
Deferral Amount shall be expressed as a percentage of
Compensation. The written election must be received not later
than December 15, 1994 to be effective for the first calendar
quarter of 1995. A Deferral Election once made shall remain in
effect from calendar quarter to calendar quarter and from
calendar year to calendar year until changed by the
Participant. An election once made or deemed made for a
calendar quarter shall not be revocable. A Participant may
change and a new Participant may make his election for any
future notice to the Committee not less than 30 days prior to
the start of the calendar quarter for which the change is to
be effective.
(b) A Participant may elect to discontinue deferrals at anytime
upon reasonable notice to the Committee.
(c) A Deferral Amount Election under this Section 3.1 shall be
made in conjunction with the Participant's pre-tax election
under the Savings Plan, and the Employer shall deposit into
the Savings Plan such amount of the Participant's Deferral
Amount as is consistent with the provisions of the Savings
Plan and with such administrative procedures of the Employer
as it may implement from time to time to insure compliance
with the requirements of the Savings Plan and the Code
Limitations.
(d) In the event any amounts under the Savings Plan must be
distributed from the Savings Plan to the Participant, such
amounts will not be credited to the Participant's Deferred
Compensation Account in the Plan unless such amount will not
be treated as taxable income to the Participant.
3.2 Matching Contribution. The Employer shall make a deemed contribution to
a Participant's Deferred Compensation Account equal to the amount of
Matching Contribution to which the Participant would have been entitled
under the Savings Plan, had the Participant's Deferral Amount under
this Plan been contributed to the Savings
<PAGE> 7
Plan without regard to the Code Limitations. The Employer Matching
Contribution shall be credited to the Participant's Deferred
Compensation Account on the same date as matching contributions are
credited to Participants' accounts under the Savings Plan.
ARTICLE IV
<PAGE> 8
Participant's Accounts
4.1 Participants' Accounts. The Committee shall create and maintain
adequate records to disclose the interest in the Plan of each
Participant and Beneficiary. Records shall be in the form of individual
bookkeeping accounts, and credits and charges shall be made to those
accounts pursuant to Article III and the following provisions of this
Article IV. Each Participant shall have a separate Deferred
Compensation Account. The Participant's interest in that portion of his
Deferred Compensation Account attributable to the Participant's pre-tax
contributions shall at all times be fully vested. The Participant's
interest in that portion of his Deferred Compensation Account
attributable to the Employer's matching contributions shall become
vested in accordance with the Savings Plan; such that a Participant
credited with the completed Years of Service shown below, as determined
under the Savings Plan, shall be vested in the percentage of his
Employer matching contribution as shown below:
Completed Years of Vested Interest in
Service Matching Contributions
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
4.2 Interest on Accounts. Each Participant's Deferred Compensation Account
shall be credited with earnings as provided in this section.
(a) The Deferred Compensation Account of a Participant shall be credited
with earnings and losses from the date it was established through the
date the entire Deferred Compensation Account is distributed to the
Participant or his Beneficiary. A Participant's Deferred Compensation
Account shall be credited with earnings or charged with losses in
accordance with procedures and at a rate adopted from time to time by
the Committee.
<PAGE> 9
(b) The Committee reserves the right, in its sole discretion, to increase
or decrease the rate at which earnings are credited to Participants'
accounts, but the earnings rate shall not be decreased for periods
prior to such action.
4.3 Valuation of Accounts. The value of a Participant's Deferred
Compensation Account as of any date shall equal the dollar amount of
any deferrals and Employer contributions credited to the Deferred
Compensation Account, adjusted for the earnings or losses DEEMED TO BE
CREDITED TO THE Deferred Compensation Account in accordance with
Section 4.2 and decreased by the amount of any payments made from the
Deferred Compensation Account to the Participant or his Beneficiary.
Earnings, losses, contributions and distributions are credited or
changed to the Deferred Compensation Account each regular business day,
i.e., each day the New York Stock Exchange is open for business, in
accordance with the procedures of the recordkeeper.
4.4 Quarterly Reports. Within 60 days following the end of each calendar
quarter, the Committee shall provide to each Participant a written
statement of the amount standing to his credit in the Deferred
Compensation Account as of the end of that calendar quarter.
4.5 Investment Funds.
(a) Notwithstanding Section 4.2, 4.3 and 4.4, the Committee, in its sole
discretion, may elect to establish for each Participant an Employee
owned separate investment account in the name of the Employer
(Investment Fund) to assist the Employer in accumulating the assets
needed to pay the promised benefits. In the event that a separate
Investment Fund is established, the Committee may direct that the
Participant's Deferred Compensation Accounts shall be invested through
such Investment Fund in one or more investment funds to be determined
from time to time by the Committee. The Committee shall direct the
investment of a Participant's Deferred Compensation Account among the
investment funds in the Investment Fund at its discretion, but the
Committee may consult with the Participants as to the investment funds
in which their Account should be invested.
(b) In the event the Committee exercises its discretion as described above,
a Participant's Deferred Compensation Account shall be credited with
earnings or charged with losses in accordance with the investment funds
in which such Investment Fund is invested. The Participant's Account
shall be charged with
<PAGE> 10
distributions and losses and credited with contributions and earnings
in accordance with procedures adopted by the Committee in consultation
with any manager of the Investment Funds.
(c) Despite the establishment of an Investment Fund or of specific
investment funds, a Participant shall have no claim to such specific
assets and such funds shall serve merely as a mechanism for assisting
the Employer in meeting its obligations under the Plan and measuring
the value of a Participant's Account.
<PAGE> 11
ARTICLE V
Payment of Deferred Compensation
5.1 Payments Upon Retirement.
(a) Except as provided in Section 5.5 or Subsection 5.1(b), upon a
Participant's separation from service with the Employers, the
vested portion of the Participant's Deferred Compensation
Account shall be distributed to him in ten substantially equal
annual installments, the sum of which shall equal (i) the
value of the Participant's Deferred Compensation Account as of
the date of his separation from service, plus (ii) the
earnings that will accrue on the unpaid balance of the
Deferred Compensation Account under Article IV during the
payout period, less, (iii) any distributions from the Deferred
Compensation Account. The first annual installment shall begin
as soon as practicable following the recordkeeper's receipt of
authorized instructions from the Committee to make the
payments. In addition, the annual installments shall be
redetermined each year as soon as practicable following the
anniversary of the start of such payments. Annual installments
shall be determined in ACCORDANCE WITH THE declining balance
method, whereby each year's installment shall equal the
product of the Participant's Deferred Compensation Account at
the time of payment multiplied by the fraction of 1 over the
number of remaining payments.
(b) A Participant may elect to receive his Deferred Compensation
Account in a single sum payment provided either such election
is made not less than one year prior to the Participant's
termination of employment with the Employer or in the event
the election is made within such one year period, such lump
sum distribution shall not be made earlier than the one year
anniversary of the election of the lump sum.
(c) Notwithstanding (a) or (b) above, the Committee may, in its
sole and absolute discretion at any time after a Participant
separates from service, distribute to the Participant the
remaining balance in the Participant's Deferred Compensation
Account.
5.2 Payment Upon Disability. If a Participant suffers a
disability, within the meaning of the Employer's long-term
disability plan, deferrals and matching contributions that
otherwise
<PAGE> 12
would have been credited to the Participant's Deferred
Compensation Account under this Plan shall cease. The
Participant's Deferred Compensation Account will continue to
be credited with earnings under Article IV during the period
of 60 days beyond the date deferrals and contributions cease,
the Participant shall be treated for purposes of this Plan as
if he had separated from service, and his Deferred
Compensation Account shall be distributed pursuant to Section
5.1.
5.3 Payments Upon Death. If a Participant dies, his remaining
Deferred Compensation Account shall be distributed to his
Beneficiary in a single lump sum payment as soon as
practicable after the Participant's death. The value of the
Participant's Deferred Compensation Account shall be
determined as of the valuation date that authorized
distribution directions are received by the Plan's
recordkeeper from the Committee.
5.4 Payments Upon Financial Emergency. A Participant, upon written
petition to the Committee, may withdraw some or all of that
portion of his Deferred Compensation Account that is
attributable to the Participant's contribution (the portion of
the Deferred Compensation Account attributable to
contributions of the Employer is not available for financial
emergencies) if the Committee, in its sole discretion,
determines that the requested withdrawal is on account of an
unforeseeable financial emergency and that the amount to be
withdrawn does not exceed the amount necessary to satisfy the
financial emergency. Withdrawals under this section shall not
be permitted to the extent that the financial emergency may
reasonably be relieved through (a) reimbursement or
compensation by insurance or otherwise, (b) liquidation of the
Participant's assets (to the extent liquidation would not in
itself cause a financial hardship), or (c) suspension or
cessation of deferrals under the Plan. For purposes of this
section, an "unforeseeable financial emergency" means severe
financial hardship to the Participant resulting from a sudden
and unexpected illness or accident of the Participant or his
dependents; loss of the Participant's property due to
casualty; or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the
Participant's control.
5.5 Small Payment. Notwithstanding any other provision of this
Plan, if the value of a Participant's Deferred Compensation
Account, upon his separation from service does not exceed
$15,000, the balance of his Deferred Compensation Account
shall be distributed in the form of a single lump sum payment
to the Participant.
5.6 Beneficiaries. A Participant's "Beneficiary" shall be the
person or persons, including a trustee, designated in writing
pursuant to practices of, or rules prescribed by, the
<PAGE> 13
Committee, as the recipient of a benefit payable under the
Plan following the Participant's death. To be effective, a
Beneficiary designation must be filed with the Committee
during the Participant's life on a form prescribed by the
Committee; provided, however, that a finalized divorce or
marriage (other than a common law marriage) shall
automatically revoke a previously filed Beneficiary
designation, unless in the case of divorce, the ex-spouse was
not designated as Beneficiary or in the case of marriage, the
Participant's new spouse is already the designated
Beneficiary. If no person has been designated as the
Participant's Beneficiary, if a Participant's Beneficiary
designation has been revoked by marriage or divorce, or if no
person designated as Beneficiary survives the Participant, the
Participant's estate shall be his Beneficiary.
<PAGE> 14
ARTICLE VI
Funding
6.1 Funding. All benefits under this Plan shall be paid directly from the
general funds of the Employer, and no special or separate fund shall be
established and no other segregation of assets shall be made to assure
payment. No Participant, spouse, or beneficiary shall have any right,
title or interest whatever in or to any investments which Employer may
make to aid the Employer in meeting its obligation hereunder. Nothing
contained in this Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between an Employer and any Participant,
spouse, or beneficiary of a Participant. Notwithstanding the foregoing,
the Employer may at its sole discretion establish the Investment Fund
described in Section 4.5 as a vehicle for accumulating the assets
needed to pay the promised benefit. To the extent that any person
acquires a right to receive payments from the Employer hereunder, such
rights shall be no greater than the right of an unsecured creditor of
the Employer.
<PAGE> 15
ARTICLE VII
Amendment, Administration
7.1 Amendment and Termination. The Company reserves THE RIGHT at any time
to modify, amend, or terminate the Plan, provided that the Company
shall not cancel, reduce, or otherwise adversely affect the amount of
benefits of any Participant credited as of the date of any such
modification, amendment, or termination, without the consent of the
Participant.
7.2 Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee),
which shall be authorized to interpret the Plan, to adopt rules and
practices concerning the administration of the Plan, to resolve
questions concerning eligibility for the Plan, amounts credited to
Deferred Compensation Accounts, timing of distributions, crediting of
earnings and other matters regarding the administration of the Plan.
7.3 Deduction of Taxes from Amounts Payable. The Employer may deduct FROM
THE amount to be distributed under the Plan such amount as the
Employer, in its sole discretion, deems proper for the payment of
income, employment, death, succession, inheritance, or other taxes with
respect to benefits under the Plan.
7.4 Indemnification. Each Employer shall indemnify and hold harmless each
employee, officer, or director of an Employer to whom is delegated
duties, responsibilities, and authority with respect to the Plan
against all claims, liabilities, fines and penalties, and all expenses
reasonably incurred by or imposed upon him (including but not limited
to reasonable attorney fees) which arise as a result of his actions or
failure to act in connection with the operation and administration of
the Plan to the extent lawfully allowable and to the extent that such
claim, liability, fine, penalty, or expense is not paid for by
liability insurance purchased or paid for by an Employer.
Notwithstanding the foregoing, an Employer shall not indemnify any
person for any such amount incurred through any settlement or
compromise of any action unless the Employer consents in writing to
such settlement or compromise.
7.5 Expenses. The expenses of administering the Plan shall be paid by the
Employer.
7.6 Claims. Claims for benefits shall be considered by the Committee in
accordance with the claims procedures set forth in the Savings Plan.
<PAGE> 16
ARTICLE VIII
Miscellaneous
8.1 Interests not Transferable. Benefits payable UNDER THIS PLAN SHALL NOT
BE SUBJECT IN ANY manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or
levy of any kind, either voluntary or involuntary, including any such
liability which is for alimony or other payments for the support of a
spouse or former spouse, or for any other relative of a Participant
prior to actually being received by the person entitled to the benefit
under the terms of the Plan, and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge, or otherwise dispose
of any right to benefits payable hereunder shall be void. The Employer
shall not in any manner be liable for, or subject to, the debts,
contracts, liabilities, engagements, or torts of any person entitled to
benefits hereunder. If any person shall attempt to, or shall alienate,
sell, transfer, assign, pledge, or otherwise encumber his benefits
under this Plan, or if by reason of his bankruptcy or other event
happening at any time, such benefit would devolve upon any other person
or would not be enjoyed by the person entitled thereto under the Plan,
the Board of Directors of the Company, in its discretion, may terminate
the interest in any such benefits of the person entitled thereof under
the Plan and hold or apply them to or for the benefit of such person
entitled thereto under the Plan or his spouse, children, or other
dependents, or any of them, in such manner as the Board of Directors of
the Company may deem proper.
8.2 Contract of Employment. Nothing contained herein shall be construed to
constitute a contract of employment between a Participant and an
Employer.
8.3 Headings. The headings of Articles and Sections are included solely for
convenience of reference, and if there is any conflict between such
headings and the text of this Plan, the text shall control.
8.4 Invalidity. If any provision of this Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provisions hereof and the Plan shall be construed and enforced as
if such provisions, to the extent invalid or unenforceable, had not
been included.
8.5 Law Governing. The Plan shall be construed and enforced according to
the laws of Indiana other than its laws respecting choice of law.
<PAGE> 17
IN WITNESS WHEREOF, the Company has executed this Plan this 2nd day of December,
1994
GREAT LAKES CHEMICAL CORPORATION
BY: _____________________________
ATTEST:
_______________________________
<PAGE> 18
Amendment No. 1
to
Great Lakes Chemical Corporation Supplemental Savings Plan
(Effective January 1, 1995)
Great Lakes Chemical Corporation hereby adopts this Amendment No. 1 to the Great
Lakes Chemical Corporation Supplemental Savings Plan (effective January 1,
1995). The provisions of this Amendment shall be effective as of January 1,
1995.
1. Section 4.5(a) of the Plan is hereby amended by deleting the first
sentence of such Section and substituting in place thereof the
following:
Notwithstanding Section 4.2, 4.3 and 4.4, the Committee, Its sole
discretion, may elect to establish on its books a separate investment
account in the name of the Employer (Investment Fund) to assist the
Employer in accumulating the assets needed to pay the promised
benefits.
IN WITNESS WHEREOF, the Company has executed this Amendment No. 1 to the Plan
this 28th day of July, 1995.
GREAT LAKES CHEMICAL CORPORATION
By: _____________________________
ATTEST:
___________________________________
<PAGE> 19
SECOND AMENDMENT
GREAT LAKES CHEMICAL CORPORATION
SUPPLEMENTAL SAVINGS PLAN
(Effective JANUARY 1, 1995)
WHEREAS, Great Lakes Chemical Corporation (the "Company") established
the Great Lakes Chemical Corporation Supplemental Savings Plan (the "Plan")
effective January 1, 1995; and
WHEREAS, Section 7.1 of the Plan reserves to the Company the right to amend the
Plan; and
WHEREAS, the Board of Directors of the Company has authorized the
extension of coverage under the Plan to additional executives of the Company.
NOW, THEREFORE, the following amendments to the Plan are hereby adopted
effective as of January 1, 1996:
1. In the Table of Contents replace "Participant's Accounts" under Article
1V with "Participants' Accounts" and change Article V, "Amendment,
Administration" to Article VII.
2. Add the word "in" after the words "same meaning as" in Section 1.3,
"Definitions".
3. Replace the language in Section 2.1, "Eligibility and Participation"
with the following:
2.1 Eligibility and Participation. Each person (a) who is a
Participant in the Savings Plan, (b) whose annual base rate of earnings in a
Plan Year after 1995 is at least $100,000 and (c) whose right to contribute to
or receive an allocation under the Savings Plan is reduced by the limitations
(i) on benefits imposed by Section 41 5(c) of the Code, (ii) on pre-tax
deferrals imposed by Section 401 (k) of the Code and Section 402(g) of the Code,
or (iii) on matching contributions and after-tax contributions under Section 401
(m) of the Code (such limitations are collectively referred to as the "Code
Limitations") shall be eligible to become a Participant in the Plan. Such a
person shall become a Participant on the first day of the calendar quarter that
is coincident with or immediately follows the 30th day after the day on which
the Participant satisfies the conditions described in (a), (b) and (c) above.
The Employer shall establish for each Participant a Deferred Compensation
Account.
Notwithstanding the foregoing provisions of this Section 2.1
and the provisions of Section 3.1, an individual who is employed by the Company
after December 31, 1995 and whose annual base rate of earnings in a Plan Year
after 1995 is at least $100,000 may participate in the Plan although he has not
satisfied all the conditions set forth above. Such an individual shall become a
Participant as of the first day of the calendar quarter after he is employed by
the Company by making an annual advance written election to defer up to 15% of
his Compensation, as described in the first sentence of Section 3.1, prior to
the first day of said calendar quarter. Once said individual becomes eligible to
participate in the Savings Plan his
<PAGE> 20
eligibility in this Plan will continue, but he must meet all the conditions
contained in the prior paragraph of this Section 2.1 and in Section 3.1 in order
to continue to make deferrals under Section 3.1 of this Plan and to receive
Matching Contributions under Section 3.2.
4. In the Heading of Article 1V change "Participant's" to "Participants".
5. In the second sentence of Section 4.3, "Valuation of Accounts" replace
"changed" with
IN WITNESS WHEREOF, the Company has executed this Second Amendment to
the Great Lakes Chemical Corporation Supplemental Savings Plan as of the
25th the day of April, 1996.
Attest:
Great Lakes Chemical Corporation
By _______________________________
<PAGE> 21
Amendment No. 3
to
Great Lakes Chemical Corporation
Supplemental Savings Plan
(Effective February 11, 1997)
Great Lakes Chemical Corporation hereby adopts this Amendment No. 3 to the Great
Lakes Chemical Corporation Supplemental Savings Plan (effective February 11,
1997). The provisions of this Amendment shall be effective as of February 11,
1997.
1. Section 7.2 of the Plan is hereby amended as follows:
The Plan shall be administered by the Board of Directors of
the Company, which shall be authorized to interpret the Plan,
to adopt rules and practices concerning the administration of
the Plan, to resolve questions concerning eligibility for the
Plan, amounts credited to Deferred Compensation Accounts,
timing of distributions, crediting of earnings and other
matters regarding the administration of the Plan, and to
delegate all or any portion of its authority hereunder to a
committee of the Board of Directors or to designated officers
or employees of the Company.
IN WITNESS WHEREOF, the Company has executed this Amendment No. 3 to the Plan
this 17th day of March , 1997.
GREAT LAKES CHEMICAL CORPORATION
By _______________________________
ATTEST:
___________________________________
<PAGE> 22
AMENDMENT TO
GREAT LAKES CHEMICAL CORPORATION
SUPPLEMENTAL SAVINGS PLAN
The Great Lakes Chemical Corporation Supplemental Savings Plan
(the "Plan"), is hereby amended, effective as of November 20, 1997, as set forth
below.
Any term which is not defined below shall have the meaning set
forth in the Plan.
1. Section 4.1 of the Plan is hereby amended by adding the
following phrase at the end thereof:
provided, however, that the Participant's interest in that portion of
his Deferred Compensation Account attributable to the Employer's matching
contributions shall become fully vested upon the occurrence of a change in
control of the Company.
2. Article IV of the Plan is hereby amended by adding a
section 4.6 as follows:
4.6 Funding of Rabbi Trust. Notwithstanding any provision in the Plan
to the contrary, in the event of a change in control of the Company (as defined
in Section 8.6 hereof), the Company shall immediately fully fund a rabbi trust
or similar instrument in an amount equal to the aggregate of each Participant's
entire Deferred Compensation Account.
3. Section 6.1 of the Plan is hereby amended and restated to
read as follows:
Funding. Except as provided for in Section 4.6, all benefits under this
Plan shall be paid directly from the general funds of the Employer, and no
special or separate fund shall be established and no other segregation of assets
shall be made to assure payment. No Participant, spouse, or beneficiary shall
have any right, title or interest whatever in or to any investments which
Employer may make to aid the Employer in meeting its obligation hereunder.
<PAGE> 23
Nothing contained in this Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a fiduciary
relationship, between an Employer and any Participant, spouse, or beneficiary of
a Participant. Notwithstanding the foregoing, the Employer may at its sole
discretion establish the Investment Fund described in Section 4.5 as a vehicle
for accumulating the assets needed to pay the promised benefit. To the extent
that any person acquires a right to receive payments from the Employer
hereunder, such rights shall be no greater than the right of an unsecured
creditor of the Employer.
4. Section 7.1 of the Plan is hereby amended and restated to
read as follows:
Amendment and Termination. The Company reserves the right at any time to modify,
amend, or terminate the Plan; provided, that, (i) the Company shall not cancel,
reduce, or otherwise adversely affect the amount of benefits of any Participant
credited as of the date of any such modification, amendment, or termination,
without the written consent of the Participant and (ii) the Company shall not
adversely amend or modify the provisions hereof or terminate the Plan following
a change in control of the Company (as defined in Section 8.6 hereof) without
the written consent of 66 2/3 percent of the Participants.
5. Article VIII of the Plan is hereby amended by adding a
section 8.6 as follows:
8.6 Definition of Change in Control. For purposes of the Plan, a
"change in control of the Company" shall be deemed to have
occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(a) any "person" (as such term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Ex
2
<PAGE> 24
change Act")) other than (i) the Company, (ii) a trustee or
other fiduciary holding securities under an employee benefit
plan of the Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv)
a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of shares of the Company (any
such person is hereinafter referred to as a "Person"), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of
the Company representing more than 20` of the combined voting
power of the Company's then outstanding securities (not
including in the securities beneficially owned by such Person
any securities acquired directly from the Company);
(b) there is consummated a merger or consolidation of the Company
with or into any other corporation, other than a merger or
consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior
thereto holding securities which represent, in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company,
immediately after such merger or consolidation, more than 70`
of the combined voting power of the voting securities of
either the
3
<PAGE> 25
Company or the other entity which survives such merger or
consolidation or the parent of the entity which survives such
merger or consolidation;
(c) the stockholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all the Company's assets; or
(d) during any period of two consecutive years (not including any
period prior to the date of the Plan), individuals who at the
beginning of such period constitute the Board and any new
director (other than a director designated by a Person who has
entered into an agreement with the Company to effect a
transaction described in clause (a), (b) or (c) of this
paragraph) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof.
For purposes of the Plan, where a change in control of the Company results from
a series of related transactions, the change in control of the Company shall be
deemed to have occurred on the date of the consummation of the first such
transaction. For purposes of clause (a) of this subsection, the stockholders of
another
4
<PAGE> 26
corporation (other than the Company or a corporation described in subclause (iv)
of clause (a) of this subsection) shall be deemed to constitute a Person.
Further, it is understood by the parties that the sale, transfer, or other
disposition of a subsidiary of the Company shall not constitute a change in
control of the Company giving rise to payments or benefits under the Plan.
Notwithstanding any other provision hereof, a "change in control of the Company"
shall not be deemed to have occurred by virtue of the Company entering into any
agreement with respect to, the public announcement of, the approval by the
Company's stockholders or directors of, or the consummation of, any transaction
or series of integrated transactions (including any merger or other business
combination transaction) entered into in connection with, or expressly
conditioned upon the occurrence of, a spin-off (such transaction or series of
integrated transactions, the "Spin-Off Transaction") immediately following which
the recordholders of the common stock of the Company immediately prior to the
Spin-Off Transaction continue to have substantially the same proportionate
ownership in the spun-off entity as they had in the Company immediately prior to
the Spin-Off Transaction; provided that such Spin-Off Transaction (including any
related merger of other - business combination transaction) has been approved by
a vote of a majority of the Company's Continuing Directors (as defined below)
then in office. For purposes of the Plan, a "Continuing Director" shall mean any
member of the Board of the Company who is a member of the Board as of the date
of the Plan and any person who subsequently becomes a member of the Board, if
such person's nomination for election or election to the Board is recommended or
approved by a majority of the Continuing Directors.
5
<PAGE> 27
IN WITNESS WHEREOF, Great Lakes Chemical Corporation has
caused this Amendment to be executed by a duly authorized officer of the Company
as of the day and year first above written.
GREAT LAKES CHEMICAL CORPORATION
By: _______________________________
6
<PAGE> 1
Exhibit No. (10)(iv)
SEVERANCE AND RELEASE AGREEMENT
(Read Carefully Before Signing)
In consideration of the agreement of Great Lakes Chemical Corporation
("Employer") to pay severance payments and provide benefits to
_____________________ ("Employee") as provided in the Severance Plan for
Domestic Directors and Key Management Employees Covered Under the Corporate
Management Incentive Compensation Plan ("Plan"), which payments and benefits
Employer is not otherwise obligated to pay or provide, Employee hereby
unconditionally releases and discharges Employer from any claims, damages,
wages, bonuses, commissions, or any other compensation, actions, liabilities,
obligations, expenses, attorneys' fees, interest, or costs of any kind, known or
unknown, directly or indirectly related to, or in any way connected with,
Employee's employment with Employer or the termination of his employment with
Employer.
The parties agree that the severance payments and benefits provided in
the Plan shall begin no later than twenty-one (21) calendar days after Employer
receives a signed copy of this Agreement from Employee provided that a period of
seven (7) calendar days has expired after Employee has signed and delivered this
Agreement to Employer without Employee having revoked acceptance of this
Agreement. The parties agree that the date of termination of Employee's
employment shall be ___________, 199 . At this time Employee shall no longer be
employed by Employer and, except as provided in the Plan, shall have no further
right to participate in or accrue benefits under any Employer plan, policy or
practice. Employee further agrees that execution of this Agreement is required
in order to receive severance payments and benefits under the Plan.
Employee agrees that he/she shall return to Employer all Employer
property in his/her possession or control no later than _____________, 199__,
including but not limited to, books, documents, memoranda, computer disks and
other software, and other records. Employee further agrees that, as a condition
of this Agreement, the fact of and terms and provisions of this Agreement are to
remain strictly confidential and shall not be disclosed to any person except
his/her legal and/or tax advisor(s), and/or other representatives, or as
required by law. Employee further agrees, as a condition of this Agreement, that
he/she will not make statements to any third parties which are in any way
disparaging to Employer. Employee further understands that, in the event
Employee breaches any of the provisions of this Agreement, Employee will return
to Employer all severance payments paid to him/her, and will reimburse Employer
for the cost of all benefits provided under the Plan (the cost to be calculated
by the applicable monthly COBRA premium that would be charged for such benefits)
and all attorneys' fees and costs of suit expended by Employer to enforce the
provisions of this Agreement.
The considerations exchanged herein do not constitute and shall not be
interpreted under any local, state, or federal statute, ordinance, regulation or
order, or any contract, or under common law, as an admission of wrongdoing,
liability or guilt on the part of Employer regarding
<PAGE> 2
Employee's employment with and separation of employment from Employer. Rather,
this Agreement results solely from the desire by the parties to resolve
expeditiously Employee's separation from Employer and any disputed issues of law
and fact which may surround his/her employment with or separation of employment
from Employer.
The parties agree and acknowledge that the claims or actions released
herein include, but are not limited to those based on any common law tort action
or based on allegations of wrongful discharge and/or breach of contract, and
those alleging any violation or allegation of discrimination on the basis of
race, color, sex, religion, age, national origin, disability, or any other basis
under Title VII of the Civil Rights Act of 1964 (as amended), Section 1981 of
the Civil Rights Act of 1866, the Older Workers Benefit Protection Act, the
Americans With Disabilities Act, the Family and Medical Leave Act, the Age
Discrimination in Employment Act ("ADEA"), the Employee Retirement Income
Security Act, all applicable state laws, the United States and all applicable
state constitutions, any and all amendments to such statutes and constitutions,
and those alleging any right or claim under any other federal, state, or local
law, rule, or regulation. Employee also agrees that his alleged rights or claims
under the aforementioned statutes and constitutions and any other federal,
state, or local law, rule or regulation are waived by this Agreement; however,
with regard to claims under the ADEA this Agreement only applies to the extent
that those alleged rights or claims arose prior to the execution of this
Agreement.
The parties understand that, as used in this Agreement, "Employer"
includes Great Lakes Chemical Corporation and all of its subsidiaries and
affiliates, all of their past and present officers, directors, employees,
trustees, agents, corporate parents, partners, shareholders, subsidiaries,
affiliates, principals, insurers, any and all employee benefit plans (and any
fiduciary of such plans) sponsored by the aforesaid entities, and each of them,
and each entity's subsidiaries, affiliates, predecessors, successors, and
assigns, and all other entities, persons, firms, or corporations liable or who
might be claimed to be liable, none of whom admit any liability to Employee but
all of whom expressly deny any such liability.
Employee further understands, and it is his/her intent, that in the
event this Agreement is ever held to be invalid or unenforceable (in whole or
part) as to any particular type of claim or charge or as to any particular
circumstances, it shall remain fully valid and enforceable as to all other
claims, charges, and circumstances. As to any actions, claims, or charges that
would not be released because of the revocation, invalidity, or unenforceability
of this Agreement, Employee understands that the return of all severance
payments paid to him/her and reimbursement of the cost of all benefits provided
under the Plan (the cost to be calculated by the applicable monthly COBRA
premium that would be charged for such benefits) is a prerequisite to asserting
or bringing any such claims, charges, or actions. Employee further agrees that
he/she will not seek re-employment or independent contractor status with
Employer and will not in the future be eligible for such employment or
independent contractor status with Employer.
Employee acknowledges that he/she has read this Agreement, fully
understands each and every provision, and signs it voluntarily and on his/her
own accord. Employee also acknowledges that in consideration of accepting the
consideration described above, he/she may be giving up possible future
administrative and/or legal claims. EMPLOYEE ALSO
<PAGE> 3
ACKNOWLEDGES THAT HE/SHE HAS BEEN ADVISED BY EMPLOYER TO CONSULT AN ATTORNEY
PRIOR TO EXECUTING THIS AGREEMENT. Furthermore, the parties hereby acknowledge
and agree that Employee has twenty-one (21) calendar days in which to consider
this Agreement, and that this Agreement may be revoked by Employee within seven
(7) calendar days after he/she delivers a signed copy to Employer. Written
notice of revocation should be delivered to [insert title], Human Resources
Department, [location]. The parties also acknowledge and agree that this
Agreement shall not be effective or enforceable until the seven (7) calendar day
revocation period expires.
The parties agree that this Agreement and the Plan sets forth the
entire agreement between the parties and supersedes-any written or oral
understandings with respect to the subject matter herein. Other than as stated
herein, the parties acknowledge and agree that no promise or inducement has been
offered for the Agreement and no other promises or agreements shall be binding
unless reduced to writing and signed by the parties.
The parties agree that this Agreement is deemed made and entered into
in the State of Indiana and in all respects shall be interpreted, enforced, and
governed under the laws of the State of Indiana, unless otherwise preempted by
Federal law. Any dispute under this Agreement shall be adjudicated by a court of
competent jurisdiction in the State of Indiana.
This Agreement may not be amended, supplemented, or modified except by
a written document signed by both parties. This Agreement shall inure to the
benefit of, and may be enforced by, and shall be binding on the parties and
their assigns and successors in interest.
The failure of either party hereto in any one or more instances to
insist upon performance of any of the provisions of this Agreement or to pursue
its rights hereunder shall not be construed as a waiver of any such provisions
or the relinquishment of any such rights.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth below.
_________________________________
Signature
_________________________________
Printed Name
_________________________________
-3-
<PAGE> 4
Date
Great Lakes Chemical Corporation
By: ______________________________
Date: ____________________________
-4-
<PAGE> 1
Exhibit No. (10)(v)
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") is made and entered
into this 1st day of December , 1992, by and between GREAT LAKES CHEMICAL
CORPORATION, a Delaware corporation (the "Corporation"), and ROBERT T.
JEFFARES, now residing in West Lafayette, Indiana ("Jeffares").
RECITALS
1. Jeffares is an executive and the Chief Financial Officer of the
Corporation. In order to assure the Corporation of the continued benefit of
Jeffares' services until his ultimate retirement, the Corporation has decided to
provide certain deferred compensation benefits to Jeffares as an incentive to
his continued employment with the Corporation.
2. In recognition of the foregoing, the Board of Directors of the
Corporation has resolved that, effective January 1, 1991, Jeffares shall be
credited with a $40,000 annual compensation increase (in addition to other
compensation adjustments that may be decided upon by the Board of Directors from
time to time) for the ten (10) year period beginning January 1, 1991 and ending
December 31, 2000, and that such increase shall not be paid to Jeffares
currently, but instead the Corporation shall provide the deferred compensation
benefits set forth in this Agreement in lieu of annual $40,000 cash bonuses
during such ten (10) year period.
AGREEMENT
In consideration of the foregoing and for other good and valuable
consideration, the parties hereby agree as follows:
1. Benefits Upon Termination of Employment for Reason Other than Death.
Upon the termination of the employment of Jeffares with the Corporation for any
reason other than death
1
<PAGE> 2
(whether voluntary or involuntary, or with or without cause), the Corporation
shall pay to Jeffares, in addition to any other amounts payable by the
Corporation to Jeffares under the Corporation's other compensation and benefit
programs, annual benefits in the amount set forth below commencing in the month
of January 2001 and continuing each January thereafter until fifteen (15) annual
installments have been paid, with the last annual installment being due and
payable in the month of January 2015. The amount of the said annual benefits
shall be determined by reference to the year in which the termination of
Jeffares' employment occurs in accordance with the following schedule:
<TABLE>
<CAPTION>
Year of Termination Annual Benefit
------------------- --------------
<S> <C>
1992 $ 32,700
1993 $ 43,600
1994 $ 54,500
1995 $ 65,400
1996 $ 76,300
1997 $ 87,200
1998 $ 98,100
1999 $103,500
2000 $109,000
</TABLE>
In the event Jeffares dies after commencement of benefits hereunder but
prior to payment of all fifteen (15) annual installments, the remaining
installments shall be paid to his beneficiary as designated pursuant to Section
4 below. If Jeffares dies after termination of his employment with the
Corporation but prior to January 1 of the calendar year in which his benefits
are to commence, then his said designated beneficiary shall receive the death
benefits provided for in Section 3 below in lieu of the benefits described in
this Section 1.
If Jeffares terminates employment with the Corporation as a result of
"Disability" (as defined below), then subject to the last paragraph of Section 2
below, Jeffares' termination shall,
2
<PAGE> 3
for purposes of this Agreement, be deemed to occur on the date on which Jeffares
ceases to perform full-time services for the Corporation as a result of such
Disability, regardless of when his termination otherwise may be deemed to occur
for purposes of the Corporation's other compensation and benefit programs.
As used in this Agreement, "Disability" shall mean the inability of
Jeffares to perform the full-time duties of his position with the Corporation as
a result of injury or illness suffered by him for which he is entitled to
receive (presently or after a designated waiting period) short term or long term
disability benefits under any disability program sponsored by the Corporation.
The "Disability" of Jeffares shall, for purposes of this Agreement, be deemed to
end at such time as Jeffares is no longer entitled to receive short term or long
term disability benefits under any disability program sponsored by the
Corporation.
2. Acceleration Election. Notwithstanding the provisions of Section 1
above, Jeffares shall be entitled to elect (by written election filed in
accordance with this Section 2) to reduce his annual benefits in accordance with
the schedule set forth below and to accelerate the payment of such reduced
annual benefits so that such benefits shall commence in the month of January of
the year following the year in which Jeffares terminates employment with the
Corporation and shall continue each January thereafter until fifteen (15) annual
installments have been paid; provided, however, that if such termination of
employment results from the Disability of Jeffares, then the fifteen (15) annual
installments payable hereunder pursuant to Jeffares' said acceleration election
shall not commence until the earlier of (a) January 2001, or (b) January of the
year following the year in which such Disability ends.
In the event Jeffares has filed a valid election to accelerate the
payment of his annual benefits pursuant to this Section 2, then the amount of
such annual benefits shall be determined
3
<PAGE> 4
by multiplying the applicable annual benefit for the year of Jeffares'
termination under the schedule set forth in Section 1 above times the following
reduction factor based upon the year in which such benefits are to commence:
<TABLE>
<CAPTION>
Year of Benefit Commencement Reduction Factor
- - ---------------------------- ----------------
<S> <C>
1993 .6768
1994 .7107
1995 .7462
1996 .7835
1997 .8227
1998 .8638
1999 .9070
2000 .9524
2001 1.0000
</TABLE>
For example, if Jeffares terminates employment with the Corporation in
1995 for a reason other than Disability and he has filed a valid acceleration
election with the Corporation, then his annual benefit would be $51,241 per year
($65,400 times .7835) commencing in January 1996 and continuing each January
thereafter until fifteen (15) annual installments have been paid. If, instead,
Jeffares' termination in 1995 results from Disability and his Disability ends in
1998, then his annual benefits would be $59,318 per year ($65,400 times .9070)
commencing in January 1999.
To constitute a valid acceleration election under this Section 2, such
election must be made in writing, must specifically refer to and affirmatively
elect the right of acceleration provided for in this Section 2, and must be
filed with the Corporation's Director of Human Resources either (a) upon the
execution of this Agreement, or (b) at least one (1) year prior to the date on
which Jeffares' termination of employment occurs. Any election not meeting these
requirements shall be invalid and, in such event, the annual benefits payable to
Jeffares hereunder shall be paid as if no election had been made. Jeffares may
revoke any acceleration
4
<PAGE> 5
election filed by him hereunder at any time prior to one (1) year preceding his
termination of employment (but not thereafter), by filing a notice of revocation
with the Director of Human Resources which specifically refers to and
affirmatively revokes the prior election.
Notwithstanding anything contained in this Section 2 to the contrary,
if Jeffares terminates employment as a result of Disability and returns to
active, full-time employment with the Corporation on or before the last day of
the calendar year in which such Disability ends (but prior to January 2001),
then (a) any acceleration election theretofore filed by Jeffares shall not be
given effect until Jeffares suffers a subsequent termination of employment, and
(b) for purposes of determining the amount of the benefit ultimately payable to
Jeffares hereunder, if Jeffares shall remain in active, full-time employment of
the Corporation for a period of one (1) year following his return to employment,
then it shall be deemed as though Jeffares' employment with the Corporation had
continued uninterrupted during the period of his Disability and he shall be
entitled to receive full benefits hereunder (when such benefits become payable)
as though his period of Disability had not occurred. If Jeffares returns to
full-time employment with the Corporation on or before the last day of the
calendar year in which such Disability ends but does not complete one (1) year
of fulltime employment following his return, then Jeffares' benefits shall be
calculated by reference to the year in which he first terminated employment as a
result of Disability.
3. Payment of Benefits upon Death. If Jeffares shall die (either during
his employment or after his employment has terminated) prior to January 1 of the
calendar year in which the annual benefits payable under Section 1 or Section 2
above are to commence, then in lieu of the benefits otherwise payable under
Sections 1 or 2, the Corporation shall pay annual benefits to Jeffares'
beneficiary in the amount of $109,000 per year (without regard to the number of
years of
5
<PAGE> 6
Jeffares' employment with the Corporation as of the time of his death),
commencing in the calendar month following Jeffares' death and continuing in the
same calendar month of each year thereafter until a total of fifteen (15) annual
installments have been paid. Notwithstanding the foregoing, however, if
Jeffares' death shall occur prior to January 1, 1994 as a result of suicide,
then in lieu of the annual benefits described in the preceding sentence and the
benefits otherwise payable under Sections 1 or 2 above, the Corporation shall
pay a single lump sum benefit to Jeffares' beneficiary in the amount of (a)
$92,000 if Jeffares' death occurs prior to January 1, 1993, or (b) $145,000 if
Jeffares' death occurs after December 31, 1992 but prior to January 1, 1994.
4. Designation of Beneficiary. Jeffares may, from time to time,
designate one or more persons, trusts, or entities (primarily, contingently, or
successively) to whom the Corporation shall pay the annual benefits hereunder in
the event of his death. Such designation shall be in writing, shall specifically
refer to this Agreement, and shall be effective upon the filing thereof with the
Director of Human Resources of the Corporation. If Jeffares fails to designate a
beneficiary in accordance with this Section or if the beneficiary named by
Jeffares predeceases him (and no contingent beneficiary has been designated),
then the Corporation shall pay the annual benefits hereunder to:
(a) Jeffares' spouse; or if he has no spouse who shall survive
him, then
(b) Jeffares' estate.
Benefit Claims Procedures. Any claim by Jeffares or his
beneficiary (the "Claimant") for the payment of annual benefits under this
Agreement shall be filed in writing with, and shall be reviewed and decided by,
the Corporation's Director of Human Resources (the "Claims Manager"). If for any
reason a claim for annual benefits is denied by the Claims
6
<PAGE> 7
Manager, then the Claims Manager shall deliver to the Claimant, within ninety
(90) days of the date the claim is filed with the Claims Manager, a written
explanation of such denial, pertinent references to the provisions of this
Agreement on which the denial is based, any other relevant data or materials,
and information regarding the procedures to be followed by the Claimant in
obtaining a review of his claim, all in a manner calculated to be understood by
the Claimant.
Upon receipt of the Claim Manager's denial of the claim, the Claimant
shall have sixty (60) days following such receipt to file a written appeal with
the Claims Manager requesting a review of the denial. Such appeal may include
pertinent documents and written issues, arguments, and other comments. Within
sixty (60) days following receipt of such appeal, the Claims Manager shall
review and decide upon the appeal and shall issue a written decision on the
appeal which shall include specific reasons for the decision and pertinent
provisions of this Agreement on which the decision is based. Such decision shall
be written in a manner calculated to be understood by the Claimant, and a copy
thereof shall be furnished to the Claimant. If the Claimant does not receive a
copy of the said decision within the said sixty (60) day period, then the appeal
shall be deemed denied upon review.
6. Arbitration of Denied Claims. Any claim or controversy arising out
of or relating to the Claim Manager's final review of an appeal pursuant to
Section 5 above shall be settled by binding arbitration in West Lafayette,
Indiana in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. Any decision of the arbitrator shall be final and
conclusive on the parties; there shall be no appeal therefrom other than for
fraud or misconduct; and judgment upon such decision may be entered in any court
having jurisdiction over the matter, or application may be made to any such
court for confirmation of such decision, for a judicial acceptance thereof, for
an order of enforcement, or for any other legal remedies which
7
<PAGE> 8
may be necessary to effectuate such decision. All attorneys' fees incurred by
the parties in connection with such arbitration shall be awarded in such manner
as the arbitrator shall deem just and appropriate under the circumstances. Any
claim or controversy submitted to arbitration hereunder shall be subject to all
applicable statutes of limitation that would apply if such claim or controversy
were brought as a suit in a United States District Court under the Employee
Retirement Income Security Act of 1974, as amended.
7. Source of Benefits. The annual benefits payable to Jeffares (or his
beneficiary) under this Agreement shall not be funded in any respect, but
instead shall be paid solely from the Corporation's general assets. Neither
Jeffares nor his beneficiary shall have any interest whatever in any specific
assets of the Corporation under the terms of this Agreement. This Agreement
evidences the Corporation's general unsecured promise to pay the benefits
provided for herein, and shall not be considered to create an escrow account,
trust fund, or other funding agreement of any kind or a fiduciary relationship
between the Corporation and Jeffares.
8. Facility of Payment. If any benefit under this Agreement is payable
to a minor or other person under legal disability, then the Corporation shall
have the right to pay such benefit to the legal guardian of that person or to
such other person or organization as a court of competent jurisdiction may
direct. Acceptance of payment of any benefit by any legal guardian or other
court appointed person or organization under this Section shall be a complete
discharge of any liability the Corporation may have with respect to such
benefit.
9. Effect on Other Benefits. The annual benefits payable under this
Agreement shall constitute deferred compensation and shall not be deemed salary
or other compensation to Jeffares for the purpose of computing benefits to which
he may be entitled under any qualified pension or profit sharing plan or other
arrangement maintained by the Corporation for the benefit
8
<PAGE> 9
of its employees.
10. Contract of Employment. Nothing contained in this Agreement shall
be construed as conferring upon Jeffares the right to continue in the
Corporation's employ as an executive or in any other capacity. This Agreement
shall not constitute an employment contract for a definite term or in any way
act as a restriction on the Corporation's right to discharge Jeffares at any
time or on Jeffares' right to terminate his employment with the Corporation at
any time.
11. Nonalienation of Benefits. Neither Jeffares nor his beneficiary
shall have any right whatever (other than by will or the laws of descent and
distribution) to anticipate, pledge, alienate, assign, or otherwise transfer any
rights or benefits under this Agreement, and any effort to do so shall be null
and void. The benefits payable to Jeffares or his beneficiary under this
Agreement shall be exempt from the claims of his (or her) creditors or other
claimants and from all orders, decrees, levies, and executions and any other
legal process to the fullest extent permitted by law.
12. Merger. Consolidation. or Acquisition. In the event of a merger or
consolidation by the Corporation with another corporation, or the acquisition of
all or substantially all of the assets or outstanding capital stock of the
Corporation by another entity, then and in such event the obligations and
responsibilities of the Corporation under this Agreement shall be assumed (and
the Corporation shall cause them to be assumed) by any such successor or
acquiring entity, and all of the rights, privileges, and benefits of Jeffares
under this Agreement shall continue in full force and effect.
13. Entire Agreement: Amendment. This Agreement contains all of the
terms and provisions of the parties' rights and obligations relating to the
subject of this Agreement and constitutes the entire agreement of the parties
regarding the subject matter hereof, and any
9
<PAGE> 10
alleged terms or provisions other than those contained herein shall be of no
effect. This Agreement may not be amended or modified except by a written
document signed by all parties to this Agreement.
14. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Indiana to the extent those laws are
not preempted by the laws of the United States of America.
15. Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors, assigns, personal
representatives, heirs, and any beneficiary of Jeffares.
16. Section Heading. The section headings of this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
the terms and provisions of this Agreement.
IN WITNESS WHEREOF, Jeffares and the Corporation have duly executed
this Agreement on the day and year first above written.
GREAT LAKES CHEMICAL CORPORATION
By: ____________________________________
Title: President and CEO
ATTEST:
_______________________________
Secretary
[Corporate Seal]
_________________________________ (Seal)
Robert T. Jeffares
10
<PAGE> 1
Exhibit No. (10)(vi)
December 19, 1996
GREAT LAKES CHEMICAL CORPORATION
NON-EMPLOYEE DIRECTORS'
DEFERRED AND LONG TERM COMPENSATION PLAN
1. PURPOSE
The purpose of the Non-Employee Directors' Deferred and Long Term
Compensation Plan (the "Plan") is to provide each Non-Employee Director with
part of his or her compensation in shares of stock in Great Lakes Chemical
Corporation (the "Stock") and to provide each Non-Employee Director with the
opportunity to elect to defer all or part of his or her cash compensation ("Cash
Compensation"). The Plan is intended as a means of maximizing the effectiveness
and flexibility of compensation arrangements, and as an aid in attracting and
retaining Non-Employee Directors of outstanding abilities for the long-term
growth and profitability of the Great Lakes Chemical Corporation (the
"Company"). A "Non-Employee Director" is a member of the Company's board of
directors who is not an "employee," as determined by the Compensation and
Incentive Committee of the Company's Board of Directors (the "Committee").
2. EFFECTIVE DATE
The Plan shall be effective with respect to services performed after
December 31, 1 996 (the "Plan Effective Date").
3. PLAN ADMINISTRATION
The Plan will be administered by the Committee. Full power to
implement, interpret and construe the provisions of the Plan shall, except as
otherwise provided in the Plan, be vested in the Committee. The Committee's
interpretations and construction hereof, and actions hereunder, including any
valuation of accounts, or determination of amounts or recipients of any payment
hereunder, shall be binding and conclusive on all persons for all purposes. No
Committee member may participate in any decisions with respect to that member's
benefits under the Plan unless such decision applies to all Non-Employee
Directors. No member of the Committee shall be liable to any person for any
action taken or omitted in connection with the interpretation and administration
of the Plan unless attributable to his own willful misconduct or lack of good
faith. The expense of administering the Plan shall be borne by the Company and
shall not be charged against amounts payable hereunder.
4. ELIGIBILITY
Each Non-Employee Director shall be eligible to participate in the
Plan. Each Non Employee Director on the date that this Plan is adopted shall be
eligible to participate as of
1
<PAGE> 2
January 1, 1997. Each Non-Employee Director who first serves after January 1,
1997 shall be eligible to participate in the Plan from the date upon which he or
she first serves as a Non-Employee Director. Participation in the Plan by each
Non-Employee Director shall continue until the date of the last payment made
pursuant to Section 8 hereof.
5. ELECTION TO DEFER CASH COMPENSATION
(a) The Election in General. Each Non-Employee Director shall be
entitled to make an irrevocable annual election (a "Deferral Election") to defer
receipt of some or all of his or her Cash Compensation ("Deferred
Compensation"). Deferred Compensation shall be credited to the "Cash Account"
designated hereinbelow in such amounts as shall have been specified in the
Deferral Election. The amount of Deferred Compensation hereunder shall be
credited as of the date such Cash Compensation would otherwise have been paid to
the Non-Employee Director. As used in the Plan, "Cash Compensation" shall mean
the fees (except telephone conference fees) payable to each Non-Employee
Director for his or her services to the Company as a director.
(b) Manner of Election. All Deferral Elections must be made before the
calendar year for which the Cash Compensation is payable; provided, however,
that (i) for the 1997 calendar year, Non-Employee Directors eligible on the Plan
Effective Date may make the applicable Deferral Election within thirty (30)
calendar days after the Plan Effective Date, and (ii) in the first year in which
a Non-Employee Director becomes eligible to participate in the Plan, the newly
eligible Non Employee Director may make the applicable Deferral Election for
services to be performed subsequent to such election within thirty (30) calendar
days after the date on which such Non Employee Director becomes eligible. Any
Deferral Elections made after the times specified in this Section 5(b) shall be
effective for the following calendar year. Each Deferral Election shall remain
effective for all subsequent calendar years unless and until revoked. Subject to
the foregoing, Deferral Elections shall be made on such form(s) as the Committee
may prescribe.
(c) Cash Account Deferred Compensation allocated to the "Cash Account"
shall be converted into credits equal to the cash value of such Deferred
Compensation. The amount of such credits shall earn interest at a rate equal to
90% of the prime rate of Chase Manhattan Bank as of the last business day of
each calendar quarter, or at such other rate as may be adopted from time to time
by the Committee. A change in the rate credited under this Plan shall not
require an amendment to this Plan.
(d) Vesting of Deferred Compensation Account. A Non-Employee Director
shall be one hundred percent (100%) vested in his or her Cash Account.
6. LONG TERM COMPENSATION
(a) Grants. The Committee may grant long term compensation from time to
time to Non Employee Directors.
2
<PAGE> 3
(b) Stock Units. Long term compensation shall be expressed in the form
of "Stock Units." Each Stock Unit shall represent the right of a Non-Employee
Director to receive payment from the Company, subject to the vesting schedule
and occurrence of the payment events specified hereinbelow. Each Stock Unit
shall be payable in cash in an amount equal to (i) the Market Value of one share
of Stock on the date of such payment, multiplied by (ii) the number of Stock
Units awarded to such Non-Employee Director as long term compensation.
(c) Long Term Compensation Account. Stock Units granted pursuant to the
Plan shall be recorded in a "Long Term Compensation Account." The Long Term
Compensation Account shall be credited with the equivalents of cash dividends,
Stock dividends, Stock splits and similar distributions.
(d) Vesting of Long Term Compensation. Unless expressly provided by the
Committee in respect of a specific grant of Stock Units to a Non-Employee
Director, Stock Units granted to each Non-Employee Director shall vest in
accordance with the following schedule (subject to the continuing service of the
Non-Employee Director, and subject to Section 8(g)):
Vesting Schedule Years of Service as a Non-Employee Director
- - ---------------- -------------------------------------------
0% Less than 1
20% 1
40% 2
60% 3
80% 4
100% 5 or more
7. MARKET VALUE OF THE STOCK
The Market Value of the Stock for the purposes of the Plan shall be the
Stock's closing price reported on the New York Stock Exchange Composite Tape on
the trading day prior to the date as of which such amount would otherwise have
been payable as cash.
8. PAYMENTS
(a) In General. Except as provided in this Section 8, no withdrawal or
payment shall be made from any Non-Employee Director's Cash Account or Long Term
Compensation Account (collectively the "Plan Accounts" and individually a "Plan
Account"). Payments of Stock Units shall be payable from the Long Term
Compensation Account only to the extent that such Stock Units have vested prior
to the Payment Date in respect of the Long Term Compensation Account.
(b) Payment Options. The value of each Plan Account shall be payable
under two alternative options, at the election of the Non-Employee Director as
follows:
Option one: in cash as a single sum payment as soon as practicable following the
Payment Date; and
3
<PAGE> 4
Option two: in annual installments over ten years, commencing as soon as
practicable following the Payment Date.
(c) Election of Payment Options. The elections made by each
Non-Employee Director in respect of payments from each of his or her Plan
Accounts (individually a "Payment Election" and collectively "Payment
Elections") shall be made separately as to each Plan Account. Payment Elections
shall apply to all amounts available in each account at the time that the
payment is made.
All Payment Elections shall be effective on the beginning of the calendar year
commencing at least one year after the election is made, provided, however, that
(i) for the 1997 calendar year, Non Employee Directors eligible on the Plan
Effective Date may make the applicable Payment Election within thirty (30)
calendar days after the Plan Effective Date, and (ii) in the first year in which
a Non-Employee Director becomes eligible to participate in the Plan, the newly
eligible Non Employee Director may make the applicable Payment Election within
thirty (30) calendar days after the date on which such Non-Employee Director
becomes eligible. Any Payment Election made after the times specified in this
Section 8(c) shall be effective beginning the calendar year commencing at least
one year after the Payment Election is made. Each Payment Election shall remain
effective unless and until revoked or amended. Subject to the foregoing, Payment
Elections shall be made on such form(s) as the Committee may prescribe. In the
absence of an Effective Payment Election, the Non-Employee Director shall be
deemed to have elected Option One pursuant in Section 8(b).
(d) The Payment Date. The "Payment Date" for payments from the Cash
Account shall commence on the date on which the Non-Employee Director retires or
resigns from service. The "Payment Date" for payments from the Long Term
Compensation Account shall be the later of (i) the retirement of the
Non-Employee Director, or (ii) the date upon which he or she attains age 70, on
which date the final value of the stock units shall be established. For the
purpose of making such payment(s), each Plan Account shall be valued as of its
Payment Date.
The amount of each installment elected under Option two in Section 8(b) shall be
equal to the quotient obtained by dividing the Non-Employee Director's account
balances as of the date of such installment payment by the number of installment
payments remaining to be made to such Non Employee Director at the time of
calculation. The remaining balance of the Cash Account and the Long Term
Compensation Account shall earn interest at the rate specified in Section 5(c)
until paid.
Acceleration for Hardship. In the event of an Unforeseeable Emergency,
a NonEmployee Director may petition the Committee to accelerate payments of
balances credited to his or her Cash Account (but not the Long Term Compensation
Account). Pursuant to such a petition, the Committee in its sole discretion may
distribute to a Non-Employee Director all or part of such balances in a lump sum
cash payment. Distributions because of a Unforeseeable Emergency shall be
determined on a case by case basis and will be permitted only to the extent
reasonably needed to satisfy the emergency need. For the purpose of any such
accelerated payment, the value of the Cash Account shall be determined in
accordance with Section 5(c) on the date of each such payment. Payments may not
be made to the extent that such hardship is or may be relieved: (i)
4
<PAGE> 5
through reimbursement or compensation by insurance or otherwise, (ii) by
liquidation of the Non-Employee Director's assets (to the extent the liquidation
of such assets would not itself cause a severe financial hardship), or (iii) by
cessation of participation in the Plan.
(f) Disability of Non-Employee Director. In the event of Disability of
a Non-Employee Director before attainment of age seventy-two and prior to
retirement or resignation, a Non-Employee Director (or his or her legal
representative) may petition the Committee to receive a benefit equal to the
remaining balance of his or her Cash Account (but not the Long Term Compensation
Account). Such benefit shall be payable pursuant to elections made by the Non-
Employee Director in the manner provided in Section 8(b). Such payments shall be
made until the earliest of the following events: (i) there is no longer any
balance m the designated account(s), (ii) the Non-Employee Director resumes
service as a Non-Employee Director, or (iii) the Non-Employee Director dies. For
the purpose of any such payments, the value of the Cash Account shall be
determined in accordance with Section 5(c) on the date of each such payment. For
purposes of this Section 8(f), "Disability" means a condition, as determined by
the Committee, that totally and continuously prevents the Non-Employee Director,
for at least six consecutive months, from serving as a Non-Employee Director.
(g) Death of Non-Employee Director. In the event of the death of a
Non-Employee Director either during or after his or her period of service as a
Non-Employee Director, the entire balance of his or her Cash Account (but not
the Long Term Compensation Account) shall be paid in cash in a lump sum to the
Non-Employee Director's designated beneficiaries (or, in absence of such
designation, to his or her heirs in accordance with his or her last will and
testament or, in the absence of a will, by the laws of intestate succession).
For the purpose of any such payments, the value of the Cash Account shall be
determined in accordance with Section 5(c) on the date of such payment. In the
event of the death of a former Non-Employee Director prior to the date upon
which he or she attains age 70, such Non-Employee Director's Long Term
Compensation Account shall be forfeited. In the event of the death of an active
Non-Employee Director prior to the date upon which he or she retires, such
Non-Employee Director's Long Term Compensation Account shall be forfeited. In
the event of the death of a Non-Employee Director after his or her period of
service and after his or her attaining age 70, the remaining vested portion of
his or her Long Term Compensation Account shall be paid in cash in a lump sum to
the Non-Employee Director's designated beneficiaries (or, in absence of such
designation, to his or her heirs in accordance with his or her last will and
testament or, in the absence of a will, by the laws of intestate succession).
9. EFFECT OF CHANGE IN CONTROL
If a single individual or legal entity acquires or offers to acquire
more than fifty percent of the outstanding Stock, or if all or substantially all
of the assets of the Company are transferred (or the Company agrees to transfer
all or substantially all of its assets) to another entity by way of sale,
merger, consolidation or other means (a "change in control"), then the entire
balance of a NonEmployee Director's Plan Accounts shall be paid in a lump sum
cash distribution to such NonEmployee Director within 30 days after the change
in control. For the purpose of any such payment, the value of the Plan Accounts
shall determined in accordance with Sections 5(c) and
5
<PAGE> 6
6(c) and (d) on the date of the change in control.
10. UNSECURED OBLIGATIONS
(a) The credits in Plan Accounts are bookkeeping entries only, and do
not represent actual shares of Stock or cash. The Company shall furnish each
Non-Employee Director with quarterly statements of activity and balances in his
or her Plan Accounts.
(b) The obligation of the Company to make payments of amounts credited
to the NonEmployee Director's Plan Accounts shall be a general obligation of the
Company, and such payments shall be made from general assets and property of the
Company. The Non-Employee Director's relationship to the Company under the Plan
shall be only that of a general unsecured creditor and neither this Plan nor any
agreement entered into hereunder or action taken pursuant hereto shall create or
be construed to create a trust or fiduciary relationship of any kind.
11. INTERESTS NOT TRANSFERABLE
Benefits payable under this Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution, or levy of any kind, either voluntary or
involuntary, including any such liability which is for alimony or other payments
for the support of a spouse or former spouse, or for any other relative of a
Non-Employee Director prior to actually being received by the person entitled to
the benefit under the terms of the Plan, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose
of any right to benefits payable hereunder shall be void. The Company shall not
in any manner be liable for, or subject to, the debts, contracts, liabilities,
engagements, or torts of any person entitled to benefits hereunder. If any
person shall attempt to, or shall alienate, sell, transfer, assign, pledge, or
otherwise encumber his benefits under this Plan, or if by any reason of his
bankruptcy or other event happening at any time, such benefit would devolve upon
any other person or would not be enjoyed by the person entitled hereto under the
Plan, the Committee, in its sole and absolute discretion, may terminate the
interest in any such benefits of the person entitled thereof under the Plan and
hold or apply them to or for the benefit of such person entitled thereto under
the Plan in such manner as the Committee may deem proper.
12. DESIGNATION OF BENEFICIARIES
Non-Employee Directors shall have the right to designate in writing, in
accordance with such rules and procedures as the Committee may prescribe, the
beneficiary or beneficiaries who are to receive the payments from his or her
Cash Account, and the vested and non-forfeitable portion of his or her Long Term
Compensation Account, if any, in the event of the Non-Employee Director's death.
13. INCAPACITY
If the Committee shall find that any person to whom any payment is
payable under the
6
<PAGE> 7
Plan is unable to care for his affairs because of illness or accident, or is a
minor, any payment due (unless a prior claim therefor shall have been made by a
duly appointed guardian, committee or other legal representative) may be paid to
the spouse, a child, a parent, or a brother or sister, or to any person deemed
by the Committee to have incurred expense for such person otherwise entitled to
payment, in such a manner and proportions as the Committee may determine. Any
such payment shall be a complete discharge of the liabilities of the Company
under the Plan.
14. CONTINUED DIRECTORSHIP
Nothing contained herein shall be construed as conferring upon the
Non-Employee Director the right to continue to serve as a Non-Employee Director.
15. CONTROLLING LAW
The Plan shall be construed in accordance with and governed by the law of the
State of Indiana.
16. AMENDMENT AND TERMINATION
(a) Amendment. The Plan may be amended in whole or in part by the
Committee at any time. Notice of any such amendment shall be given in writing by
the Committee to each Non-Employee Director and each Beneficiary of a deceased
Non-Employee Director. No amendment shall decrease the value of a Non-Employee
Director's Plan Accounts, the benefits to which a NonEmployee Director may be
entitled under Section 8 or other benefit entitlements existing prior to any
such amendment.
(b) Board of Director's Right to Terminate. The Board of Directors
reserves the sole right to terminate the Plan and/or any grant or other
agreement pertaining to a Non-Employee Director at any time after the Plan
Effective Date. In the event of any such termination, the Non-Employee Director
shall be entitled to a payment equal to the balance as of the date of
termination of his Plan Accounts determined under Sections 5 and 6 and payable
in accordance with Section 8.
* * *
7
<PAGE> 1
Exhibit No. (10)(vii)
SPLIT DOLLAR LIFE INSURANCE
THIS AGREEMENT, made and entered into this 1st day of January, 1996, by and
among Great Lakes Chemical Corporation (hereinafter referred to as the
"Corporation"), a Corporation organized and existing under the laws of Delaware,
and ____________________ (hereinafter referred to as the Employee).
WHEREAS, the Employee has performed his duties in an efficient and
capable manner; and/or
WHEREAS, the Corporation is desirous of retaining the services of the
Employee; and
WHEREAS, the Corporation is desirous of assisting the Employee in
paying for life insurance on his life; and
WHEREAS, the Corporation has determined that this assistance can best
be provided under a "split-dollar" arrangement; and
WHEREAS, the Employee has applied for, and is the owner of Insurance
Policy No. 8887370 (the "Policy") issued by New England Mutual Life Insurance
Company ("The New England") in the face amount of $590,000 which is described in
Exhibit A attached hereto and by reference made a part hereof; and
WHEREAS, the Employee and the Corporation agree to make said insurance
policy subject to this split-dollar agreement; and
WHEREAS, the Employee has assigned the Policy to the Corporation as
collateral for amounts to be advanced by the Corporation under this Agreement by
an instrument of assignment, dated January 1, 1996, (the "Assignment"); and
WHEREAS, it is now understood and agreed that this split-dollar
Agreement is to be effective as of the date on which the Policy was assigned to
the Corporation;
NOW, THEREFORE, for value received and in consideration of the mutual
covenants contained herein, the parties agree as follows:
ARTICLE I - DEFINITIONS
For purposes of this Agreement, the following terms will have the meanings set
forth below:
1.) "CASH SURRENDER VALUE OF THE POLICY" will mean the Cash Value of
the Policy; plus the cash value of any paid-up dividends; and less any Policy
Loan Balance.
2.) "CASH VALUE OF THE POLICY" will mean the cash value as illustrated
in the table of values shown in the Policy.
3.) "CORPORATION'S INTEREST IN THE POLICY" will be as defined in
Article VII.
4.) "CURRENT LOAN VALUE OF THE POLICY" will mean the Loan Value of the
Policy reduced by any outstanding Policy Loan Balance.
5.) "LOAN VALUE OF THE POLICY" will mean the amount which with loan
interest will equal the Cash Value of the Policy and of any paid-up additions on
the next loan interest due date or on the next premium due date, whichever is
the smaller amount.
6.) "POLICY LOAN BALANCE" at any time will mean policy loans
outstanding plus interest
<PAGE> 2
accrued to date.
ARTICLE II - OWNERSHIP OF POLICY
1.) The Employee has purchased the Policy from The New England in the total Face
amount of $590,000. The parties hereto agree that they will take all necessary
action to cause the New England to conform to the provisions of this Agreement.
The parties hereto agree that the Policy shall be subject to the terms and
conditions of this Agreement and of the collateral assignment filed with the
Insurer relating to the Policy.
2.) The Employee shall be the sole and absolute owner of the policy, and may
exercise all ownership rights granted to the owner thereof by the terms of the
Policy, except as may otherwise be provided herein.
ARTICLE III - ALLOCATION OF PREMIUMS
The Corporation will pay all premiums on the Policy when due, or within the
grace period provided under the policy. The Corporation shall annually furnish
to the Employee a statement of the amount of income reportable by the Employee
for federal and state income tax purposes, as a result of the insurance
protection provided the Employee's beneficiary.
ARTICLE IV- WAIVER OF PREMIUMS RIDER
Upon written request by the Corporation, the Employee will add to the Policy a
rider providing for the waiver of premiums in the event of disability. Any
additional premium attributable to such rider will be payable by the
Corporation.
ARTICLE V - OTHER RIDERS AND SUPPLEMENTAL AGREEMENTS
Should the Corporation deem it desirable, the Employee will add to the Policy
one or more of such other riders or supplemental agreements which may be
available from The New England. Any additional premium attributable to such
rider or supplemental agreement will be payable by the Corporation. Any
additional death benefits provided by such rider or supplemental agreement will
be paid to the Corporation.
ARTICLE VI - APPLICATION OF POLICY DIVIDENDS
All dividends attributable to the Policy will be applied to provide paid-up
additional insurance as set forth in the Policy.
<PAGE> 3
ARTICLE VII - RIGHTS IN THE POLICY
The Employee may exercise all rights, options and privileges of ownership in the
Policy except those granted to the Corporation in the Assignment. The
Corporation will have those rights in the Policy given to it in the Assignment
except as hereinafter modified. The Corporation may not surrender the Policy for
cancellation except upon expiration of the thirty (30) day period described in
Article X. The Corporation will not without the written consent of the Employee
assign it's rights in the Policy, other than for purposes of obtaining a loan
against the Policy, to anyone other than the Employee. The Corporation will not
take any action in dealing with The New England that would impair any right or
interest of the Employee in the Policy. The Corporation will have the right to
borrow from the New England, and to secure that loan by the Policy, an amount
which, together with the unpaid interest accrued thereon, will at no time exceed
the lesser of (a) the Corporation's Interest in the Policy, and (b) the Loan
Value of the Policy. The Corporation's Interest in the Policy will be the face
value of the Policy, less any death benefits payable pursuant to Article VIII.
"Corporation's Interest in the Policy N will mean, at any time at which the
value of such interest is to be determined under this Agreement prior to the
Employee's death, the total of premiums theretofore paid on the Policy by the
Corporation accumulated at four percent (4%) per annum compound interest
(including premiums paid by loans charged automatically against the Policy),
reduced by the Policy Loan Balance, with respect to any loans made or charged
automatically against the Policy by the Corporation. In the event that the
Corporation has paid additional premiums attributable to a rider providing for
the waiver of premiums in the event of the Employee's disability, Premiums" as
used in the preceding sentence will not include any premiums waived pursuant to
the terms of such rider while this Agreement is in force.
ARTICLE VIII - RIGHTS TO THE PROCEEDS AT DEATH
In the event of the Employee's death while this Agreement is in force, the
beneficiary designated by the Employee will receive two times the Employee's
annual base compensation payable as of the date of the Employee's death. On
January 1 of the year following the Employee's retirement, the amount payable to
the Employee's beneficiary will be reduced to one times the amount of the
Employee's base annual compensation. The amount payable to the Employee's
beneficiary will be further reduced by 10% each January 1 thereafter for five
years.
ARTICLE IX- TERMINATION OF AGREEMENT
This Agreement may be terminated at any time while the insured is living by
written notice thereof by either the Corporation or the Employee to the other;
and, in any event, this Agreement will terminate upon the earlier of the
termination of the Employee's employment for reasons other than retirement and
the payment of all benefits under the Policy in accordance with this Agreement
following the Employee's death.
<PAGE> 4
ARTICLE X - EMPLOYEE RIGHTS UPON TERMINATION
The Employee will, for thirty (30) days immediately following the date on which
termination occurs, have the right to obtain a release of the Assignment by
paying to the Corporation an amount equal to the Corporation's Interest in the
Policy. Upon such payment the Corporation will release it's Interest in the
Policy to the Employee.
Alternatively, at the election of the Employee prior to the expiration of said
(30) day period and upon the payment by him of the excess, if any, of the
Corporation's Interest in the Policy over the Current Loan Value of the Policy,
the Corporation will make a collateral policy loan from the New England in the
amount of the Current Loan Value of the Policy, or in the amount of the
Corporation's Interest in the Policy, if less, and release it's Interest in the
Policy to the Employee. Upon release by the Corporation of all it's Interest in
the Policy, the Employee will thereafter own the Policy free from the Assignment
and from this Agreement, but subject to any Policy Loan Balance.
If the Employee fails to make either the payment provided for in the first
paragraph or the election (and payment, if any) provided for in the second
paragraph of this Article, the Employee agrees to transfer all of his right,
title and interest in the Policy to the Corporation, by executing such documents
as are necessary to transfer such right, title and interest to the Corporation
as of the date of termination. The Corporation will thereafter be able to deal
with the policy in any way that it may seem fit.
ARTICLE XI - STATUS OF AGREEMENT VS. COLLATERAL ASSIGNMENT
As between the Employee and the Corporation, this Agreement will take precedence
over any provisions of the Assignment. The Corporation agrees not to exercise
any rights possessed by it under the Assignment except in conformity with this
Agreement.
ARTICLE XII - SATISFACTION OF CLAIM
The Employee's rights and interest, and rights and interest of any persons
taking under or through him, will be completely satisfied upon compliance by the
Corporation with the provisions of this Agreement.
ARTICLE XIII - AMENDMENT AND ASSIGNMENT
This Agreement may be altered, amended or modified, including the addition of
any extra policy provisions, by a written instrument signed by the Corporation
and the Employee. Either party may, subject to the limitations of Article VII,
assign it's interest and obligations under this Agreement, provided, however,
that any assignment will be subject to the terms of this Agreement.
<PAGE> 5
ARTICLE XIV - POSSESSION OF POLICY
The Corporation will keep possession of the Policy, and will provide an exact
duplicate of the Policy to the Employee.
ARTICLE XV - ADMINISTRATION
1.) The Corporation is hereby designated as the named fiduciary under
this Agreement. The named fiduciary shall have authority to control and manage
the operation and administration of this Agreement, and it shall be responsible
for establishing and carrying out a funding policy consistent with the
objectives of this Agreement.
2.) The Corporation shall have sole and absolute discretion to
interpret the provisions of this Agreement (including, without limitation, by
supplying omissions from, correcting deficiencies in, or resolving
inconsistencies or ambiguities in, the language of this Agreement), to determine
the rights and status under this Agreement of the Employee, his beneficiary and
other persons, to decide disputes arising under this Agreement, and to make any
determinations and findings with respect to the benefits payable thereunder and
the persons entitled thereto as may be required for the purposes of this
Agreement. In furtherance of, but without limiting, the foregoing, the
Corporation is hereby granted the following specific authorities, which it shall
discharge in its sole and absolute discretion in accordance with the terms of
this Agreement (as interpreted, to the extent necessary, by the Corporation):
(a) To resolve all questions arising under the provisions of
this Agreement as to any individual's entitlement to become a
Participant;
(b) To determine the amount of benefits, if any, payable to
any person under this Agreement; and
(c) To conduct the review procedure specified in Section 4 of
this Article.
All decisions of the Corporation as to the facts of any case, as to the
interpretation of any provision of this Agreement or its application to any
case, and as to any other interpretive matter or other determination or
questions under this Agreement shall be final and binding on all persons
affected thereby, subject to the provisions of Section 3 of this Article.
3.) The Employee, his beneficiary or any other individual (hereinafter
referred to as the "Claimant") who believes that he is entitled to receive a
benefit under this Agreement that he has not received may file a written claim
with the Corporation (on a form furnished by the Corporation) specifying the
basis for his claim and the facts upon which he relies in making such claim.
Such claim must be signed by the Claimant or his authorized representative and
shall be deemed filed when delivered to the Corporation.
(a) Unless such claim is allowed in full, within 90 days after
such claim is filed (plus an additional period of 90 days if required
for processing and if notice of the
<PAGE> 6
extension is given to the claimant within the first 90 - day period),
the Corporation shall cause written notice to be mailed to the Claimant
of the total or partial denial of such claim. Such notice shall be
written in a manner calculated to be understood by the Claimant and
shall state:
(1) The specific reason(s) for the denial of the claim:
(2) Specific reference(s) to pertinent provisions of the
Agreement on which the denial of the claim was based;
(3) A description of any additional material or information
necessary for the Claimant to perfect the claim and an explanation of why such
material or information is necessary; and this Article.
(4) An explanation of the review procedures specified in
Section 4 of
(b) If notice of denial of a claim is not furnished within the time
specified above, the claim shall be deemed to have been denied in full.
4.) (a) Within 60 days after the denial of a claim, such Claimant may
appeal such denial by filing with the Corporation a written request for a review
of such claim on a form provided by the Corporation. If such Claimant does not
file such a request with the Corporation within such 60 - day period, the
Claimant shall be conclusively presumed to have accepted as final and binding
the initial decision of the Corporation on his claim.
(b) If such an appeal is so filed within 60 days, the Corporation
shall (1) conduct a full and fair review of such claim and (2) mail or deliver
to the Claimant a written decision on the matter based on the facts and
pertinent provisions of the Agreement within a period of 60 days after the
receipt of the request for review unless special circumstances require an
extension of time, in which case such decision shall be rendered not later than
120 days after receipt of such request. If an extension of time for review is
required, written notice of the extension shall be furnished to the Claimant
prior to the commencement of the extension.
(c) Such decision (1) shall be written in a manner calculated to be
understood by the Claimant, (2) shall state the specific reason(s) for the
decision, (3) shall make specific reference(s) to pertinent provisions of this
Agreement on which the decision is based and (4) shall, to the extent permitted
by applicable law, be final and binding on all interested persons.
(d) During such review, the Claimant or his duly authorized
representative shall be given an opportunity to review the documents that are
pertinent to the Claimant's claim and to submit issues and comments in writing.
(e) If the decision on review is not furnished within such 60 - day
or 120 - day period, as the case may be, the claim shall be deemed denied in
full on review.
<PAGE> 7
ARTICLE XVI - GOVERNING LAW
This Agreement sets forth the entire agreement of the parties hereto, and any
and all prior Agreements, to the extent inconsistent herewith, are hereby
superseded. This Agreement will be governed by the laws of the State of Delaware
except to the extent preempted by federal law.
ARTICLE XVII - INTERPRETATION
Where appropriate in this Agreement, words used in the singular will include the
plural and words used in the masculine will include the feminine.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals, the
Corporation by it's duly authorized officer, on the day and year first above
written.
___________________________ (L.S.)
EMPLOYEE
GREAT LAKES CHEMICAL CORPORATION, BY
___________________________ (L.S.)
TITLE:
<PAGE> 8
EXHIBIT A
The following life insurance policy is subject to the attached Agreement:
INSURER: New England Mutual Life Insurance Company
INSURED:
POLICY NUMBER:
FACE AMOUNT:
DATE OF ISSUE:
<PAGE> 1
Exhibit No. (10)(viii)
CHANGE OF CONTROL AGREEMENT
March 16, 1998
Dear
Great Lakes Chemical Corporation (the "Company") considers the
establishment and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and its stockholders.
In this connection, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, could result in the departure or distraction of key management
personnel to the detriment of the Company and its stockholders. Accordingly, the
Company's Board of Directors (the "Board") has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including yourself, to their
assigned duties without distraction and disruption in the event of a threatened
or actual change in control of the Company.
This letter does not constitute an employment contract, nor does it
alter your status as an at will employee of the Company or any subsidiary
thereof. This letter agreement merely sets forth the severance benefits which
the Company agrees will be provided to you in the event, but only in the event,
that your employment with the Company and its subsidiaries terminates or is
deemed to terminate subsequent to a "change in control of the Company" or a
"potential change in control of the Company" as defined in paragraph 2 hereof
under the circumstances specified herein.
In order to accomplish the purposes specified herein, the parties hereby agree
as follows:
1. TERM. (a) This Agreement shall commence on the date hereof and shall
continue in effect through December 31, 1999; provided, however, that commencing
on January 1, 1999 and each January 1 thereafter, the term of this Agreement
shall automatically be extended for one additional year unless, not later than
September 30th of the preceding year, the Company shall have given you notice
that it does not wish to extend this Agreement or a change in control of the
Company, as defined in paragraph 2 hereof, shall have occurred prior to such
January 1; provided, however, (i) if a change in control of the Company shall
have occurred during the term of this Agreement, this Agreement shall continue
in effect for a period of not less than thirty-six (36) months beyond the month
in which such change in control of the Company occurs, and (ii) this Agreement
shall continue in effect during the pendency of a "potential change in control
of the Company" (as defined in paragraph 2(b) hereof) (or in the case of a
potential change in control of the Company described in paragraph 2(b)(i), for a
period of three (3) months following the occurrence of such potential change in
control of the Company).
<PAGE> 2
(b) This Agreement shall be immediately terminated, and you
shall have no right to the payment of any compensation or benefits under this
Agreement, in the event that your employment with the Company and its
subsidiaries is terminated, with or without Cause, prior to the occurrence of a
change in control of the Company. Nothing in this Agreement shall confer upon
you any right to continue in the employ of the Company and its subsidiaries
prior to a change in control of the Company or shall interfere with or restrict
in any way the rights of the Company and its subsidiaries, which are hereby
expressly reserved, to discharge you at any time prior to a change in control of
the Company for any reason whatsoever.
(c) Notwithstanding the provisions of paragraph l(b) hereof,
in the event that your employment with the Company and its subsidiaries is
terminated by the Company and its subsidiaries during the pendency of a
"potential change in control of the Company" (as defined in paragraph 2(b)
hereof) (or, in the case of a potential change in control of the Company
described in paragraph 2(b)(i), within three (3) months following the occurrence
of such potential change in control of the Company), then such termination shall
be deemed to be a termination subsequent to a change in control of the Company
for purposes of this Agreement entitling you to the severance and all other
benefits hereinafter set forth as if your employment had terminated subsequent
to a change in control of the Company.
2. CHANGE IN CONTROL AND POTENTIAL CHANGE IN CONTROL.
(a) Definition of Change in Control of the Company.
For purposes of this Agreement, a "change in control of the Company" shall be
deemed to have occurred if the conditions set forth in any one of the following
paragraphs shall have been satisfied:
(i) any "person" (as such term is used in Section 1 3(d) and 14(d) of
the Securities Exchange Act of 1934 (as in effect as of the date of this
Agreement (the "Exchange Act")) other than (i) the Company, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of shares of the Company (any such person is
hereinafter referred to as a "Person"), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than 20% of the combined voting
power of the Company's then outstanding securities (not including in the
securities beneficially owned by such Person any securities acquired directly
from the Company);
<PAGE> 3
(ii) there is consummated a merger or consolidation of the Company
with or into any other corporation, other than a merger or
consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior
thereto holding securities which represent, in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company,
immediately after such merger or consolidation, more than 70%
of the combined voting power of the voting securities of
either the Company or the other entity which survives such
merger or consolidation or the parent of the entity which
survives such merger or consolidation;
(iii) the stockholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all the Company's assets; or
(iv) during any period of two consecutive years (not including any
period prior to the date of this Agreement), individuals who
at the beginning of such period constitute the Board of
Directors and any new director (other than a director
designated by a Person who has entered into an agreement with
the Company to effect a transaction described in clause (i),
(ii) or (iii) of this paragraph) whose election by the Board
or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason
to constitute a majority thereof.
For purposes of this Agreement, where a change in control of the
Company results from a series of related transactions, the change in control of
the Company shall be deemed to have occurred on the date of the consummation of
the first such transaction. For purposes of clause (i) of this subsection (a),
the stockholders of another corporation (other than the Company or a corporation
described in subclause (iv) of clause (i) of this subsection (a)) shall be
deemed to constitute a Person. Further, it is understood by the parties that the
sale, transfer, or other disposition of a subsidiary of the Company shall not
constitute a change in control of the Company giving rise to benefits under this
Agreement.
(b) Definition of Potential Change in Control of the Company.
For purposes of this Agreement, a "potential change in control of the
Company" shall be deemed to have occurred if the conditions set forth
in any one of the following clauses shall have been satisfied:
(i) any Person is or becomes the beneficial owner, directly or
indirectly, of 10% or more of the outstanding common stock of
the Company unless such Person has reported or is required to
report such ownership on Schedule 13G under the Exchange Act
(or any comparable or successor report) or on Schedule 13D
under
<PAGE> 4
the Exchange Act (or any comparable or successor report) which
Schedule 1 3D does not state any intention to or reserve the
right to control or influence the management or policies of
the Company or engage in any of the actions specified in Item
4 of such Schedule (other than the disposition of the common
stock) so long as such Person neither reports nor is required
to report such ownership other than as described in this
clause; or
(ii) the Company enters into an agreement, the consummation of
which would result in the occurrence of a change in control of
the Company; or
(iii) any Person publicly announces an intention to take or to
consider taking actions which, if consummated, would
constitute or result in a change in control of the Company; or
(iv) any Person commences a solicitation (as defined in Rule 14a-1
of the Exchange Act) of proxies or consents which has the
purpose of effecting or would (if successful) result in a
change in control of the Company; or
(v) a tender or exchange offer for at least 10% of the outstanding
voting securities of the Company, made by a Person, is first
published or sent or given (within the meaning of Rule
14d-2(a) of the Exchange Act).
(c) Exception for Spin-Off Transaction.
Notwithstanding the provisions of paragraphs 2(a) and 2(b) or
any other provision hereof, neither a "change in control of
the Company" nor a "potential change in control of the
Company" shall be deemed to have occurred by virtue of the
Company entering into any agreement with respect to, the
public announcement of, the approval by the Company's
stockholders or directors of, or the consummation of, any
transaction or series of integrated transactions (including
any merger or other business combination transaction) entered
into in connection with, or expressly conditioned upon the
occurrence of, a spin-off (such transaction or series of
integrated transactions, the "Spin-Off Transaction")
immediately following which the recordholders of the common
stock of the Company immediately prior to the Spin-Off
Transaction continue to have substantially the same
proportionate ownership in the spun-off entity as they had in
the Company immediately prior to the Spin-Off Transaction;
provided that such Spin-Off Transaction (including any related
merger of other business combination transaction) has been
approved by a vote of a majority of the Company's Continuing
Directors (as defined below) then in office. For purposes of
this agreement, a "Continuing Director" shall mean any member
of the Board of Directors of the Company who is a member of
the Board of Directors as of the date of this Agreement and
any person who subsequently becomes a member of the Board of
Directors, if such person's nomination for election or
election to the
<PAGE> 5
Board of Directors is recommended or approved by a majority of
the Continuing Directors.
CONDITIONS OF TERMINATION FOLLOWING A CHANGE IN CONTROL. If a
change in control of the Company (as defined in paragraph 2(a) hereof) occurs,
the Company and its subsidiaries or you may terminate your employment with the
Company and its subsidiaries under the following terms and conditions:
(a) Cause. The Company and its subsidiaries may terminate your
employment for Cause. For the purposes of this Agreement, the Company and its
subsidiaries shall have "Cause" to terminate your employment hereunder upon (1)
the willful and continued failure by you to substantially perform your duties
with the Company or any subsidiary thereof (other than any such failure
resulting from your incapacity due to physical or mental illness), after a
demand for substantial performance is delivered to you by the Board which
specifically identifies the manner in which the Board believes that you have not
substantially performed your duties, or (2) the willful engaging by you in gross
misconduct, which is materially injurious to the Company and its subsidiaries.
For purposes of this paragraph, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in good
faith and without reasonable belief that your action or omission was in the best
interest of the Company and its subsidiaries. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for that purpose (after
reasonable notice to you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set forth above in clauses (1) or (2) of the
first sentence of this paragraph and specifying the particulars thereof in
detail.
(b) Good Reason. You may terminate your employment with the Company and
its subsidiaries for Good Reason; provided however, that you must provide
written notice of termination to the Company within ninety (90) days from the
event (or from the last in a series of events) relied upon by you as a basis for
termination for Good Reason hereunder. For purposes of this Agreement, "Good
Reason" shall mean:
(1) without your express written consent, a material reduction in
your duties, responsibilities or status with the Company and
its subsidiaries as in effect immediately prior to a change in
control of the Company, or a change in your titles or offices
(to a lesser title or office) as in effect immediately prior
to a change in control, or any removal of you from or any
failure to reelect or reappoint you to any of such positions,
except in connection with the termination of your employment
for Cause or by you other than for Good Reason;
(2) a reduction by the Company and its subsidiaries in your base
salary or perquisites as in effect on the date hereof or as
the same may be increased from time to time; the material
reduction by the Company and its subsidiaries of the benefits
<PAGE> 6
provided to you in any thrift, incentive or compensation plan,
or any pension, life insurance, health and accident or
disability plan in which you are participating at the time of
a change in control of the Company (or plans providing you
with substantially similar benefits), or the taking of any
action by the Company and its subsidiaries which would
adversely affect your participation in or materially reduce
your benefits under any of such plans or deprive you of any
material fringe benefit enjoyed by you at the time of the
change in control of the Company, unless such reduction or
action is generally applicable to all employees of the Company
or the relevant subsidiary; or
(4) the Company and its subsidiaries require you regularly to
perform your duties of employment beyond a fifty mile radius
from the location of your employment immediately prior to the
change in control of the Company;
provided, however, that (i) any termination of employment by you shall
not be considered a termination for Good Reason for purposes of this Agreement
if such termination occurs after you have been absent from your job for a
continuous period of at least six months as a result of your incapacity due to
physical or mental illness (a "Disability Period") and occurs while you are
receiving benefits under the Company's (or any subsidiary's) long-term
disability plan(s) (if such benefits are at least as favorable to you as those
available under the Company's (or such subsidiary's) long-term disability
plan(s) in effect immediately prior to the change in control of the Company) and
(ii) if you return to work following a Disability Period, clause (1) of this
paragraph 3(b) shall be inapplicable in determining whether Good Reason exists
following such return.
(c) Burden of Proof. In any judicial or other proceedings in which your
right to, or the amount of, benefits hereunder is disputed, the ultimate burden
of proof shall be on the Company.
(d) Change in Control Required. Except as expressly provided in this
Agreement, the above provisions of this paragraph 3 and the provisions of
paragraph 4 shall be applicable after a change in control of the Company or a
potential change in control of the Company has occurred, and not prior thereto.
(e) Notice of Termination. Any termination of your employment by the
Company and its subsidiaries for Cause under paragraph 3(a) hereof or by you for
Good Reason pursuant to paragraph 3 (b) hereof shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this Agreement,
a "Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (1) if your
employment is terminated for Good Reason pursuant to paragraph 3(b) above, the
date specified in the Notice of Termination, and (2) if your employment is
terminated for any other reason, the date on which a Notice of Termination is
given.
<PAGE> 7
4. COMPENSATION UPON TERMINATION FOLLOWING A CHANGE IN CONTROL. The following
compensation will be provided to you by the Company in the event your employment
with the Company and its subsidiaries is terminated (i) by the Company and its
subsidiaries for Cause (as defined in paragraph 3(a) hereof), (ii) by the
Company and its subsidiaries, other than for Cause or (iii) by you for Good
Reason (as defined in paragraph 3(b) hereof), in each case either subsequent to
a change in control of the Company as defined in paragraph 2 hereof or deemed to
be subsequent to a change in control of the Company pursuant to paragraph 1 (c)
hereof:
(a) If your employment with the Company and its subsidiaries is
terminated by the Company and its subsidiaries for Cause under paragraph 3(a)
hereof, the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
and the Company shall have no further obligations to you under this Agreement.
(b) If the Company and its subsidiaries terminate your employment with
the Company and its subsidiaries other than for Cause under paragraph 3(a)
hereof, or if you terminate your employment for Good Reason under paragraph 3
(b) hereof, then the Company shall pay to you as severance pay (and without
regard to the provisions of any benefit plan) in a lump sum payment, the sum of
the following amounts:
(1) your full base salary through the Date of Termination at a
rate equal to the greater of the rate in effect immediately
prior to the occurrence of the event(s) giving rise to the
Notice of Termination or the rate in effect immediately prior
to the change in control of the Company; plus a pro-rata bonus
based on the bonus received by you in the calendar year
immediately preceding the year in which the Date of
Termination occurs, multiplied by (the number of days in the
calendar year in which the Date of Termination occurs, up to
and including the Date of Termination, divided by 365); plus
an amount equal to unpaid salary with respect to any vacation
days accrued but not taken as of the Date of Termination;
(2) an amount equal to the product of (x) the sum of your annual
base salary at a rate equal to the greater of the rate in
effect immediately prior to the occurrence of the event(s)
giving rise to the Notice of Termination or the rate in effect
immediately prior to the change in control of the Company,
plus the highest bonus or other amount paid or awarded
(although not yet paid) to you by the Company and its
subsidiaries in the year in which the Date of Termination
occurs or the two full calendar years immediately preceding
the year in which such Date of Termination occurs (amounts or
awards in shares being taken for this purpose at the closing
price on the New York Stock Exchange, or other appropriate
exchange, on the last trading day before the allotment date),
multiplied by (y) the number three (3); and.
(3) in lieu of any further payments under any long term incentive
or compensation
<PAGE> 8
plan of the Company or any subsidiary thereof or any successor
plan, an amount equal to all awards thereunder earned or
accrued, but not yet paid, for periods up to and including the
Date of Termination.
(c) If the Company and its subsidiaries shall terminate your employment with the
Company and its subsidiaries other than for Cause under paragraph 3(a) hereof,
or if you shall terminate your employment with the Company and its subsidiaries
for Good Reason under paragraph 3(b) hereof, in addition to any payment made or
owed to you by the Company under paragraph 4(b) hereof:
(1) the Company shall maintain in full force and effect, for your
continued benefit for three years after the Date of
Termination, all life insurance, health and accident or
disability plans and programs in which you were entitled to
participate immediately prior to the occurrence of the
event(s) giving rise to the Notice of Termination, provided
that your continued participation is possible under the
general terms and provisions of such plans and programs. In
the event that your continued participation in any such plan
or program is barred, the Company shall arrange upon
comparable terms to provide you with benefits substantially
similar to those benefits which you would otherwise have been
entitled to receive under such plans and programs. At the end
of the period of coverage, you shall have the option to have
assigned to you, at no cost and with no apportionment of
prepaid premiums, any assignable insurance policy owned by the
Company or any subsidiary thereof and relating specifically to
you. The receipt by you, from a new employer, of any of the
benefits described in this paragraph 4(c)(1), shall not
eliminate the Company's obligations to provide you with such
benefits (or their equivalent), but shall act merely as an
offset to the Company's obligations hereunder;
(2) In addition to the retirement benefits to which you are entitled
under each pension plan of the Company or any subsidiary thereof (a "Pension
Plan") or any successor plans thereto, including, but not limited to the
Retirement Plan and the Supplemental Retirement Plan, the Company shall pay you
a lump sum amount, in cash, equal to the excess of (x) the actuarial equivalent
of the retirement pension (taking into account any early retirement subsidies
associated therewith and determined as a straight life annuity commencing at
Normal Retirement Age (as defined in the Retirement Plan) or any earlier date,
but in no event earlier than the third anniversary of the Date of Termination,
whichever annuity the actuarial equivalent of which is greatest) which you would
have accrued under the terms of each such Pension Plan (without regard to any
amendment to such Pension Plan made subsequent to a change in control of the
Company, which amendment adversely affects in any manner the computation of
retirement benefits thereunder), determined as if you were fully vested
thereunder and had accumulated (after the Date of Termination) thirty-six (36)
additional months of service credit thereunder and had been credited under each
such Pension Plan during such period with compensation equal to (i) the higher
of (a) your annual base salary in effect immediately preceding the occurrence of
the event(s) giving rise to your Notice of Termination or (b) your annual base
salary in effect immediately preceding the change in control of the Company,
plus (ii) the higher of (a) your
<PAGE> 9
target bonus under any applicable incentive compensation plan in effect as of
the Date of Termination or (b) the highest bonus or other amount paid or awarded
(although not yet paid) to you by the Company and its subsidiaries in the year
in which the Date of Termination occurs or the two full calendar years
immediately preceding the year in which such Date of Termination occurs, over
(y) the actuarial equivalent of the retirement pension (taking into account any
early retirement subsidies associated therewith and determined as a straight
life annuity commencing at Normal Retirement Age or any earlier date, but in no
event earlier than the Date of Termination, whichever annuity the actuarial
equivalent is greatest) which you had accrued pursuant to the provisions of each
such Pension Plan as of the Date of Termination. For purposes of this paragraph
4(c)(2), "actuarial equivalent" shall be determined using the same methods and
assumptions utilized under each of the Pension Plans, as applicable, immediately
prior to occurrence of the event(s) giving rise to the Notice of Termination
(without regard to any amendment of such methods and assumptions made subsequent
to a change in control of the Company, which amendment results in a lower
payment under this paragraph 4(c)(2));
(3) All outstanding stock options previously granted to you, and
not yet expired, will become fully and immediately vested and
exercisable by you on the Date of Termination and for ninety
(90) days thereafter. You may, at your option, elect to
receive in lieu of the exercise of all, or any portion of, the
above options, a lump sum payment from the Company (such sum
to be paid within ten (10) days after such election) in an
amount equal to the difference between (i) total number of
such options elected by you multiplied by the greater of (1)
the market price of the Company's common stock on the Date of
Termination or (2) the highest price paid for the Company's
common stock in connection with the change in control of the
Company and (ii) the aggregate exercise price of all such
options elected by you;
(4) the Company shall reimburse you for individual out placement
services to be provided by a firm of your choice or, at your election, will
provide you the use of office space, office supplies and secretarial assistance
satisfactory to you. The aggregate expenditures of the Company pursuant to this
paragraph 4(c)(4) shall not exceed $20,000;
(5) the Company shall cause title to the automobile, if any, provided
by the Company or any of its subsidiaries to you as of the date of the change in
control to be transferred to you within 10 days following the Termination Date
and shall pay all license and title registration fees and sales and transfer
taxes applicable in connection with the transfer; and
(6) the Company will pay all reasonable out-of-pocket expenses,
including reasonable legal fees and legal expenses, incurred by you in
connection with any judicial or other proceeding, including any arbitration
proceeding under paragraph 16 hereof, to enforce this Agreement or to construe,
or to determine or defend the validity of this Agreement, or otherwise, in
connection herewith.
(d) You shall not be required to mitigate the amount of any payment or
benefits provided for in paragraph 4 by seeking other employment or otherwise,
nor (except as provided in paragraph 4(c)(1)) shall the amount of any payment or
benefits provided for in paragraph 4 be
<PAGE> 10
reduced by any payments or benefits received by you as the result of employment
by another employer after the Date of Termination, or otherwise; provided,
however, that the amount payable under paragraph 4 hereof shall be reduced by
the amount of any severance, termination or notice pay (or any other similar
amounts) required by law to be paid to you by the Company or its subsidiaries
and by any salary or other amounts paid to you during any notice period which
the Company or its subsidiaries is required by law to provide.
(e) In the event that any payment or benefit received or to be received
by you in connection with a change in control of the Company or the termination
of your employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company) (all such payments and benefits
being hereinafter called "Total Payments") would be subject to (in whole or
part) the excise tax imposed under Section 4999 of the Code (the "Excise Tax"),
the Company shall pay you an additional amount (the "Gross-Up Payment") such
that the net amount retained by you, after deduction of any Excise Tax on the
Total Payments and any federal, state and local income tax and Excise Tax upon
the payment provided for by this paragraph 4(e), shall be equal to the Total
Payments. For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) your Total
Payments shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(l ) of the Code shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel selected by the accounting firm which
was, immediately prior to the actual or deemed change in control of the Company,
the Company's independent auditor (the "Auditor") and reasonably acceptable to
you, such other payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, or
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such
reasonable compensation, or are otherwise not subject to the Excise Tax, (ii)
the amount of the Total Payments which shall be treated as subject to the Excise
Tax shall be equal to the lesser of (A) the total amount of the Total Payments
or (B) the amount of excess parachute payments within the meaning of Section
280G(b)(l) of the Code (after applying clause (i), above), and (iii) the value
of any non-cash benefits or any deferred payment or benefit shall be determined
by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the Gross-Up Payment, you
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of your residence (or, if higher, in the
state and locality of our principal place of business) on the Date of
Termination, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time of termination of your employment, you shall repay
to the Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the
<PAGE> 11
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by you to the extent
that such repayment results in a reduction in Excise Tax and/or a federal, state
or local income tax deduction) plus interest on the amount of such repayment at
120% of the rate provided in Section 1 274(b)(2)(B) of the Code. In the event
that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of your employment (including by reason
of any payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties or additions payable by
you with respect to such excess) at the time that the amount of such excess is
finally determined. You and the Company shall each reasonably cooperate with the
other in connection with any administrative or judicial proceedings concerning
the existence or amount of liability for Excise Tax with respect to the
Severance Payments.
(f) The cash payment obligations of the Company under paragraphs 4(b),
4(c)(2), and 4(e) hereof shall be paid to you in a lump sum within thirty (30)
days of the Date of Termination.
5. DEFAULT IN PAYMENT. Any payment not made within ten days after it is
due in accordance with this Agreement shall thereafter bear interest, compounded
quarterly, at the prime rate from time to time in effect at the Chase Manhattan
Bank of New York.
6. CONTINUED EMPLOYMENT. As consideration for the benefits to be
provided to you by the Company under this Agreement, after a potential change in
control of the Company but prior to the occurrence of a change in control, you
agree to deliver to the Company 60 days' prior written notice of any voluntary
termination by you of your employment with the Company and its subsidiaries.
7. EFFECT ON OTHER PLANS. AGREEMENTS AND BENEFITS. Except to the extent
expressly set forth herein, any benefit or compensation to which you are
entitled under any agreement between you and the Company or any of its
subsidiaries or under any plan maintained by the Company or any of its
subsidiaries in which you participate or participated shall not be modified or
lessened in any way, but shall be payable according to the terms of the
applicable plan or agreement. The terms of this Agreement shall supersede and
terminate any prior change in control severance agreement, or the provisions of
any other agreement providing benefits following a change in control, entered
into between you and the Company or any subsidiary thereof. Notwithstanding the
above, any benefits received by you pursuant to this Agreement shall be in lieu
of any severance benefits to which you would otherwise be entitled under any
general severance policy maintained by the Company or the relevant subsidiary
for its management personnel or under any employment contract between you and
the Company or any subsidiary thereof.
8. UNSECURED OBLIGATION. All rights of you or any beneficiary of yours
who succeeds to your rights to payments or benefits under this Agreement shall
at all times be entirely
<PAGE> 12
unfunded and no provision shall at any time be made with respect to segregating
any assets of the Company or payment of any amounts due hereunder. Neither you
nor any such beneficiary shall have any interest in or rights against any
specific assets of the Company or any of its subsidiaries, and you and any such
beneficiary shall have only the rights of a general unsecured creditor of the
Company.
9. SUCCESSORS BINDING AGREEMENT.
(a) 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, by agreement in form and substance
satisfactory to you, to expressly assume 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. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled
hereunder if you terminated your employment for Good Reason subsequent to a
change in control of the Company, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. 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 executes and delivers the agreement provided for in
this paragraph 9 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
10. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when mailed, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the first page of
this Agreement, provided that all notices to the Company shall be directed to
the attention of the Chief Executive Officer of the Company with a copy to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
11. MODIFICATION AND WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and is signed by you and such officer as may be
specifically designated by the Board of the Company. The failure of any party at
any time or times to require performance of any provision hereof shall in no
manner affect such party's rights at a later time to enforce the same. No waiver
by either party of any provisions or breach of this Agreement, whether by
conduct or
<PAGE> 13
otherwise, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of such provision or breach or a waiver of any
other provision or breach.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding of the parties in respect of the transaction contemplated
herein and supersedes all prior agreements, arrangements or understandings,
whether written or oral, relating to the subject matter hereof, including,
without limitation, any letters, agreements, or understandings between you and
the Company or any subsidiary thereof prior to the date hereof. Execution of
this Agreement shall supersede and terminate any prior change in control
severance agreement, or the provisions of any other agreement providing benefits
following a change in control, entered into between you and the Company or any
subsidiary thereof.
13. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the State of Indiana.
14. SEVERABILITY. If any provision of the Agreement shall be held to be
invalid, illegal or unenforceable, the remainder of this Agreement shall not be
affected thereby. If any provisions of this Agreement are held by a court of
competent jurisdiction to conflict with any federal, state or local law, such
provisions are hereby declared to be of such force and effect as is permissible
in such jurisdiction.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
16. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Chicago, Illinois, by three arbitrators, one of whom shall be appointed by the
Company, one of whom shall be appointed by you and the third of whom shall be
appointed by the first two arbitrators. If either the Company or you fails to
appoint an arbitrator within twenty (20) days of a request in writing by the
other to do so, or if the first two arbitrators cannot agree on the appointment
of a third arbitrator within 20 days after the second arbitrator is designated,
then such arbitrator shall be appointed by the Chief Judge of the United States
District Court located in the city of Chicago, or upon his failure to act, by
the American Arbitration Association so as to enable the arbitrators to render
an award within ninety (90) days after the three arbitrators have been
appointed. Following the selection of arbitrators as set forth above, the
arbitration shall be conducted promptly and expeditiously and in accordance with
the rules of the American Arbitration Association. Pending the resolution of
such dispute or controversy, the Company will continue to pay you without
interruption your full base salary in effect immediately prior to the notice
giving rise to the dispute was given and continue you as a participant in all
thrift, incentive, compensation, pension, life insurance, health and accident or
disability plans in which you were participating when the notice giving rise to
the dispute was given at a level equal to the level that was in effect
immediately prior to such notice. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided, however, that you shall be
entitled to seek specific performance of your right to be paid during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
<PAGE> 14
The Company shall bear all of the expenses relating to any arbitration under
this Agreement.
17. INTERPRETATION. References herein to action taken by the Company and its
subsidiaries shall mean action taken by the Company and its subsidiaries taken
together as a single entity. For example, if you are receiving benefits from a
subsidiary and such benefits are no longer provided by such subsidiary but the
same or equivalent benefits are instead provided by the Company or a different
subsidiary, the Company and its subsidiaries shall be deemed for purposes of
this Agreement not to have reduced or changed your benefits. As a further
example, if your responsibilities with the Company are replaced with similar
responsibilities with a subsidiary of the Company, the Company and its
subsidiaries shall be deemed for purposes of this Agreement not to have changed
your responsibilities. References herein to your employment or status with the
Company and its subsidiaries shall mean your employment or status with the
Company and its subsidiaries taken together as a single entity. References
herein to the termination of your employment with the Company and its
subsidiaries shall mean the termination of your employment with the Company and
its subsidiaries such that after such termination you are no longer employed by
the Company or any of its then subsidiaries.
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
GREAT LAKES CHEMICAL CORPORATION
By:
-----------------------------------------
Title: Chief Executive Officer and President
-----------------------------------------
Date:
-----------------------------------------
AGREED TO:
By:
----------------------------------
Title:
----------------------------------
Date:
----------------------------------
<PAGE> 1
Exhibit No. (10)(ix)
GREAT LAKES CHEMICAL CORPORATION
DIRECTORS RETIREMENT PLAN
(Effective January 1, 1993)
<PAGE> 2
GREAT LAKES CHEMICAL CORPORATION
DIRECTORS RETIREMENT PLAN
(EFFECTIVE JANUARY 1, 1993)
Table of Contents
ARTICLE 1
Establishment 1
1.1 Establishment and Purpose 1
1.2 Applicability 1
ARTICLE II
Participation 2
2.1 Eligibility and Participation 2
2.2 Duration 2
ARTICLE III
Benefit; Payment 3
3.1 Accrued Benefit 3
3.2 Time and Method of Payment 3
ARTICLE IV
Funding 4
4.1 Funding 4
ARTICLE V
Amendment, Administration 5
5.1 Amendment and Termination 5
5.2 Administration 5
5.3 Deduction of Taxes from Amounts Payable 5
5.4 Indemnification 5
5.5 Expenses 5
ARTICLE VI
Miscellaneous 6
6.1 Interests not Transferable 6
6.2 Contract of Employment 6
6.3 Headings 6
6.4 Invalidity 6
6.5 Law Governing 6
<PAGE> 3
GREAT LAKES CHEMICAL CORPORATION
DIRECTORS RETIREMENT PLAN
(EFFECTIVE JANUARY 1, 1993)
ARTICLE I
ESTABLISHMENT
1.1 ESTABLISHMENT AND PURPOSE. Great Lakes Chemical Corporation (the
"Company") hereby restates the Great Lakes Chemical Corporation
Directors Retirement Plan (the "Plan"), effective January 1, 1993 (the
"Effective Date"). The purpose of the Plan is to provide former
non-employee members of the Board of Directors (the "Board") of the
Company with a pension benefit in recognition of their service to the
Company.
1.2 APPLICABILITY. The provisions of the Plan shall apply only to a
non-employee Director who terminates his directorship on or after the
Effective Date.
Page 1
<PAGE> 4
ARTICLE II
PARTICIPATION
2.1 ELIGIBILITY AND PARTICIPATION. Each non-employee Director shall be
eligible for a benefit after completing five (5) years of service as a
member of the Board.
A Director shall be credited with one year of service for eligibility
or benefit calculation purposes for each calendar year during which the
Director was a member of the Board for six or more calendar months.
2.2 DURATION. Any Director who became a Participant shall continue to be a
Participant as long as he is entitled to benefits hereunder.
Page 2
<PAGE> 5
ARTICLE III
BENEFIT; PAYMENT
3.1 ACCRUED BENEFIT. An eligible Director shall be entitled to an annual
benefit, payable for his lifetime only, equal to the percentage (%)
determined below of the Annual Retainer paid to the Director for his
last completed calendar year of service as a Director. No benefit shall
be payable under the Plan upon the death of a Director or former
Director.
<TABLE>
<CAPTION>
ANNUAL BENEFIT YEARS
-------------- -----
% OF DIRECTOR'S FEES OF SERVICE
-------------------- ----------
<S> <C>
0% Less than 5
50% 5
60% 6
70% 7
80% 8
90% 9
100% 10 or more
</TABLE>
The Annual Retainer is the annual retainer paid by the Corporation for Board
membership; it does not include meeting fees, fees paid for membership on board
committees, special retainers, fees paid for attending meetings of the Board or
of its committees, expense reimbursement or per diem.
The Annual Benefit shall be equal to the Annual Retainer in effect immediately
prior to the Director's retirement date.
3.2 TIME AND METHOD OF PAYMENT. The Accrued Benefit shall commence to be paid
annually (or more frequently at the election of the Company), upon the first day
of the month following the later of the former Director's attainment of age 70
or the last day the Director is a member of the Board.
Page 3
<PAGE> 6
ARTICLE IV
FUNDING
4.1 FUNDING. All benefits under this Plan shall be paid directly from the
general funds of the Company, and no special or separate fund shall be
established and no other segregation of assets shall be made to assure
payment. No Director shall have a right, title or interest whatever in
or to any investments which the Company may make to aid the Company in
meeting its obligation hereunder. Nothing contained in this Plan, and
no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship,
between the Company and a Director. To the extent that any person
acquires a right to receive payments from the Company hereunder, such
rights shall be no greater than the right of an unsecured creditor of
the Company.
Page 4
<PAGE> 7
ARTICLE V
AMENDMENT, ADMINISTRATION
5.1 AMENDMENT AND TERMINATION. The Company intends the Plan to be
permanent, but reserves the right at any time to modify, amend, or
terminate the Plan, provided that the Company shall not cancel, reduce,
or otherwise adversely affect the amount of benefits of any Participant
accrued as of the date of any such modification, amendment, or
termination, without the consent of the Participant.
5.2 ADMINISTRATION. The Plan shall be administered by the Executive
Committee of the Board of Directors of the Company, which shall be
authorized to interpret the Plan, to adopt rules and practices
concerning the administration of the Plan, to resolve questions
concerning the eligibility for the amount of the Accrued Benefit, and
to delegate all or any portion of its authority hereunder to designated
officers or employees of the Company. A Director shall not have the
power to take part in any discriminatory decision or action affecting
his own interest as a Participant unless such decision or action is
upon a matter which affects all other Participants similarly situated
and confers no special right, privilege or benefit not simultaneously
conferred upon all other such Participants.
5.3 DEDUCTION OF TAXES FROM AMOUNTS PAYABLE. The Company may deduct from
the amount to be distributed such amount as the Company, in its sole
discretion, deems proper for the payment of income, employment, death,
succession, inheritance, or other taxes with respect to benefits under
the Plan.
5.4 INDEMNIFICATION. The Company shall indemnify and hold harmless each
employee, officer, or director of the Company to whom is delegated
duties, responsibilities, and authority with respect to the Plan
against all claims, liabilities, fines and penalties, and all expenses
reasonably incurred by or imposed upon him (including but not limited
to reasonable attorney fees) which arise as a result of his actions or
failure to act in connection with the operation and administration of
the Plan to the extent lawfully allowable and to the extent that such
claim, liability, fine, penalty, or expense is not paid for by
liability insurance purchased or paid for by the Company.
Notwithstanding the foregoing, the Company shall not indemnify any
person for any such amount incurred through any settlement or
compromise of any action unless the Company consents in writing to such
settlement or compromise.
5.5 EXPENSES. The expenses of administering the Plan shall be paid by the
Company.
Page 5
<PAGE> 8
ARTICLE VI
MISCELLANEOUS
6.1 INTERESTS NOT TRANSFERABLE. Benefits payable under this Plan shall not
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or
levy of any kind, either voluntary or involuntary, including any such
liability which is for alimony or other payments for the support of a
spouse or former spouse, or for any other relative of a Participant
prior to actually being received by the person entitled to the benefit
under the terms of the Plan, and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge, or otherwise dispose
of any right to benefits payable hereunder shall be void. The Company
shall not in any manner be liable for, or subject to, the debts,
contracts, liabilities, engagements, or torts of any person entitled to
benefits hereunder. If any person shall attempt to, or shall alienate,
sell, transfer, assign, pledge, or otherwise encumber his benefits
under this Plan, or if by any reason of his bankruptcy or other event
happening at any time, such benefit would devolve upon any other person
or would not be enjoyed by the person entitled hereto under the Plan,
the Executive Committee of the Board, in its discretion, may terminate
the interest in any such benefits of the person entitled thereof under
the Plan and hold or apply them to or for the benefit of such person
entitled thereto under the Plan in such manner as the Board may deem
proper.
6.2 CONTRACT OF EMPLOYMENT. Nothing contained herein shall be construed to
constitute a contract of employment between a Participant and the
Company or to confer any right of a Director to remain on the Board.
6.3 HEADINGS. The headings of Articles and Sections are included solely for
convenience of reference, and if there is any conflict between such
headings and the text of this Plan, the text shall control.
6.4 INVALIDITY. If any provision of this Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provisions hereof and the Plan shall be construed and enforced as
if such provisions, to the extent invalid or unenforceable, had not
been included.
6.5 LAW GOVERNING. The Plan shall be construed and enforced according to
the laws of Indiana other than its laws respecting choice of law.
Page 6
<PAGE> 9
IN WITNESS WHEREOF, the Company has executed this Plan this 28 day of
December, 1993.
GREAT LAKES CHEMICAL CORPORATION
By:
------------------------------
------------------------------
------------------------------
------------------------------
<PAGE> 1
Exhibit No. (10)(x)
GREAT LAKES CHEMICAL CORPORATION
1993 EMPLOYEE STOCK COMPENSATION PLAN
As amended by the Board of Directors
on
November 21, 1997
1. SHARES SUBJECT TO PLAN. 2,000,000 shares of common stock, par value
$1.00 per share, shall be reserved for Awards granted under this Plan (the "1993
Plan"). That number does not include 251,900 shares which are reserved for
options granted under the company's 1984 Employee Stock Option Plan, as last
amended on March 6, 1995 (the "1984 Plan"), and which are not subject to
presently outstanding options granted under the 1984 and 1975 Plans. If any
Award granted under this 1993 Plan shall terminate or expire without being fully
exercised for any reason prior to the end of the period under which Awards may
be granted, the shares of common stock to which such termination or expiration
relates shall again become available for Awards thereafter granted.
2. EFFECTIVE DATE AND DURATION. This 1993 Plan became effective on May
6, 1993, upon its approval by the holders of a majority of the common stock of
the company present and voting (in person or by proxy) at the 1993 Annual
Meeting of Stockholders, and shall continue in effect for a period of ten (10)
years from the date of such stockholder approval. Upon expiration of such
ten-year period, no further Awards shall be granted (although unexercised Awards
theretofore granted shall continue in effect).
3. AWARDS. The Board may grant Awards, including Incentive Stock
Options meeting the requirements of Section 422(a) of the Internal Revenue Code
of 1986, as amended, (the "Code") and Non-Qualified Options, or other
stock-based awards, collectively referred to as "Awards."
4. ADMINISTRATION OF THE 1993 PLAN. The Board of Directors (the
"Board"), which may act through its Compensation and Incentive Committee (the
"Committee"), shall administer this 1993 Plan. It may in its sole discretion
determine the person or persons to whom Awards are to be granted and the number
of shares to be covered by each such Award, all within the limitations set forth
in this 1993 Plan. It may interpret the provisions of this 1993 Plan and decide
all questions of fact arising out of its application, and all such
interpretations and determinations shall be conclusive and binding upon the
individual employees involved and all persons claiming under them.
<PAGE> 2
GREAT LAKES CHEMICAL CORPORATION
1993 EMPLOYEE STOCK COMPENSATION PLAN
As amended on November 21, 1997
Page 2
5. PERSONS ELIGIBLE FOR AWARDS. Individuals who are (a) executive
officers, (b) other key employees (including those who are also directors) or
(c) non-employee directors, in each case of the company or any of its
subsidiaries (the "Company") may be granted Awards. For this purpose, the term
"subsidiary" shall mean any corporation in which the company owns stock having
50 percent or more of the total combined voting power of all classes of such
corporation's stock. A person is a key employee by virtue of meeting all of the
following standards: (i) such person is employed by the company, (ii) such
person has managerial, supervisory, professional, scientific, engineering or
similar responsibilities, and (iii) such person is not covered by any collective
bargaining agreement binding on the company. No Award shall be granted to any
director of the company who is not also an executive officer or key employee of
the company on the date the Award is granted.
6. TERMS AND CONDITIONS OF OPTIONS. Options granted may be either
Incentive Stock Options as defined in Section 422(a) of the Code, (hereinafter
referred to as "ISOs") or options which are not within the 422(a) definition
(hereinafter referred to as "Non-Qualified Options") (ISOs and Non-Qualified
Options are referred to collectively as "Options").
(a) INCENTIVE STOCK OPTIONS. The terms of each ISO granted shall
include those terms which are required by Section 422(a) of the Code,
and other such terms, not inconsistent therewith as the Board may
determine.
(b) NON-QUALIFIED OPTIONS. Subject to the minimum option price
specified in paragraph (c), the terms of each Non-Qualified Option
granted, which may be different in each case, shall be determined by
the Board.
(c) MINIMUM OPTION PRICE. The option price payable for the shares
of stock subject to each Option granted shall not be less than the fair
market value of the company's common stock at the time of the grant of
that Option. The fair market value of the company's stock at the time
of the grant of an Option shall be deemed to be equal to the closing
price on the preceding trading day on the New York Stock Exchange;
provided, however, that during the [60]-day period from and after a
change in control, "fair market value" shall mean, other than in the
case of shares of common stock subject to ISOs, the higher of (X) the
highest closing price on the New York Stock Exchange during the 60-day
period prior to the change in control and (Y) if the change in control
is the result of a transaction or series of transactions described in
paragraphs (a), (b) or (c) of Section 13(A)(v) hereof, the highest
price for shares of common stock paid in such transaction or series of
transactions, which in the case of such paragraph (a) shall be the
highest price for shares of common stock as reflected in a Schedule 13D
filed under the Exchange Act (as defined in Section 13(A)(v)(a) hereof)
by the person having made the acquisition.
<PAGE> 3
GREAT LAKES CHEMICAL CORPORATION
1993 EMPLOYEE STOCK COMPENSATION PLAN
As amended on November 21, 1997
Page 3
(d) MAXIMUM NUMBER OF SHARES. Subject to the provisions of
Paragraph 11 hereof, the maximum number of shares that may be awarded
to any employee in any year hereunder shall not exceed 150,000.
7. TERMS AND CONDITIONS OF OTHER STOCK-BASED AWARDS. The Committee may
grant other stock-based Awards either alone or in addition to other Awards under
the 1993 Plan. The Committee will place such restrictions on such Awards as the
Committee determines to be necessary.
8. TRANSFER LIMITATIONS. No Award granted shall be transferable
otherwise than by will or the laws of descent and distribution, and no Award
granted may be exercised by any person other than the person to whom the Award
shall initially have been granted during the lifetime of such initial Awardee.
9. EXERCISE OF AWARDS. Awards shall be exercised by written notice to
the company. Option exercise notices must be accompanied by payment in full of
the option price and may be exercised in one or more installments. Payment of
the option price may be made as specified in each Award Agreement (as discussed
below), in cash, by exchanging common stock of the company already owned by the
optionee for at least six months prior to the date of exercise, or by delivery
of a combination of cash and common stock. The exchanged shares, plus cash, if
any, must be equal to the aggregate option price of the shares acquired upon
exercise of the Option. The value to be used for any exchanged shares shall be
the closing market price of the company's common stock on the preceding trading
day on the New York Stock Exchange. Notwithstanding the foregoing, during the
[60]-day period from and after a change in control, all optionees, with respect
to any or all of their respective Options (including, in the case of
Non-Qualified Options, Options already outstanding on [insert effective date of
amendment], 1997), shall, unless the Committee shall determine otherwise at the
time of grant, have the right, in lieu of the payment of the full Option price
of the shares of common stock being purchased under the Options and by giving
written notice to the company in form satisfactory to the Committee, to elect
(within such [60]-day period) to surrender all or part of the Options to the
Company and to receive in cash an amount equal to the amount by which the fair
market value of shares of common stock on the date of exercise exceeds the
option price per share of common stock under the Options multiplied by the
number of shares of common stock granted under the Options as to which the right
granted by this proviso shall have been exercised.
(a) MANDATORY WITHHOLDING TAXES. Whenever a Non-Qualified
Option is exercised, the company may require as a condition of delivery
that the optionee remit an amount sufficient to satisfy all federal,
state and local withholding tax requirements related thereto. The
optionee may elect to pay the tax by remitting (1) cash, (2) shares of
common stock already owned by the optionee for at least six months, (3)
withholding a
<PAGE> 4
GREAT LAKES CHEMICAL CORPORATION
1993 EMPLOYEE STOCK COMPENSATION PLAN
As amended on November 21, 1997
Page 4
portion of the shares otherwise deliverable to the optionee upon the
exercise, or (4) by any combination of the above. The value to be used
for any shares delivered or withheld shall be the closing market price
the preceding trading day on the New York Stock Exchange.
(b) DISQUALIFYING DISPOSITIONS OF ISO SHARES. An optionee shall
be required to notify the Company of any disposition of shares issued
pursuant to the exercise of an ISO under the circumstances described in
Section 421(b) of the Code (relating to certain disqualifying
dispositions), within ten days of such disposition.
10. AWARD AGREEMENT. No person shall have any rights unless and until
the company and the person to whom such Award shall have been granted shall have
executed and delivered an Award Agreement containing provisions setting forth
the terms of the Award.
11. ANTI-DILUTION PROVISION. If, prior to the complete exercise of any
Award, there shall be declared and paid a stock dividend upon the shares of
common stock of the Company or if the shares shall be split up, converted,
reclassified, changed into, or exchanged for, a different number or kind of
securities of the Company, the Award, to the extent that it has not been
exercised, shall entitle the holder upon the future exercise of such Award to
such number and kind of securities or other property subject to the terms of the
Award to which the holder would be entitled had such holder actually owned the
shares subject to the unexercised portion of the Award at the time of the
occurrence of such stock dividend, split-up, conversion, exchange,
reclassification or exchange; and the aggregate purchase price upon the future
exercise of the Award shall be the same as if originally optioned or awarded
shares were being purchased thereunder; or the Compensation and Incentive
Committee shall make such other adjustment to such Award as it deems
appropriate. If any such event should occur, the number of shares with respect
to which Awards remain to be issued, or with respect to which awards may be
reissued, shall be similarly adjusted.
In the event the outstanding shares of common stock shall be changed
into or exchanged for any other class or series of capital stock or cash,
securities or other property pursuant to a recapitalization, reclassification,
merger, consolidation, combination or similar transaction (other than a
transaction described in the previous paragraph), then each Award shall
thereafter become exercisable for the number and/or kind of capital stock,
and/or the amount of cash, securities or other property so distributed, into
which the shares subject to the Award would have been changed or exchanged had
the Award been exercised in full prior to such transaction, provided that, if
the kind or amount of capital stock or cash, securities or other property
received in such transaction is not the same for each outstanding share, then
the kind or amount of capital stock or cash, securities or other property for
which the Award shall thereafter become exercisable shall be the kind and amount
so receivable per share by a plurality of the shares; or the Compensation
<PAGE> 5
GREAT LAKES CHEMICAL CORPORATION
1993 EMPLOYEE STOCK COMPENSATION PLAN
As amended on November 21, 1997
Page 5
and Incentive Committee shall make such other adjustment to such Award as it
deems appropriate. If any such event should occur, the number of shares with
respect to which Awards remain to be issued, or with respect to which awards may
be reissued, shall be similarly adjusted.
12. AWARDS GRANTED UNDER OPTION PLANS. Options granted under the 1975
and 1984 Plans shall be governed by the provisions of the respective Plan as
amended. Awards granted under this 1993 Plan shall be governed by the provisions
of this 1993 Plan.
13. ADDITIONAL PROVISIONS.
A. VESTING, TERMINATION OF EMPLOYMENT.
The following provisions shall be applicable to all Awardees; provided,
however, that in the case of an Awardee whose employment terminates in
connection with the distribution to company stockholders of the stock
of Octel Corp., such provisions (including but not limited to any
provisions relating to vesting and post-termination exercisability)
shall be so applicable except as may be otherwise determined by the
Board or the Compensation and Incentive Committee.
(i) Upon a change in control of the Company (as defined
below), all Options shall immediately vest and become exercisable and
all restrictions on other Awards shall immediately lapse.
(ii) An Award shall be exercisable only during the Awardee's
employment by or service with the Company and for up to three months
after the termination of such employment or service for any reason
(including but not limited to any such termination of employment or
service which occurs following a change in control of the Company),
except that in the Board's (or, if such authority is delegated by the
Board, the Compensation and Incentive Committee's or the Chief
Executive Officer's) discretion, an Award may be exercisable for a
period of up to three years after retirement or death, or for up to ten
years after mandatory retirement under the Executive Mandatory
Retirement Policy.
(iii) An Award may be exercised after the termination of an
Awardee's employment or service with the Company only to the extent
that (a) the Awardee was entitled to do so on the date of termination
(after giving effect to Section 13(A)(i) above), and (b) the Award
would not have expired had the Awardee continued to be employed by (or
to be in the service of) the Company.
(iv) The Board (or if such authority is delegated by the
Board, the Compensation and Incentive Committee or the Chief Executive
Officer) may in its discretion determine
<PAGE> 6
GREAT LAKES CHEMICAL CORPORATION
1993 EMPLOYEE STOCK COMPENSATION PLAN
As amended on November 21, 1997
Page 6
that an authorized leave of absence or disability shall be deemed to
satisfy this 1993 Plan's employment or service requirements.
(v) For purposes of this 1993 Plan, a "change in control of
the Company" shall be deemed to have occurred if the conditions set
forth in any one of the following paragraphs shall have been satisfied:
(a) any "person" (as such term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) other than (i) the
Company, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the
Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership
of shares of the Company (any such person is
hereinafter referred to as a "Person"), is or becomes
the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of the Company representing more than 20%
of the combined voting power of the Company's then
outstanding securities (not including in the
securities beneficially owned by such Person any
securities acquired directly from the Company);
(b) there is consummated a merger or consolidation of the
Company with or into any other corporation, other
than a merger or consolidation which would result in
the holders of the voting securities of the Company
outstanding immediately prior thereto holding
securities which represent, in combination with the
ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the
Company, immediately after such merger or
consolidation, more than 70% of the combined voting
power of the voting securities of either the Company
or the other entity which survives such merger or
consolidation or the parent of the entity which
survives such merger or consolidation;
(c) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the
Company or an agreement for the sale or disposition
by the Company of all or substantially all the
Company's assets; or
(d) during any period of two consecutive years (not
including any period prior to the date of this 1993
Plan), individuals who at the beginning of such
period constitute the Board and any new director
(other than a director designated by a Person who has
entered into an agreement with the Company to effect
a
<PAGE> 7
GREAT LAKES CHEMICAL CORPORATION
1993 EMPLOYEE STOCK COMPENSATION PLAN
As amended on November 21, 1997
Page 7
transaction described in clause (a), (b) or (c) of this
paragraph) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof.
For purposes of this 1993 Plan, where a change in control of the
Company results from a series of related transactions, the change in
control of the Company shall be deemed to have occurred on the date of
the consummation of the first such transaction. For purposes of clause
(a) of this subsection, the stockholders of another corporation (other
than the Company or a corporation described in subclause (iv) of clause
(a) of this subsection) shall be deemed to constitute a Person.
Further, the sale, transfer, or other disposition of a subsidiary of
the Company shall not constitute a change in control of the Company
giving rise to payments or benefits under this 1993 Plan.
Notwithstanding any other provision hereof, a "change in control of the
Company" shall not be deemed to have occurred by virtue of the Company
entering into any agreement with respect to, the public announcement
of, the approval by the Company's stockholders or directors of, or the
consummation of, any transaction or series of integrated transactions
(including any merger or other business combination transaction)
entered into in connection with, or expressly conditioned upon the
occurrence of, a spin-off (such transaction or series of integrated
transactions, the "Spin-Off Transaction") immediately following which
the recordholders of the common stock of the Company immediately prior
to the Spin-Off Transaction continue to have substantially the same
proportionate ownership in the spun-off entity as they had in the
Company immediately prior to the Spin-Off Transaction; provided that
such Spin-Off Transaction (including any related merger of other
business combination transaction) has been approved by a vote of a
majority of the Company's Continuing Directors (as defined below) then
in office. For purposes of this 1993 Plan, a "Continuing Director"
shall mean any member of the Board of the Company who is a member of
the Board as of the date of this 1993 Plan and any person who
subsequently becomes a member of the Board, if such person's nomination
for election or election to the Board is recommended or approved by a
majority of the Continuing Directors. Notwithstanding any other
provision hereof, "Company," for purposes of the definition of "change
in control of the Company," shall mean Great Lakes Chemical
Corporation.
B. LISTINGS, REGISTRATION AND COMPLIANCE WITH LAWS AND REGULATIONS.
(i) Each Award shall be subject to the requirement that if at
anytime the Board shall determine, in its discretion, that the listing,
registration, or qualification of the shares
<PAGE> 8
GREAT LAKES CHEMICAL CORPORATION
1993 EMPLOYEE STOCK COMPENSATION PLAN
As amended on November 21, 1997
Page 8
subject to the Award upon any securities exchange or under any state or
federal securities or other law or regulation, or the consent or
approval of any governmental regulatory body, is necessary or desirable
as a condition to or in connection with the granting of such Award or
the issue or purchase of shares thereunder, no such Award may be
exercised or paid in common stock in whole or in part unless such
listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the
Board and the Awardee will supply the company with such certificates,
representations and information as the company shall request and shall
otherwise cooperate with the company in obtaining such listing,
registration, qualification, consent or approval. In the case of
executive officers and other persons subject to Section 16(b) of the
Securities Exchange Act of 1934, the Board may at any time impose any
limitations upon the exercise of an Award which, in the Board's
discretion, are necessary or desirable in order to comply with Section
16(b) and the rules and regulations thereunder. If the company, as part
of an offering of securities or otherwise, finds it desirable because
of federal or state regulatory requirements to reduce the period during
which any Award may be exercised, the Board may, in its discretion and
without the Awardee's consent, so reduce such period on not less than
15 days written notice to the Awardee.
(ii) Notwithstanding the terms of this paragraph, no Awardee shall
have the right to require the company to register, list or qualify said
Award or any of the stock underlying such Option.
C. AMENDMENT OF THE 1993 PLAN. Except as provided in the following
sentence and as required by law, the company's Board shall have
complete power and authority to amend this 1993 Plan at any time and no
approval by the company's stockholders or by any other person,
committee or other entity of any kind shall be required to make any
such amendment effective. The Board shall not, however, increase the
maximum number of shares available for Awards granted unless such
increase shall either be approved by the company's stockholders or
shall be permitted by Paragraph 11. No termination or amendment may,
without the consent of the individual to whom any Award shall have been
granted under the 1993 Plan, adversely affect the rights of such
individual under such Award.
D. CAPTIONS. The captions (i.e., all boldfaced words) are for
convenience only, do not constitute a part of this 1993 Plan, and shall
not be deemed to limit, characterize or affect in any way any
provisions of this 1993 Plan, and all provisions shall be construed as
if no captions had been used.
E. SEVERABILITY. Whenever possible, each provision in this 1993 Plan
and in every Award at any time granted under this 1993 Plan shall be
interpreted in such manner as to
<PAGE> 9
GREAT LAKES CHEMICAL CORPORATION
1993 EMPLOYEE STOCK COMPENSATION PLAN
As amended on November 21, 1997
Page 9
be effective and valid under applicable law, but if any provision of
this 1993 Plan or any Award at any time granted under this 1993 Plan
shall be held to be prohibited by or invalid under applicable law, then
(i) such provision shall be deemed amended to accomplish the objectives
of the provision as originally written to the fullest extent permitted
by law, and (ii) all other provisions and every Award at any time
granted under this 1993 Plan shall remain in full force and effect.
F. NO STRICT CONSTRUCTION. No rule of strict construction shall be
applied against the company, the Board, or any other person in the
interpretation of any of the terms of this 1993 Plan, any Award granted
under this 1993 Plan or any rule or procedure established by the Board.
G. APPLICABLE LAW. Every Award at any time granted under this 1993 Plan
shall be deemed to be a contract made under the laws of the State of
Indiana. For all purposes, both this 1993 Plan and every Award granted
under this 1993 Plan shall be construed in accordance with and governed
by the laws of the State of Indiana.
2/20/98
<PAGE> 1
Exhibit No. (10)(xi)
GREAT LAKES CHEMICAL CORPORATION
1984 EMPLOYEE STOCK OPTION PLAN
As amended by the Board of Directors
on
November 21, 1997
1. Shares Subject to Option. 3,600,000 shares of common stock (after
adjustments for the 100 percent stock dividends in 1989 and 1991), par value
$1.00 per share, of the company (the "common stock") shall be reserved for
options granted under this Plan (the "Plan"). That number does not include
103,100 shares which are reserved for options granted under the company's 1975
Employee Stock Option Plan, as amended (the "1975 Plan"), and which are not
subject to presently outstanding options granted under the 1975 Plan. If any
option granted under this Plan shall terminate or expire without being fully
exercised for any reason prior to the end of the period under which options may
be granted under the Plan, the shares of common stock to which such termination
or expiration relates shall again become available for options thereafter
granted under this Plan.
2. Effective Date and Duration of Plan. This Plan shall become
effective upon its approval by the holders of a majority of the common stock of
the Company present and voting (in person or by proxy) at the 1984 Annual
Meeting of Stockholders, and shall continue in effect for a period of ten (10)
years from the date of such stockholder approval. Upon expiration of such
10-year period, no further options shall be granted under this Plan (although
unexercised options theretofore granted under this Plan shall continue in
effect).
3. Administration of the Plan. The Board of Directors (the "Board"),
which may act through its Compensation and Incentive Committee (previously the
Stock Option Committee) shall administer this Plan. It may in its sole
discretion determine the person or persons to whom options are to be granted and
the number of shares to be covered by each such option, all within the
limitations set forth in this Plan. It may interpret the provisions of the Plan
and decide all questions of fact arising in application of this Plan, and all
such interpretations and determinations shall be conclusive and binding upon the
individual employees involved and all persons claiming under them.
4. Persons Eligible for Options. Only officers and other key employees
(including those who are also directors) of the company or any of its
subsidiaries may be granted options under this Plan. A person is a key employee
by virtue of meeting all of the following standards: (I) such person is employed
by the company or subsidiary, (ii) such person has managerial, supervisory
<PAGE> 2
GREAT LAKES CHEMICAL CORPORATION
1984 EMPLOYEE STOCK OPTION PLAN
As amended on February 10, 1997
Page 2
or professional, scientific, engineering or similar responsibilities, and (iii)
such person is not covered by any collective bargaining agreement binding on
such person's employer. No option shall be granted to any director of the
company or subsidiary who is not also an officer or key employee of the company
or one of its subsidiaries on the date the option is granted. For this purpose,
the term "subsidiary" shall mean any corporation in which the company owns stock
having 50 percent or more of the total combined voting power of all classes of
such corporation's stock.
5. Terms and Conditions of Options. Options granted under this Plan may
be either Incentive Stock Options as defined in Section 422(a) of the Internal
Revenue Code of 1954, as amended (the "Code") (hereinafter referred to as
"ISOs") or options which are not within the Section 422(a) definition
(hereinafter referred to as "Nonstatutory Options") (ISOs and Nonstatutory
Options are hereinafter referred to collectively as "options").
(a) Incentive Stock Options. The terms of each ISO granted under this
Plan shall include those terms which are required by Section 422(a)of
the Code and such other terms not inconsistent therewith as the Board
may determine. The aggregate fair market value (determined as of the
time of the granting of each option) of the shares of stock for which
any officer or other key employee is granted such options (whether
pursuant to this Plan or the 1975 Plan) in any calendar year shall not
exceed the limitations provided by Section 422(a)(8) of the Code as the
same may be amended from time to time, said limit at this time being
$100,000 plus any unused limit carryover to such year (as defined in
Section 422(a) of the Code).
(b) Nonstatutory Options. Subject to the minimum option price specified
in paragraph (c), the terms of each Nonstatutory Option granted under
this Plan, which may be different in each case, shall be determined by
the Board.
(c) Minimum Option Price. The option price payable for the shares of
stock subject to each ISO or Nonstatutory Option granted under this
Plan shall not be less than the market value of the company's common
stock on the date of the grant of such option. The fair market value of
the company's stock at the time of grant of an option shall be deemed
to be equal to the closing price on the preceding trading day on the
American Stock Exchange or the New York Stock Exchange, as the case may
be; provided, however, that during the [60]-day period from and after a
change in control, "fair market value" shall mean, other than in the
case of shares of common stock subject to ISOs, the higher of (X) the
highest closing price on the American Stock Exchange or the New York
Stock Exchange, as the case may
<PAGE> 3
GREAT LAKES CHEMICAL CORPORATION
1984 EMPLOYEE STOCK OPTION PLAN
As amended on February 10, 1997
Page 3
be, during the 60-day period prior to the change in control and (Y) if
the change in control is the result of a transaction or series of
transactions described in paragraphs (a), (b) or (c) of Section
12(A)(v) hereof, the highest price for shares of common stock paid in
such transaction or series of transactions, which in the case of such
paragraph (a) shall be the highest price for shares of common stock as
reflected in a Schedule 13D filed under the Exchange Act (as defined in
Section 12(A)(v)(a) hereof) by the person having made the acquisition.
6. Cash Payments. Any one or more of the Nonstatutory Options granted
under this Plan may, in the discretion of the Board, provide that, upon the
exercise of such option, the optionee will receive a cash payment equal to the
excess of the market value (on the date of exercise) of the shares of the
company's common stock purchased upon exercise of the option over the option
price.
7. Transfer Limitations. No option granted under this Plan shall be
transferable otherwise than by will or the laws of descent and distribution, and
no option granted under this Plan may be exercised by any person other than the
person to whom the option shall initially have been granted during the lifetime
of such initial optionee.
8. Exercise of Options. Options shall be exercised by written notice to
the Company accompanied by payment in full of the option price and may be
exercised in one or more installments. Payment of the option price may be made
as specified in each Option Agreement (as discussed below), in cash (including
check, bank draft or money order), by exchanging common stock of the company
already owned by the optionee, or by delivery of a combination of cash and
common stock. The exchanged shares, plus cash, if any, must have a market value
on the date of exercise equal to the aggregate option price of the shares
acquired upon exercise of the option. The market value shall be considered to be
the closing price the preceding trading day on the American Stock Exchange or
the New York Stock Exchange, as the case may be. Notwithstanding the foregoing,
during the [60]-day period from and after a change in control, all optionees,
with respect to any or all of their respective options (including, in the case
of Nonstatutory Options, options already outstanding on [insert effective date
of amendment], 1997), shall, unless the Compensation and Incentive Committee
shall determine otherwise at the time of grant, have the right, in lieu of the
payment of the full option price of the shares of common stock being purchased
under the options and by giving written notice to the company in form
satisfactory to the Compensation and Incentive Committee, to elect (within such
[60]-day period) to surrender all or part of the options to the Company and to
receive in cash an amount equal to the amount by which the fair market value of
shares of common stock on the date of
<PAGE> 4
GREAT LAKES CHEMICAL CORPORATION
1984 EMPLOYEE STOCK OPTION PLAN
As amended on February 10, 1997
Page 4
exercise exceeds the option price per share of common stock under the options
multiplied by the number of shares of common stock granted under the options as
to which the right granted by this proviso shall have been exercised.
9. Option Agreement. No person shall have any rights under this Plan
unless and until the company and the person to whom such option shall have been
granted shall have executed and delivered an agreement expressly granting the
option to such person and containing provision setting forth the terms of the
option.
10. Anti-Dilution Provision. If, prior to the complete exercise of any
option, there shall be declared and paid a stock dividend upon the shares of
common stock of the Company or if the shares shall be split up, converted,
reclassified, changed into, or exchanged for, a different number or kind of
securities of the Company, the option, to the extent that it has not been
exercised, shall entitle the holder upon the future exercise of such option to
such number and kind of securities or other property subject to the terms of the
option to which the holder would be entitled had such holder actually owned the
shares subject to the unexercised portion of the option at the time of the
occurrence of such stock dividend, split-up, conversion, exchange,
reclassification or exchange; and the aggregate purchase price upon the future
exercise of the option shall be the same as if originally optioned shares were
being purchased thereunder. If any such event should occur, the number of shares
with respect to which options remain to be issued, or with respect to which
options may be reissued, shall be similarly adjusted.
In the event the outstanding shares of common stock shall be changed
into or exchanged for any other class or series of capital stock or cash,
securities or other property pursuant to a recapitalization, reclassification,
merger, consolidation, combination or similar transaction (other than a
transaction described in the previous paragraph), then each option shall
thereafter become exercisable for the number and/or kind of capital stock,
and/or the amount of cash, securities or other property so distributed, into
which the shares subject to the option would have been changed or exchanged had
the option been exercised in full prior to such transaction, provided that, if
the kind or amount of capital stock or cash, securities or other property
received in such transaction is not the same for each outstanding share, then
the kind or amount of capital stock or cash, securities or other property for
which the option shall thereafter become exercisable shall be the kind and
amount so receivable per share by a plurality of the shares.
11. Options Granted Under This Plan and 1975 Plan. Options which have
been or which may be granted under the 1975 Plan shall be governed by the
provisions of the 1975 Plan as amended. Options granted under this Plan shall be
governed by the provision of this Plan.
<PAGE> 5
GREAT LAKES CHEMICAL CORPORATION
1984 EMPLOYEE STOCK OPTION PLAN
As amended on February 10, 1997
Page 5
12. Additional Provisions.
A. VESTING, TERMINATION OF EMPLOYMENT.
(i) Upon a change in control of the Company (as defined
below), all options shall immediately vest and become exercisable.
(ii) An option shall be exercisable only during the optionee's
employment by the Company or a subsidiary and for up to three months
after the termination of such employment for any reason (including but
not limited to any such termination of employment which occurs
following a change in control of the Company), except that in the
Board's (or, if such authority is delegated by the Board, the
Compensation and Incentive Committee's or the Chief Executive
Officer's) discretion, an option may be exercisable for a period of up
to three years after retirement or death, or for up to ten years after
mandatory retirement under the Executive Mandatory Retirement Policy.
(iii) An option may be exercised after the termination of an
optionee's employment with the Company only to the extent that (a) the
optionee was entitled to do so on the date of termination (after giving
effect to Section 12(A)(i) above), and (b) the Award would not have
expired had the Awardee continued to be employed by the Company or a
subsidiary.
(iv) The Board (or if such authority is delegated by the
Board, the Compensation and Incentive Committee or the Chief Executive
Officer) may in its discretion determine that an authorized leave of
absence or disability shall be deemed to satisfy this Plan's employment
requirements.
(v) For purposes of this Plan, a "change in control of the
Company" shall be deemed to have occurred if the conditions set forth
in any one of the following paragraphs shall have been satisfied:
(a) any "person" (as such term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) other than (i) the
Company, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the
Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such
securities, or
<PAGE> 6
GREAT LAKES CHEMICAL CORPORATION
1984 EMPLOYEE STOCK OPTION PLAN
As amended on February 10, 1997
Page 6
(iv) a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the
same proportions as their ownership of shares of the
Company (any such person is hereinafter referred to
as a "Person"), is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing more than 20% of the combined voting
power of the Company's then outstanding securities
(not including in the securities beneficially owned
by such Person any securities acquired directly from
the Company);
(b) there is consummated a merger or consolidation of the
Company with or into any other corporation, other
than a merger or consolidation which would result in
the holders of the voting securities of the Company
outstanding immediately prior thereto holding
securities which represent, in combination with the
ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the
Company, immediately after such merger or
consolidation, more than 70% of the combined voting
power of the voting securities of either the Company
or the other entity which survives such merger or
consolidation or the parent of the entity which
survives such merger or consolidation;
(c) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the
Company or an agreement for the sale or disposition
by the Company of all or substantially all the
Company's assets; or
(d) during any period of two consecutive years (not
including any period prior to the date of this Plan),
individuals who at the beginning of such period
constitute the Board and any new director (other than
a director designated by a Person who has entered
into an agreement with the Company to effect a
transaction described in clause (a), (b) or (c) of
this paragraph) whose election by the Board or
nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors at the beginning of the period or whose
election or nomination for election was previously so
approved, cease for any reason to constitute a
majority thereof.
<PAGE> 7
GREAT LAKES CHEMICAL CORPORATION
1984 EMPLOYEE STOCK OPTION PLAN
As amended on February 10, 1997
Page 7
For purposes of this Plan, where a change in control of the
Company results from a series of related transactions, the
change in control of the Company shall be deemed to have
occurred on the date of the consummation of the first such
transaction. For purposes of clause (a) of this subsection,
the stockholders of another corporation (other than the
Company or a corporation described in subclause (iv) of clause
(a) of this subsection) shall be deemed to constitute a
Person. Further, the sale, transfer, or other disposition of a
subsidiary of the Company shall not constitute a change in
control of the Company giving rise to payments or benefits
under this Plan.
Notwithstanding any other provision hereof, a "change in
control of the Company" shall not be deemed to have occurred
by virtue of the Company entering into any agreement with
respect to, the public announcement of, the approval by the
Company's stockholders or directors of, or the consummation
of, any transaction or series of integrated transactions
(including any merger or other business combination
transaction) entered into in connection with, or expressly
conditioned upon the occurrence of, a spin-off (such
transaction or series of integrated transactions, the
"Spin-Off Transaction") immediately following which the
recordholders of the common stock of the Company immediately
prior to the Spin-Off Transaction continue to have
substantially the same proportionate ownership in the spun-off
entity as they had in the Company immediately prior to the
Spin-Off Transaction; provided that such Spin-Off Transaction
(including any related merger of other business combination
transaction) has been approved by a vote of a majority of the
Company's Continuing Directors (as defined below) then in
office. For purposes of this Plan, a "Continuing Director"
shall mean any member of the Board of the Company who is a
member of the Board as of the date of this Plan and any person
who subsequently becomes a member of the Board, if such
person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing
Directors.
B. Listings, Registration and Compliance With Laws and Regulations.
(i) Each option shall be subject to the requirement that if at
any time the Board shall determine, in its discretion, that the listing,
registration, or qualification of the shares subject to the option upon
any securities exchange or under any state or federal securities or
other law or regulation, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition to or in
connection with the granting of such
<PAGE> 8
GREAT LAKES CHEMICAL CORPORATION
1984 EMPLOYEE STOCK OPTION PLAN
As amended on February 10, 1997
Page 8
option or the issue or purchase of shares thereunder, no such option
may be exercised or paid in common stock in whole or in part unless
such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to
the Board and the optionee will supply the company with such
certificates, representations and information as the company shall
request and shall otherwise cooperate with the company in obtaining
such listing, registration, qualification, consent or approval. In the
case of officers and other persons subject to Section 16(b) of the
Securities Exchange Act of 1934, the Board may at any time impose any
limitations upon the exercise of an option which, in the Board's
discretion are necessary or desirable in order to comply with Section
16(b) and the rules and regulations thereunder. If the company, as part
of an offering of securities or otherwise, finds it desirable because
of federal or state regulatory requirements to reduce the period during
which any options may be exercised, the Board may, in its discretion
and without the optionee's consent, so reduce such period on not less
than 15 days' written notice to the optionee.
(ii) Notwithstanding the terms of this paragraph, no optionee
shall have the right to require the company to register, list or
qualify said option or any of the stock underlying such option.
C. Amendment of the Plan. Except as provided in the following
sentence and as required by law, the company's Board shall have complete power
and authority to amend this Plan at any time and no approval by the company's
stockholders or by any other person, committee or other entity of any kind shall
be required to make any such amendment effective. The Board shall not, however,
increase the maximum number of shares available for options granted under this
Plan unless such increase shall either be approved by the company's stockholders
or shall be permitted by Paragraph 10. No termination or amendment of this Plan
may, without the consent of the individual to whom any option shall theretofore
have been granted under this Plan, adversely affect the rights of such
individual under such option.
D. Captions. The captions (i.e., all italicized words) used in this
Plan are for convenience only, do not constitute a part of this Plan, and shall
not be deemed to limit, characterize or affect in any way any provision of this
Plan, and all provisions in this Plan shall be construed as if no captions had
been used in this Plan.
E. Severability. Whenever possible, each provision in this Plan and
in every option at any time granted under this Plan shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Plan or any option at any time granted under
<PAGE> 9
GREAT LAKES CHEMICAL CORPORATION
1984 EMPLOYEE STOCK OPTION PLAN
As amended on February 10, 1997
Page 9
this Plan shall be held to be prohibited by or invalid under applicable law,
then (I) such provision shall be deemed amended to accomplish the objectives of
the provision as originally written to the fullest extent permitted by law and
(ii) all other provisions of this Plan and every option at any time granted
under this Plan shall remain full force and effect.
F. No Strict Construction. No rule of strict construction shall be
applied against the company, the Board, or any other person in the
interpretation of any of the terms of this Plan, any option granted under this
Plan or any rule or procedure established by the Board.
G. Applicable Law. Every option at any time granted under this Plan
shall be deemed to be a contract made under the laws of the State of Indiana.
For all purposes, both this Plan and every option granted under this Plan shall
be construed in accordance with and governed by the laws of the State of
Indiana.
<PAGE> 1
EXHIBIT 13
[LOGO] GREAT LAKES CHEMICAL CORPORATION
BUSINESS PROFILE
1997 Revenue by Business Unit
(in millions)
- - -------------------------------------------------------------------------------
[PIE CHART] -- $309
FLAME RETARDANTS
The world's leading producer of brominated flame retardants is now the leading
supplier of antimony-based flame retardant products as well. Our customers use
these synergistic products, in combination as well as independently, to reduce
or eliminate the inherent flammability of a wide variety of combustible
materials, such as engineered plastics, urethane foams and epoxy resins.
- - -------------------------------------------------------------------------------
[PIE CHART] -- $211
INTERMEDIATES AND FINE CHEMICALS
Great Lakes is leveraging its expertise in complex chemical synthesis and
experience in handling specialized chemistries to become a world-leading
developer and manufacturer of custom chemicals. With ISO 9000 quality
manufacturing facilities on two continents, Great Lakes is well positioned to
serve a growing number of customers around the globe that choose to outsource
the custom manufacture of a variety of intermediates and fine chemicals.
- - -------------------------------------------------------------------------------
[PIE CHART] -- $245
POLYMER STABILIZERS
A broad range of stabilizing products -- from antioxidants to hindered amine
light stabilizers -- enhances critical polymer performance characteristics such
as heat and light resistance and color consistency. Great Lakes is also a
pioneer in the development and manufacture of alternative physical forms, such
as patented No Dust Blends, which satisfy market demand for additives that are
easier to process and safer for employees and the environment.
- - -------------------------------------------------------------------------------
[PIE CHART] -- $194
SPECIALIZED SERVICES AND MANUFACTURING
The company's highly profitable, narrowly focused specialty businesses
exemplify the entrepreneurial spirit that propelled Great Lakes to the
forefront of the specialty chemical industry. Serving high-growth niche
markets, these businesses open dynamic markets for Great Lakes' high-margin,
value-added products and services.
- - -------------------------------------------------------------------------------
[PIE CHART] -- $352
WATER TREATMENT
Great Lakes is the premier supplier of recreational water treatment products to
consumers throughout the world. The company's BioLab and Bayrol subsidiaries
develop and market popular pool and spa products in North America, Europe,
Australia and South Africa. In addition, Great Lakes is the world's leading
producer of bromine-based water treatment chemicals used for cooling towers,
municipal wastewater treatment and other specialty applications.
6
<PAGE> 2
[ LOGO ] GREAT LAKES CHEMICAL CORPORATION
FLAME RETARDANTS
[ PHOTO ]
Look around any home, office or vehicle, and chances are Great Lakes flame
retardant additives are hard at work, silently protecting the products
consumers rely on from the destructive effects of fire. These additives are
built into the plastic casings of computer monitors. They protect the circuit
boards found in electronic appliances. They're part of the foams and fabrics
used in furniture and automobiles, and the wiring behind walls and inside of
components. As the world's leading supplier of brominated, antimony-based and
other specialty flame retardants, Great Lakes helps manufacturers ensure that
the products they produce are safe to use.
8
<PAGE> 3
IN INDUSTRIES AS DIVERSE AS PLASTICS, CONSUMER ELECTRONICS, TEXTILES AND
BUILDING MATERIALS, MANUFACTURERS FACE THE SAME FUNDAMENTAL CHALLENGE: FINDING
A DEPENDABLE, EFFICIENT WAY TO INCORPORATE FLAME RETARDANCY AND OTHER
PERFORMANCE CHARACTERISTICS INTO THEIR PRODUCTS. AS THESE PRODUCTS BECOME MORE
COMPLEX, AND AS REGULATORS ESTABLISH NEW STANDARDS FOR FIRE SAFETY IN MARKETS
AROUND THE WORLD, COMPANIES TURN TO GREAT LAKES AND ITS COMPREHENSIVE LINE OF
FLAME RETARDANTS TO MEET THEIR HIGHLY SPECIFIC PRODUCTION REQUIREMENTS. AS THE
WORLD'S LEADING MANUFACTURER OF FLAME RETARDANT COMPOUNDS, GREAT LAKES HAS THE
TECHNOLOGY, GLOBAL RESOURCES AND EXPERTISE TO DEVELOP SOLUTIONS THAT OPTIMIZE
PRODUCT PERFORMANCE WHILE CONTRIBUTING TO MORE EFFICIENT AND HIGHER QUALITY
PROCESSING.
FLAME RETARDANTS [ BAR CHART ]
[in millions]
93 240
94 265
95 300
96 294
97 309
After a stagnant 1996, the worldwide flame retardant market gained momentum
during 1997 and approached its traditional growth levels. Increased demand from
the consumer electronics and plastics industries, especially in the fourth
quarter, propelled worldwide volumes of Great Lakes flame retardants to an
eight percent gain over 1996. Earnings from the company's joint venture
tetrabrombisphenol-A (TBBA) plant in Israel improved markedly as the facility
operated well above last year's level. In addition, volumes of staple products
such as pentabromodiphenyloxide (PBDPO), polydibromostyrene (PDBS),
hexabromocyclododecane (HBCD) and a number of custom flame retardant compounds
all surpassed 1996 levels. Despite this strong volume performance, revenues
were partially constrained by price erosion in select areas that resulted from
increased competition and general foreign currency weakness against the U.S.
dollar.
Great Lakes continues to emphasize customer- and market-focused research and
development as the key to meeting the evolving needs of its customers. These
efforts have produced a variety of new products, some of which began
commercialization in 1997. The company's South Arkansas plant began commercial
production of BI-70, a new brominated flame retardant used in both wire and
cable and light-stable packaging film applications. Sales are likewise
accelerating for BZ-54, a new non-diphenyloxide (non-DPO) product for the
flexible urethane market. In addition, the company successfully piloted its
first non-halogenated flame retardant compound with large-scale commercial
potential -- a new phosphorous-based product developed to meet a customer's
specific engineering thermoplastics requirements. Commercialization of this
product is slated for 1998.
The company further expanded its flame retardant product line -- and fortified
its world leadership position -- when it acquired Anzon, the leading global
manufacturer of antimony products. In addition to antimony trioxide, the key
synergist used with halogenated flame retardants, Anzon manufactures a variety
of user friendly products that eliminate dust and reduce yield loss. Anzon also
boasts a robust new product pipeline, which includes its recently
commercialized "super-submicron" technology that disperses additives more
quickly and completely to give customers better quality and more cost-effective
processing. While offering complementary products to most of the current Great
Lakes customer base, the Anzon acquisition also opens new downstream markets
for Great Lakes and provides a solid platform for developing new specialty
chemicals.
Quality improvement represents another strong platform for growth. In 1997 the
company demonstrated its commitment to meeting the high quality standards of
its customers by investing in a number of quality improvement projects. These
projects will ensure that Great Lakes' products lead the industry in quality
and performance.
1998 OUTLOOK The market conditions that contributed to strong flame retardant
volumes in the fourth quarter should provide abundant growth opportunities in
1998. The Asian financial instability, which had no measurable effect on 1997
results, in all likelihood will have an impact in 1998, the extent of which is
not yet known. In any event, Great Lakes stands ready with the industry's
broadest array of existing flame retardant products -- and a customer-focused
approach to research, development and applications testing -- to help
manufacturers meet new and stricter performance criteria. Great Lakes also
anticipates increased sales to electronics manufacturers as this industry
projects seven to eight percent growth in 1998. In the year ahead, Great Lakes
will boost revenues and margins by capitalizing on synergies afforded by both
the Anzon acquisition and the Polymer Stabilizers business unit, to provide the
most comprehensive basket of high-quality polymer additives to the plastics
industry. All these factors point to 1998 as a year of steady, consistent
growth.
9
<PAGE> 4
[ LOGO ] GREAT LAKES CHEMICAL CORPORATION
INTERMEDIATES AND FINE CHEMICALS
[ PHOTO ]
Complex chemical synthesis is often required to help products achieve their
highly specialized performance characteristics. Great Lakes' fine chemicals and
intermediates are key building blocks for many of the pharmaceutical products
that keep consumers healthy. They work their magic in agricultural products
that protect crops from insects and disease. They function as a key reactive
agent in the photographic process. And Great Lakes has developed a number of
end-product applications, such as a family of new bromine-based solvents for
precision and electronic cleaning.
10
<PAGE> 5
IN TODAY'S FAST-PACED MANUFACTURING ENVIRONMENT, COMPETITIVE ADVANTAGE GOES TO
THOSE COMPANIES THAT CAN STREAMLINE AND ACCELERATE THE PROCESS OF DEVELOPING
AND INTRODUCING NEW, HIGH QUALITY PRODUCTS. WITH INCREASING FREQUENCY,
COMPANIES ARE MEETING THIS OBJECTIVE BY OUTSOURCING STRATEGIC SEGMENTS OF THE
PRODUCT DEVELOPMENT PROCESS TO ORGANIZATIONS WITH THE BROAD RESOURCES AND
PROVEN EXPERTISE TO MEET HIGHLY SPECIFIC REQUIREMENTS. GREAT LAKES IS FAST
EMERGING AS A LEADING RESOURCE FOR PERFORMING THE COMPLEX CHEMICAL PROCESSES
THAT ARE VITAL TO NEW PRODUCT DEVELOPMENT. WITH A STRONG PRESENCE IN BOTH THE
UNITED STATES AND EUROPE, GREAT LAKES IS WELL EQUIPPED TO PERFORM A VARIETY OF
ACTIVITIES -- FROM CREATING COMPLEX ORGANIC MOLECULES THAT MEET SPECIFIC
PERFORMANCE CRITERIA, TO DEVELOPING AND PILOTING ECONOMICAL MANUFACTURING
PROCESSES FOR PHARMACEUTICAL, AGROCHEMICAL AND OTHER FINISHED PRODUCTS
DEVELOPED BY CUSTOMERS.
INTERMEDIATES AND FINE CHEMICALS [ BAR CHART ]
[in millions]
93 145
94 167
95 197
96 196
97 211
Great Lakes' strategic decision to focus on those core specialty businesses
that offer the best potential for high, consistent growth has changed the face
of its intermediates and fine chemicals business. In 1997 Great Lakes began the
process of exiting the furfural and derivatives business to concentrate on
meeting growing customer demand for high-value fine chemical compounds, as well
as bromine-based chemicals. As part of the company's plan to spin off its
petroleum additives business, the European bromine and fine chemicals
businesses formerly managed by Octel were integrated into Great Lakes' global
bromine and fine chemicals businesses. This more focused approach will allow
the company to leverage its raw materials and technology resources to serve
areas where recent performance promises a significant return on this
investment.
Great Lakes built on its strong 1996 sales of bromine and bromine derivatives
by meeting or exceeding its 1997 performance targets in these areas. In
addition to increasing its sales of derivatives to the photographic and
pharmaceutical markets, the company signed a number of new contracts with
companies worldwide to perform custom research projects. Results in 1997 also
reflect the successful introduction of several price increases for certain
bromine derivatives and intermediates. In 1998 and beyond, this business unit
should realize further enhanced margins as the company explores new bromine
production strategies that will impact the company's entire range of bromine
products.
The company's custom synthesis activities continue to yield significant
long-term manufacturing opportunities that contribute significantly to the
business unit's revenue stream. Great Lakes' Newport, Tennessee, facility is
operating at optimal capacity to meet the requirements of a seven-year contract
to supply one customer with DBB, a key agrochemical intermediate used in an
acaricide. Full-scale production is also underway for BMA, a key intermediate
used in a new AIDS drug, and for OTBN, a new intermediate used in a variety of
beta-blocker drugs. Revenues should continue to increase as more agrochemical
and pharmaceutical manufacturers see the benefits of outsourcing their complex
intermediate and fine chemical synthesis. Great Lakes is exploiting this market
opportunity by fortifying relationships with major life science customers, by
making acquisitions and by developing new process technologies.
Great Lakes also made its first deliveries of its HyperSolve(TM) NPB, the first
of a family of new Great Lakes solvents based on n-propyl bromide chemistry.
HyperSolve, which the U.S. Environmental Protection Agency is expected to
approve under its Significant New Alternatives Policy, offers a lower cost,
environmentally friendly alternative to ozone depleting solvents used in
precision applications such as electronics, aerospace and the military. This
new technology, which is also under review by manufacturers of sealants and
adhesives as a raw material solvent, leaves Great Lakes well positioned to
increase its share of the more than $10 billion solvent market.
1998 OUTLOOK As Great Lakes refocuses on its core specialty chemical
businesses, the Intermediates and Fine Chemicals business unit becomes an even
more important ingredient in the company's formula for success. The continuing
challenge is to manage our bromine resources strategically to concentrate on
the highest value-added applications. We will also exploit our global
manufacturing capacity and expertise to develop our niches in custom
intermediate and fine chemical synthesis and to penetrate new and expanding
markets.
11
<PAGE> 6
[ LOGO ] GREAT LAKES CHEMICAL CORPORATION
POLYMER STABILIZERS
[ PHOTO ]
Plastics compounds gain many of their important performance characteristics
from special polymer stabilizer additives such as antioxidants and UV
stabilizers produced by Great Lakes. Manufacturers use them to protect a
variety of products -- from car seats and steering wheels to the colorful
fibers used in carpets and upholstery -- from the damaging effects of sunlight.
They are incorporated into polyethylene pipes used for water and natural gas
transmission to assure long-term stability. And Great Lakes' revolutionary No
Dust Blends simplify manufacturing processes by compressing multiple additives
into precisely calibrated granular mixtures.
12
<PAGE> 7
LESS THAN FIVE YEARS AFTER IT ENTERED THE DYNAMIC AND FAST-GROWING POLYMER
STABILIZERS BUSINESS, GREAT LAKES HAS BECOME THE WORLD'S SECOND-LARGEST
SUPPLIER OF POLYMER STABILIZERS BY DEVELOPING HIGH-PERFORMANCE NEW PRODUCTS,
RESPONDING TO INCREASING DEMANDS OF THE MARKET AND EXPANDING ITS GLOBAL
MANUFACTURING AND DISTRIBUTION CAPABILITIES. EVEN IN THE FACE OF FIERCE
COMPETITION, GREAT LAKES CONTINUES TO IMPROVE ITS MARKET SHARE BY WORKING WITH
CUSTOMERS TO DEVELOP INNOVATIVE STABILIZATION SYSTEMS, BY FORMULATING CUSTOM
BLENDS AND BY PROVIDING TECHNICAL SERVICE WORLDWIDE.
POLYMER STABILIZERS [ BAR CHART ]
[in millions]
93 81
94 164
95 224
96 242
97 245
Great Lakes manufactures antioxidants, ultraviolet light stabilizers and
customized additive blends in the three major polymer stabilizer markets --
Europe, North America and the Far East. These products expand the use of
plastics by providing better protection against heat and light degradation and
by making them cleaner to process and easier to recycle. In 1997 sales volume
increased 16 percent worldwide despite severe price competition and an
unusually strong U.S. dollar. Operating income rose more than 30 percent as
increased volumes, more efficient manufacturing operations and other cost
reduction initiatives boosted profit margins.
The company's antioxidant plant in Newport, Tennessee, enabled Great Lakes to
establish a strong manufacturing base in the key North American market, which
accounts for almost one-third of the worldwide volume of plastics additives.
The facility began production last year of Anox(R) 20, a high-volume,
high-performance phenolic antioxidant used in polyolefins and engineering
polymers. In the spring of 1998, the company will start up a second
manufacturing line in Newport to produce the phenolic antioxidant Anox(R) PP-18,
thereby gaining economies of scale, optimizing throughput and lowering
production costs.
New product introductions are providing additional platforms for growth. Sales
of UV stabilizers such as Lowilite(R) 77, Lowilite(R) 62 and Uvasil(R) 299,
exceeded expectations and should continue to grow following recent approvals by
large polymer manufacturers. Great Lakes' proprietary No Dust Blend (NDB)
technology -- which provides a calibrated, uniform combination of
high-performance additives blended into one dustless granule -- should continue
its above-average growth in 1998 as an alternative to commonly used powders.
These NDB compounds simplify processing, handling and storage; enhance product
quality; eliminate the use of inactive binders; and reduce workers' health and
safety risks.
Great Lakes plans to produce commercial quantities of another new product, a
silicon-based antioxidant, whose low extractability will expand the use of
plastics. The company will further extend its geographic reach through a
world-scale antioxidants joint venture in Saudi Arabia, one of the fastest
growing polyolefin producing countries in the world.
The company's acquisition of the Anzon antimony business provides yet another
opportunity to exploit the natural synergies with the Flame Retardants business
unit. Great Lakes now offers an even broader combination of high-performance
polymer additives, strengthening the company's commit-ment to provide
comprehensive solutions to all its customers' additive needs.
1998 OUTLOOK Growth will be driven by innovative solutions for polymer
stabilization, enhanced sales and technical service, as well as further efforts
to increase the company's market penetration and manufacturing presence in
China, South America and other regions. Great Lakes has the solid customer
relationships, global manufacturing capabilities and enhanced service support
systems to increase its share of the highly competitive $1.6 billion plastics
additives market.
13
<PAGE> 8
[ LOGO ] GREAT LAKES CHEMICAL CORPORATION
SPECIALIZED SERVICES AND MANUFACTURING
[ PHOTO ]
Great Lakes excels in identifying niche markets that provide outlets for its
value-added products. In 1997 FM-200(R) portable fire extinguishers were
unveiled to protect the interiors of military vehicles and other close quarters
where human safety is critical. FM-200 systems also protect valuable
possessions such as the Thrust SSC supersonic car and collections of sensitive
materials like digital tapes. The company's OSCA subsidiary uses specially
designed marine vessels to extend its oil field services beyond the Gulf of
Mexico's shelf to the deep-water market. The toxicological testing services of
WIL Research help many industries develop new products that are as safe as they
are effective.
14
<PAGE> 9
THROUGH INVESTMENTS IN COMPLEMENTARY, HIGH-MARGIN BUSINESSES, GREAT LAKES
LEVERAGES ITS CORE COMPETENCIES AND CAPITALIZES ON OPPORTUNITIES FOR LONG-TERM
GROWTH. IN 1997 GREAT LAKES STRENGTHENED ITS SPECIALIZED SERVICES AND
MANUFACTURING BUSINESS BY RETAINING ONLY THOSE BUSINESSES THAT COMPLEMENT THE
COMPANY'S WELL FOCUSED SPECIALTY CHEMICAL PORTFOLIO WHILE MEETING KEY OPERATING
PERFORMANCE CRITERIA. EACH OF THESE BUSINESSES RECORDED INCREASES IN BOTH SALES
AND OPERATING INCOME.
SPECIALIZED SERVICES AND MANUFACTURING [ BAR CHART ]
[in millions]
93 125
94 118
95 152
96 190
97 194
OIL FIELD SERVICES Through its OSCA, Inc. subsidiary, Great Lakes finds a
unique and profitable outlet for its bromine technology. OSCA's wide product
array includes bromine-based well completion, drill-in and stimulation fluids
as well as ancillary services. OSCA's on-site personnel help customers increase
production through such services as gravel packing, high-pressure frac packing,
well stimulation and coiled tubing well intervention.
Steadily growing oil demand and declining reserves continue to fuel increased
drilling activity. In 1997 OSCA bolstered its leadership position with products
and services that enhance the productivity of existing oil and gas wells and
contribute to the recovery of energy resources. Boosted by the strong
performance of its domestic completion services division and recent investments
in marine services and coiled tubing businesses, OSCA posted 18 percent revenue
gains over 1996.
OSCA successfully entered the marine well services business in 1997 with a
vessel designed to provide high-pressure frac packing services. In 1998 OSCA
will add two more vessels that are specially designed for the challenging
deep-water segment of the Gulf of Mexico. These vessels have the capacity to
provide sand control, stimulation and completion fluid for five to 10 wells at
a time. This floating warehouse strategy has diversified OSCA's service
offerings and created pull-through sales for its down-hole tool and coiled
tubing divisions.
For 1998 OSCA will apply this strategy to other key geographic regions,
particularly the North Sea and Latin America. By adding these complementary
services internationally, OSCA will further capitalize on its strong,
vertically integrated service capabilities.
FLUORINE CHEMICALS With worldwide industry sales of $6 billion, fluorine
chemicals represent a key growth platform for Great Lakes to capitalize on its
core strengths in manufacturing, technology and process development. The
company is implementing a specialty chemical niche market strategy with its
fluorine-based compounds, FM-200(R) and HFC-32, which continue to gain worldwide
recognition and acceptance for their superior performance and environmental
benefits. Increased demand for both of these products boosted sales and
operating income to record heights in 1997.
FM-200, an environmentally friendly fire extinguishing agent that leaves no
residue, is now used in tens of thousands of total-flooding fire suppression
systems around the world. In 1997 it received approval by the U.S.
Environmental Protection Agency for use in portable fire extinguishers, opening
new sales opportunities in applications requiring a safe, non-ozone depleting
alternative to halon 1211.
FM-200's space-weight ratio and performance characteristics, combined with its
unmatched safety features, make it the most successful halon replacement on the
market. Because of this superior performance, FM-200 systems were selected to
protect an array of high-value critical assets last year, such as historical
artifacts at the Antiques Library in Cairo, the first draft of the Declaration
of Independence, the U.S. Navy's new nuclear-powered air-craft carrier under
construction, and the engine of Thrust SSC, a supersonic car that shattered the
land-speed record. Success with Thrust SSC proves FM-200 can meet or exceed the
strictest performance criteria and may lead to other opportunities in the
aerospace industry.
HFC-32 is a key component of environmentally friendly refrigerant blends used
in commercial refrigeration applications. With demand growing in North America
and Europe, Great Lakes has the production capabilities and sales support to
give major manufacturers access to the latest technology.
TOXICOLOGICAL TESTING WIL Research Laboratories, Inc. provides a broad array
of interdisciplinary research and toxicological assessment services. From its
recently expanded facility in Ashland, Ohio, WIL conducts critical product
research and develop-ment for pharmaceutical, chemical, veterinary medical,
agricultural, food and consumer products industries. This expanded capacity
propelled WIL to record sales and forms a solid platform for continued growth.
1998 OUTLOOK By expanding global penetration and distribution of their
customer-preferred products and services, these businesses are poised to take
advantage of high growth rates in diverse specialty markets and contribute to
the overall success of Great Lakes.
15
<PAGE> 10
[ LOGO ] GREAT LAKES CHEMICAL CORPORATION
WATER TREATMENT
[ PHOTO ]
Pool owners may not recognize Great Lakes by name, but they know all about the
pool and spa chemical products manufactured by the company's BioLab and Bayrol
subsidiaries. Their patented water treatment technologies provide exceptional
pool and spa maintenance results, keeping the water clear and algae free.
Innovations like Smart Sticks(TM) demonstrate how improvements in formulation
can make pool and spa care more easy and effective than ever. An active
research and development effort is also producing an expanding range of product
offerings.
16
<PAGE> 11
AGGRESSIVE INTERNAL GROWTH INITIATIVES, COUPLED WITH EXPANDING MARKETS AND
CONSISTENT GROWTH IN NEW POOL CONSTRUCTION, ARE INCREASING BUSINESS
OPPORTUNITIES FOR GREAT LAKES, A LEADING GLOBAL SUPPLIER OF WATER SANITIZERS
FOR RESIDENTIAL, COMMERCIAL AND INSTITUTIONAL POOLS AND SPAS AND RECREATIONAL
MARKETS SUCH AS THEME PARKS. THROUGH ITS BIOLAB AND BAYROL SUBSIDIARIES, THE
COMPANY HAS A STRONG PRESENCE IN THE MAJOR RECREATIONAL WATER MARKETS OF NORTH
AMERICA, EUROPE, AUSTRALIA, NEW ZEALAND AND SOUTH AFRICA, WITH BRANDS SUCH AS
BIOGUARD(R), OMNI(R), GUARDEX(R), HYDROTECH(R), POOL TIME(R), AQUA CHEM(R) AND
BAYROL(R). IN ADDITION, GREAT LAKES IS THE WORLD'S LEADING PRODUCER OF
BROMINE-BASED WATER TREATMENT CHEMICALS USED FOR COOLING TOWERS, MUNICIPAL
WASTEWATER TREATMENT AND OTHER SPECIALTY APPLICATIONS.
WATER TREATMENT [ BAR CHART ]
[in millions]
93 361
94 383
95 419
96 430
97 352
Despite unfavorable weather conditions in certain markets throughout the year,
the domestic water treatment business recorded a 16 percent increase in sales,
excluding the divested pool products distribution network. Tighter cost
controls and improved manufacturing efficiencies also fueled a 35 percent gain
in operating income over 1996. In 1997 BioLab discontinued its BCDMH
manufacturing line in Lake Charles, Louisiana, and consolidated production at
its Adrian, Michigan, facility, an ISO 9002 plant. In Europe, the company's
Bayrol subsidiary improved operating efficiencies and reduced inventories by
more than 40 percent.
BioLab received a record eight new technology and process-based patents in 1997
and filed applications for several new ones in both domestic and international
markets. The company also achieved increased market penetration with several
new product introductions, including Polysheen(R) Blue, Optimizer(R) and the
Softswim(R) filter cleaner.
Great Lakes continued to help customers, consumers, employees and suppliers
keep pace with its new products and advanced technologies by offering a number
of educational seminars. With the cooperation and support of its dealer
network, the company presented seminars on pool and spa maintenance to more
than 25,000 consumers. In addition, it held two extensive professional
conferences in the United States for its network of BioGuard Authorized
Dealers, as well as additional conferences in Canada, Australia and South
Africa. It also conducted 23 educational seminars covering chemical technology
at locations throughout the United States. These programs are among the most
comprehensive educational programs available in the industry.
The Internet is providing yet another forum for Great Lakes' water treatment
business to communicate product information and advance its marketing
initiatives. To reach pool and spa owners, it launched World Wide Web sites
dedicated to specific product lines such as BioGuard, OMNI, Pool Time and AQUA
CHEM. Visitors to these sites can find valuable pool and spa product
information, promotions, product updates and tips on pool care. The BioGuard
site also provides consumers access to their nearest U.S. dealer locations.
The company also redesigned several product lines, including BioGuard's
SpaGuard(R) and the distributor products division's Guardex product lines, to
strengthen brand recognition and accentuate specific product features. These
product lines feature new packaging with an important color-coded functionality
designed to enhance consumers' understanding of pool care and maintenance.
Also, updated designs helped establish consumer friendly identities.
Globally, Great Lakes introduced new product lines in Australia and expanded
distribution of its BioGuard products in South Africa by targeting pool
builders and smaller retailers. The company also introduced its industrial
water treatment compounds to pulp and paper manufacturers in several new
markets, including Europe and Japan.
1998 OUTLOOK With a strong portfolio of new products, Great Lakes' worldwide
water treatment business is poised to strengthen and leverage its leadership
position. In the United States, approximately 140,000 new in-ground pools,
450,000 above-ground pools and 350,000 spas are added each year, creating a
corresponding growth in demand for water-treatment chemicals and related
products. In addition, the company's bromine-based biocides are gaining broader
market acceptance as environmentally friendly solutions for commercial,
industrial and household water treatment applications, as well as for
applications in the pulp and paper industries. This technology will continue to
be a strong focus in 1998.
Great Lakes' well established presence in important world markets gives the
company a solid base from which to optimize the revenue potential for its
multiple brands and related products. By building on the base of its recognized
brand names, extending the applications and reach of its products, and
achieving further operational efficiencies, Great Lakes expects to grow well
ahead of water treatment industry averages in 1998.
17
<PAGE> 12
FINANCIAL REVIEW
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
(in millions of dollars, except per share data)
1997 1996 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS
Net sales $1,311.2 1,352.3 1,291.6 1,097.1 952.0
Operating income $ 141.8 183.9 198.3 151.6 150.6
Income from continuing operations
before income taxes $ 117.2 184.0 200.2 169.7 166.0
Income taxes $ 45.4 63.4 68.0 44.0 37.6
Percent of income before income taxes 38.7 34.5 34.0 25.9 22.6
Net income from continuing operations $ 71.8 120.6 132.2 125.7 128.4
Net (loss) income from discontinued operations (14.9) 129.7 163.4 153.0 144.3
- - ------------------------------------------------------------------------------------------------------
Total net income $ 56.9 250.3 295.6 278.7 272.8
Percent of stockholders' average equity 4.1 17.2 21.7 21.7 23.6
FINANCIAL POSITION AT YEAR-END
Working capital $ 364.2 424.1 399.7 286.8 283.2
Current ratio 2.2 2.5 2.4 2.3 2.5
Capital expenditures $ 133.0 168.7 182.9 86.0 57.8
Total assets $2,270.4 2,352.7 2,179.9 1,810.8 1,632.8
Long-term debt $ 561.5 496.2 331.2 133.1 49.0
Percent of total capitalization 29.1 24.4 18.9 8.8 4.3
Stockholders' equity $1,307.4 1,486.9 1,416.2 1,310.9 1,256.6
Per share $ 22.18 24.13 21.92 19.48 17.63
SHARE DATA
Basic earnings (loss) per share
Continuing operations $ 1.20 1.90 2.02 1.80 1.80
Discontinued operations (0.25) 2.04 2.50 2.20 2.02
- - ------------------------------------------------------------------------------------------------------
Total $ 0.95 3.94 4.52 4.00 3.82
Diluted earnings (loss) per share
Continuing operations $ 1.19 1.89 2.00 1.79 1.78
Discontinued operations (0.25) 2.02 2.48 2.17 1.99
- - ------------------------------------------------------------------------------------------------------
Total $ 0.94 3.91 4.48 3.96 3.77
Cash dividends per share
Declared during year $ 0.63 0.57 0.44 0.39 0.35
Paid during year $ 0.62 0.54 0.43 0.38 0.34
Payout as percent of net income 66.3 14.5 9.7 9.8 9.2
Shares outstanding (basic)
Average during year 60,041 63,539 65,364 69,659 71,329
At year-end 58,944 61,613 64,604 67,297 71,275
Stock price
High $ 54 7/8 78 5/8 74 5/8 82 84
Low $ 41 1/2 44 1/4 55 3/4 48 3/4 64 1/2
At year-end $ 44 7/8 46 3/4 72 57 74 5/8
- - ------------------------------------------------------------------------------------------------------
</TABLE>
Great Lakes Chemical Corporation 19
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This annual report, including Management's Discussion and Analysis, contains
both historical information and forward-looking statements. The
forward-looking statements involve risks and uncertainties that could affect
the Company's operations, markets, products, services, prices and factors as
discussed in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission. These risks and uncertainties include, but
are not limited to, economic, competitive, governmental and technological
factors. Accordingly, there is no assurance that the Company's expectations
will be realized.
OVERVIEW
In 1997 the Company took a number of actions to focus on its core specialty
chemical businesses. Reported as discontinued operations in the accompanying
financial statements is the announced spin-off of the Company's petroleum
additives business (Octel) as well as several non-core and underperforming
businesses--furfural and derivatives, Eastern European trading (Chemol) and
environmental services--that the Company decided to exit. In addition, the
Company recorded a special charge to provide for the cost associated with
restructuring remaining operations, exiting certain product lines and to write
down impaired assets. Also, the Company strengthened its polymer additives
market position by acquiring Anzon, a producer of antimony-based flame
retardants and other products.
CONTINUING OPERATIONS
The following table sets forth for the Company's continuing operations the
percentage relationship to net sales of certain income statement items:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------
1997 1996 1995
- - ------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0%
Gross Profit 28.5 28.3 30.5
Selling and
Administrative Expense 10.7 11.5 11.9
Research and
Development Expense 3.2 3.2 3.2
Special Charge 3.8 -- --
- - ------------------------------------------------------------------
Operating Income 10.8 13.6 15.4
Interest and Other Income 2.4 4.2 2.1
Interest and Other Expense 4.2 4.2 2.0
- - ------------------------------------------------------------------
Income before Income Taxes 9.0 13.6 15.5
Income Taxes 3.5 4.7 5.3
- - ------------------------------------------------------------------
Net Income from
Continuing Operations 5.5% 8.9% 10.2%
==================================================================
</TABLE>
RESULTS OF CONTINUING OPERATIONS -- 1997 COMPARED WITH 1996
Sales for the year amounted to $1,311 million, a decrease of $41 million from
the prior year. Sales by business unit are shown in the following table (in
millions):
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------
Percent Inc./
(Dec.) Over
1997 1996 1995 Prior Year
- - --------------------------------------------------------------------------
$ % $ % $ % 1997 1996
- - --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Flame Retardants 309 24 294 22 300 23 5 (2)
Intermediates
and Fine
Chemicals 211 16 196 14 197 15 8 (1)
Polymer
Stabilizers 245 19 242 18 224 17 1 8
Specialized
Services and
Manufacturing 194 14 190 14 152 13 2 25
Water Treatment 352 27 430 32 419 32 (18) 3
- - --------------------------------------------------------------------------
1,311 100 1,352 100 1,292 100 (3) 5
==========================================================================
</TABLE>
On an overall basis, the increase (decrease) from the prior year results from
the following (in millions):
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------
1997 1996
- - --------------------------------------------------------------------------
<S> <C> <C>
Selling Prices $ (23) $ 8
Volume 155 86
Dispositions (155) (27)
Acquisitions 9 3
Foreign Exchange (27) (10)
- - --------------------------------------------------------------------------
$ (41) $ 60
==========================================================================
</TABLE>
Flame Retardants sales were $309 million in 1997, an increase of $15 million
over the $294 million reported in 1996. The acquisition of Anzon, a producer
of antimony-based products, contributed about $9 million of the increase.
Excluding the acquisition, the business recorded a strong volume improvement
which was primarily offset by the negative effects of lower selling prices and
foreign exchange as the U.S. dollar strengthened vis-a-vis the Japanese yen
and the German mark. Volume for key products was strong throughout the year in
U.S. and Far Eastern markets. European markets showed improvement in the
latter part of the year. Selling prices, which began to soften in late 1996,
remained under pressure throughout 1997. It appears that some price
stabilization has occurred as selective price increases were successfully
implemented in the Far East during the second half of 1997 and in Europe
during the fourth quarter of 1997. Worldwide market share was maintained in a
very competitive environment.
Intermediates and Fine Chemicals sales of $211 million increased $15 million
over the $196 million reported in 1996. The increase results primarily from
the introduction of new fine chemical products developed in collaboration with
customers and the introduction of HyperSolve(TM), a bromine-based solvent.
Prices and foreign exchange were small positives for the year.
Polymer Stabilizers sales amounted to $245 million as compared to $242 million
recorded in the prior year. Volume improvements of about 16 percent were
offset by a decline in its average selling prices of about 8 percent and
unfavorable currency effects. Antioxidant volume gains led a volume expansion
that was achieved across all product areas. The growth in antioxidants
20 Great Lakes Chemical Corporation
<PAGE> 14
resulted from customer acceptance of new proprietary products and physical
forms and expanded presence in both the U.S. and Far Eastern markets. Recent
market indications suggest that price pressure is beginning to ease.
Specialized Services and Manufacturing sales were $194 million in 1997 as
compared to $190 million in 1996. The 1996 amount included the sales of E/M
Corporation which was sold in November 1996. Excluding the divestiture, 1997
sales increased almost 20 percent primarily due to volume improvements. Sales
in the fluorine segment increased approximately 18 percent over 1996 as the
FM-200(R) fire extinguishant product expanded its geographic presence and
entered the marine market with a portable fire extinguisher. OSCA, our oil
field services business, posted increased sales of about 18 percent as a
result of meeting customer requirements for a full service supplier and by
entering into the deep water well marine service market. WIL, our
toxicological testing service business, sales increased approximately 27
percent due to increased utilization of its expanded facilities and changes in
the type of test services provided.
Water Treatment sales totaled $352 million in 1997 compared to $430 million in
the prior year. Results in 1996 included $126 million of sales related to a
pool products distribution business that was sold in September, 1996.
Excluding the divestiture, sales increased approximately 16 percent over the
prior year. The sales gain was essentially all volume related as average
selling prices improved only 1 percent while currency had a 2 percent negative
effect. Volume gains were achieved in all markets except Europe. The U.S.
recreational water treatment business achieved significant growth in both its
branded and distributor market segments.
Gross profits for 1997 amounted to $374 million compared to $383 million in
1996. The change in gross profit from the prior year resulted from the
following (in millions):
<TABLE>
<CAPTION>
- - --------------------------------------------------------
<S> <C>
Selling Price Decreases $ (23)
Volume Increases 55
Cost Increases (11)
Dispositions (29)
Acquisitions 2
Foreign Exchange (3)
- - --------------------------------------------------------
$ (9)
========================================================
</TABLE>
Cost increases resulted from higher cost of raw materials, primarily chlorine
and energy, and increased depreciation. Capacity utilization increased in most
facilities. As a percentage of sales, gross profit was 28.5 percent, a slight
improvement over the 28.3 percent in the prior year.
Selling, administrative and research expenditures amounted to $182 million in
1997 compared to $199 million in 1996, a decrease of $17 million from the
prior year. The reduction reflected the benefits of divestitures, $24 million,
and favorable foreign exchange, $5 million, offset, in part, by cost increases
including a $3 million provision for potential litigation settlements. As a
percentage of sales, SAR improved about 1 percentage point amounting to
approximately 14 percent for 1997. This improvement resulted from the
disposition of a business that had a disproportionately high selling and
administrative cost structure. Spending on research and development has
remained constant as a percentage of sales over the last several years.
The special charge of $50 million in 1997 provides for, among other things,
the restructuring of the Company's European water treatment business, closing
a BCDMH manufacturing facility in Louisiana and a pharmaceutical intermediates
plant in Arkansas, and withdrawal from a European joint venture. It is
estimated that these actions will result in a pre-tax savings of approximately
$3 million in 1998, primarily from depreciation.
Operating income, including the special charge, amounted to 11 percent of
sales. Excluding the special charge, operating income was 15 percent of sales,
a 1 percentage point improvement from the 14 percent achieved in 1996.
Interest and other income amounted to $32 million for 1997 compared to $57
million for the prior year. 1996 included a net gain of $19 million from
breakup fees when NOWSCO Well Service Ltd. accepted an acquisition offer that
the Company was unwilling to meet and a net gain of $13 million from the sale
of the Company's subsidiary, E/M. Excluding the aforementioned items, the $7
million increase in 1997 was attributable to increased interest income, in
part, related to loans to Octel to finance the acquisition of minority owners
and the increased earnings of affiliates.
Interest and other expenses in both 1997 and 1996 amounted to approximately
$56 million as follows (in millions):
<TABLE>
<CAPTION>
- - -------------------------------------------------------------
1997 1996
- - -------------------------------------------------------------
<S> <C> <C>
Interest Expense $28 $18
Amortization of Goodwill 4 4
Environmental 10 11
Asset Write-off and Redundancy -- 11
Other 14 12
- - -------------------------------------------------------------
$56 $56
=============================================================
</TABLE>
The increase in interest expense resulted from higher borrowings related to
acquisitions, capital expenditures and share repurchases. Environmental
expense in both years is related to a provision for estimated remediation
costs of a former plant site sold by the Company in the early 1980s.
Income taxes were $45 million, or effectively 38.7 percent of income, for 1997
compared to $63 million, or effectively 34.5 percent, for 1996. The increase
in the effective rate is primarily related to the lower tax rate on the
special charge of approximately 22 percent because certain charges are not
expected to result in a tax benefit. Excluding the effect of this special
charge, the effective tax rate was 34 percent.
Reported net income for 1997 was $72 million, or $1.19 per share, compared to
$121 million, or $1.89 per share, in 1996. Excluding the after-tax effect of
the special charge, $39 million, and the environmental and legal provision of
$6 million and $2 million, respectively, net income amounts to $119 million,
or $1.97 per share, as compared to 1996 net income of $120 million, or $1.88
per share, adjusted for after-tax effects of miscellaneous charges, gains on
E/M and on the NOWSCO break-up fee.
Great Lakes Chemical Corporation 21
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF CONTINUING OPERATIONS -- 1996 COMPARED WITH 1995
Sales for 1996 amounted to $1,352 million compared to $1,292 million in 1995,
an increase of $60 million, or 4.6 percent.
Flame Retardants sales of $294 million were approximately 2 percent short of
the record performance in 1995. Even though volumes increased, reduced product
prices and the negative effects of a strong dollar vis-a-vis both the Japanese
yen and the German mark more than offset the volume improvement. Market demand
was weak all year, particularly in automotive, wire and cable and consumer
electronics. A sluggish European economy also held down customer requirements.
Intermediates and Fine Chemicals sales of $196 million were comparable with
the prior year. Sales of agricultural chemicals, bromine and derivatives and
fine chemicals were essentially flat following a very strong performance in
1995.
Polymer Stabilizers sales for the year increased $18 million, or approximately
8 percent, over 1995. On an overall basis, the sales improvement was
attributable to volume gains as market conditions and competitive activity
restricted price improvements and the effect of currency fluctuations was
negative. The lower growth rate experienced by this business unit in 1996
reflected a stagnant European economy, our largest market, where total
plastics output declined about 10 percent in 1996. End-use markets in North
America and the Far East grew at a modest rate. The business unit improved
market share outside of Europe, in part, by bringing onstream an antioxidant
production facility in Newport, Tennessee, and establishing a joint venture in
Korea.
Specialized Services and Manufacturing sales were $190 million in 1996 as
compared to $152 million in 1995. OSCA, the Company's oil field services
business, sales improved approximately 35 percent from the prior year as
drilling activity in the Gulf of Mexico expanded and the business extended its
presence in international markets. Fluorine chemicals sales grew approximately
25 percent as the FM-200(R) fire extinguishing product strengthened its
worldwide market position.
Water Treatment sales gained $11 million primarily due to volume improvements.
U.S. recreational water treatment sales posted strong growth to distributors
and mass merchandisers in an average weather year. Volumes in Europe suffered
due to cool weather conditions during the pool season. Competitive pressure
allowed only minimal price improvements which were mostly offset by
unfavorable currency effects.
Gross profits amounted to $383 million in 1996 compared to $394 million in
1995. The $11 million decline reflects the negative effects of divestitures,
higher manufacturing and raw materials costs and unfavorable currency effects
partially offset by increased prices and volumes.
SAR expense of $199 million increased $3 million over the prior-year period
and as a percentage of sales was 15 percent, a slight decline from the
prior-year period.
Interest and other income increased $30 million from 1995 primarily due to the
break-up fees associated with the failed NOWSCO acquisition and the gain on
the sale of E/M.
Interest and other expense increased $31 million from 1995 primarily due to
provision for environmental and redundancy costs and asset write-off recorded
in 1996.
Net income from continuing operations was $121 million, or $1.89 per share,
compared to $132 million, or $2.00 per share in the 1995 period. The share
repurchase program benefited earnings by approximately $0.02 per share.
DISCONTINUED OPERATIONS
Discontinued operations include the results of the Company's petroleum
additives business, Octel, and the furfural and derivatives, Eastern European
trading and environmental services businesses. Also included is a special
provision of $137 million, net of income taxes, related to estimated losses on
divestitures and taxes related to repatriation of earnings from Octel. The
historical operating results of the Octel business which will be spun off to
shareholders is reviewed below. These results may not reflect the results of
operations that Octel would have achieved had Octel been a separate
independent company.
1997 compared to 1996 -- Excluding special provisions, Octel reported sales of
$531 million and net income of $119 million for 1997 compared to sales of $590
million and net income of $131 million for 1996. The decline in sales and
earnings continues to reflect the reduction in demand for alkyl lead antiknock
compound (TEL). Retail TEL volume declined about 13 percent from the prior year
while price improvement averaged about 2 percent. Volume declines exceeded
recent trends, in part, due to the timing of deliveries. The lower level of
price improvement reflects a continued shift in the geographic mix of customers
and price competition. Wholesale volumes declined by about 20 percent from 1996
because of the Mexican phaseout of leaded gasoline. This market had been served
by E.I. du Pont de Nemours & Company with TEL purchased from Octel. Prices in
the wholesale market improved due to contractual price escalators. The ratio
between retail TELsales and wholesale TEL sales was 70/30. Operating income, as
a percent of sales, was 42 percent for 1997, a decline of 1 percentage point
from 1996, as Octel has been generally successful in scaling back operations in
line with the decline in TEL.
1996 compared to 1995 -- Octel's net sales decreased $32 million in 1996 to
$590 million from $622 million in 1995. Net income was $131 million and $149
million in 1996 and 1995, respectively. The decrease in net sales was
primarily attributable to a decline in sales volumes of $48 million, which was
partly offset by a price increase of $19 million. In addition, foreign
exchange losses totaled $3 million. In 1996, the retail volume of TEL sold
declined approximately 13 percent, which was higher than the 8 to 10 percent
annual market decline experienced previously. No single factor accounted for
the decline, and the Company believes it maintained its share of the worldwide
retail TEL market during this period. Retail sales prices of TEL increased by
approximately 4 percent in 1996 as compared to 1995, which is lower than the
rate of increase in 1995. Sales of TEL on a wholesale basis increased
approximately 5 percent in 1996 as compared to 1995. The ratio between the
Company's retail TEL sales and wholesale TEL sales was 68/32 in 1996 as
compared to 72/28 in 1995. Income declined because lower TEL volumes were only
partially offset by increased sales prices.
FINANCIAL CONDITIONS AND LIQUIDITY
Cash flow from operating activities of the continuing operations amounted to
$193 million compared to the $209 million generated in 1996. This cash flow,
coupled with increased commercial paper borrowings of $58 million, cash
provided by the discontinued operations of $64 million and use of cash and
cash equivalents of $67 million, funded $133 million in plant and equipment
additions, acquisitions of $91 million, share repurchases of $129 million and
$38 million in dividends to shareholders.
22 Great Lakes Chemical Corporation
<PAGE> 16
The Company's investment in working capital, excluding cash and cash
equivalents, increased approximately $8 million. Accounts receivable increased
$4 million from 1996 as a result of trade accounts receivable increasing
almost $15 million due to increased sales and the acquisition of Anzon offset
by a $12 million reduction in non-trade accounts receivable. Day sales
outstanding in accounts receivable improved four days from 73 days to 69 days.
Inventories at December 31, 1997, were $298 million, an increase of
approximately $21 million from the prior year. The increase resulted from the
Anzon acquisition and a planned build-up in the polymer stabilizer business to
meet anticipated demand. Inventory turnover at 3.3 times per year improved
slightly from the prior year.
Accounts payable and accrued liabilities increased $49 million from the prior
year due, in part, to liabilities related to the special charge and amounts
due on stock repurchases.
Spending on plant and equipment in 1997 amounted to $133 million, compared to
$169 million in 1996. In 1997 the emphasis on capital projects shifted from
capacity expansion and additions toward projects to improve infrastructure and
efficiency, primarily the LINX enterprise-wide computer support system
project. In 1997 capital approval for capacity expansions amounted to about 30
percent, down from 45 percent in 1996. Over the two years, projects for
capacity maintenance, cost savings and safety and regulatory accounted for
about 20 percent, 10 percent and 7 percent, respectively. Capital spending in
1998 is expected to total about $150 million with a distribution pattern
similar to 1997.
Capital spending on environmental projects was $4 million in 1997 compared to
$12 million in 1996. Capital requirements in 1998 for environmental-related
projects is estimated to be about the same as 1997.
The Company utilizes commercial paper borrowings as its primary source of
external financing which, because of its predictably strong cash flows,
substantially reduces its cost of debt. Commercial paper borrowings at
December 31, 1997, amounted to $530 million compared to $467 million at
December 31, 1996. At December 31, 1997, debt to total capitalization was 29
percent compared to 24 percent at December 31, 1996. The Company has a $600
million credit facility with various banks. The credit facility provides
back-up to the Company's $600 million commercial paper program. The Company's
senior debt rating is A/A2 and its commercial paper rating is A1/P1. These
ratings were lowered due to the pending spin-off of Octel and the announced
divestitures. The spin-off will also require a renegotiation of the credit
facility.
Stockholders' equity was $1.3 billion, or $22.18 per share, at December 31,
1997, compared to $1.5 billion, or $24.13 per share, at December 31, 1996.
Dividends declared increased for the 25th consecutive year totaling $38
million, compared with $36 million in the prior year. On a per-share basis,
dividends declared of $0.63 per share were increased 11 percent over the $0.57
per share declared in 1996.
In 1997 the Company purchased 2.8 million shares of its stock for a total cost
of $129 million under share repurchase authorization by the Board of
Directors. The average price per share of the stock purchased was $46.17.
During the four-year period ended December 31, 1997, the Company repurchased
13.1 million shares at a cost of approximately $717 million, or $54.83 per
share. As of December 31, 1997, management is authorized to repurchase an
additional 6.5 million shares. Management intends to repurchase additional
shares as market conditions warrant.
The cumulative translation adjustment component of stockholders' equity
represents the translation of foreign currency-denominated financial
statements into U.S. dollars. The change in the cumulative translation
adjustment decreased stockholders' equity by $70 million in 1997. The decrease
primarily related to the strength of the U.S. dollar against most European
currencies. Approximately 50 percent of the Company's net assets are in
Europe.
OTHER MATTERS
Spin-Off Of Petroleum Additives Business
On July 16, 1997, the Company's Board of Directors approved a plan to spin off
its petroleum additives business, establishing a new independently traded
public Company (Octel). The Company created by the spin-off will consist of
the Company's tetraethyl lead antiknock compounds business and its non-lead
petroleum additives businesses.
As part of the process to affect the spin-off, Chevron Chemical Company's
(Chevron) 10.65 percent interest in Octel was redeemed in November 1997 at a
cost of approximately $117 million.
Current plans call for Octel to raise approximately $450 million through
borrowings in the public and private sector prior to the spin-off. A portion
of the proceeds will be used to repay Great Lakes' advances related to the
acquisition of the Chevron interest with the remainder of the proceeds, plus
available cash from Octel, less taxes and transaction costs, distributed to
Great Lakes in the form of a special distribution of roughly $300 million. It
is anticipated that the debt will mature over eight years and have an average
interest cost of 9.5 percent. This level of debt will result in Octel having
debt to total capitalization of about 60 percent at the time of the spin.
The transaction will be carried out in the form of a tax-free distribution to
Great Lakes shareholders of shares in Octel, and it is expected to be
completed during the first half of 1998. The transaction is subject to receipt
of a favorable ruling from the Internal Revenue Service and final approval by
Great Lakes' Board of Directors of the structure and financing of the new
Company.
Dispositions
In December 1997 the Board of Directors approved a comprehensive restructuring
plan including exiting the furfural and derivatives, Eastern European trading
and environmental services businesses. A pre-tax charge of $145 million, $96
million after income taxes, was recorded in connection with these actions. The
Company expects to affect the dispositions during 1998 and anticipates
realizing approximately $150 million in cash.
Acquisitions
On November 3, 1997, the Company completed the acquisition of Cookson Group
plc's global antimony products business, Anzon, for $90 million. Anzon is a
global producer of antimony-based components for use as flame retardants.
Market Risks
The Company's operations are exposed to changes in foreign currency exchange
and interest rates primarily in its cash, debt and foreign currency
transactions. Derivative instruments, including swaps, forward contracts and
options, are used to manage certain of these exposures. The derivative
instruments utilized by the Company in its hedging activities are considered
risk management tools and are not used for trading or speculative purposes.
The Company diversifies the counterparties used and monitors the concentration
of risk to limit its counterparty exposure.
Great Lakes Chemical Corporation 23
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
International operations, including U.S. export sales, constitute a
significant portion of the Company's revenues and identifiable assets. These
operations result in a large volume of foreign currency commitment and
transaction exposures and foreign currency net asset exposures. Since the
Company manufactures its products in a number of locations around the world,
principally North America and Europe, it has a cost base that is diversified
over a number of different currencies which mitigates, in part, its currency
transaction risk. Management of foreign currency exposure is coordinated at
the corporate headquarters level, and exposures that are not offset are
hedged. The Company forecasts foreign-currency-denominated cash flow for
12-month periods and aggregates these flows by currency to determine the
amount of exposure. Hedging decisions are made based on the amount of exposure
and the near-term outlook for each currency. The Company's policy is to hedge
approximately 60-80 percent of key currencies using forward or option
contracts. Hedges are set to mature coincident with the estimated timing of
the underlying transactions. The Company currently does not hedge foreign
currency net asset positions; however, by borrowing in local currency, it
reduces such exposure. Considering the Company's operating profile, a uniform
10 percent change in the value of the dollar from December 31, 1997, would
result in approximately a $1 million change in annual net income. This
calculation assumes that each exchange rate would change in the same direction
relative to the U.S. dollar, and does not factor in any potential changes in
sales levels or local currency prices which may result from changes in
exchange rates.
Currently, commercial paper is the primary source of external financing which
exposes the Company to changes in short-term interest rates. The Company
monitors interest rate trends for volatility. The Company presently does not
hold interest rate derivative contracts against its debt portfolio. Based on
the commercial paper balance outstanding at December 31, 1997, a hypothetical
1 percentage point change in interest rates for a one-year period would change
net income by $3 million. The sensitivity does not consider any effect a
change in interest rates would have on overall economic activity nor
management actions to mitigate the impact of interest rate changes.
Environmental
The Company's operations, like those of most companies which use or make
chemicals, are subject to various laws and regulations relating to maintaining
or protecting the quality of the environment. Such laws and regulations, along
with the Company's own internal compliance efforts, have required and will
continue to require capital expenditures and associated operating costs.
Spending for environmental compliance, including expenditures associated with
waste minimization and pollution prevention programs, amounted to
approximately $40 million in 1997 and about $47 million in 1996. These amounts
include approximately $4 million and $12 million for capital equipment in 1997
and 1996, respectively. Spending for environmental compliance is anticipated
to be in the $45 million range in 1998.
The Company is a party to several proceedings and lawsuits involving
environmental matters, including being named as defendant, respondent or a
potentially responsible party, together with other companies, under CERCLA,
and similar state laws, in which recovery is sought for the cost of cleanup of
contaminated manufacturing and waste disposal sites. Due to the prevailing
practices of manufacturing facilities, waste disposal haulers and disposal
facilities prior to adoption and implementation of various environmental laws
and regulations, it is difficult to accurately determine the Company's
liability with respect to these sites. In each such matter, the Company
anticipates, although there can be no assurance, that liability, if any, will
eventually be equitably apportioned among the companies found to be
responsible. In most of these matters, the Company believes that its
responsibility is small relative to other parties and that it may have
meritorious defenses to or claims against these other parties. Based upon
current regulation and the information available, management believes that
adequate provisions have been made in the Company's financial statements and
future costs will not have a material adverse impact on the Company's
consolidated financial condition.
Inflation
Inflation has not been a significant factor for the Company over the last
several years. Management believes that inflation will continue to be moderate
over the next several years.
Year 2000
The Company is in the process of upgrading much of its information systems and
computer hardware. The Company is also in the process of evaluating all other
computer-based systems. The upgrading activities which encompass the key
business processes such as sales, order entry, financial and procurement, for
approximately two-thirds of the Company began in 1996 and are expected to be
completed in early 1999. The evaluation of the remaining business processes
and computer control systems were begun in 1997 and are expected to be
completed by mid 1998. Based on progress to date, the Company does not expect
the cost of its Year 2000 compliance program will be material to its business,
results of operations or financial condition. The Company believes that it
will be able to achieve compliance prior to the end of 1999 and does not
currently anticipate any material disruption of its operations as the result
of any failure by the Company to be in compliance. Although the Company is in
the process of determining the degree of Year 2000 compliance of significant
suppliers and customers, it does not believe that their failure to be fully
compliant will materially adversely affect its business or operating results.
Future Accounting Changes
In June 1997 SFAS No. 130, "Reporting Comprehensive Income," was issued. The
statement must be adopted in the first quarter of 1998. Under provisions of
this statement, the Company will be required to change the financial statement
presentation of comprehensive income and its components to conform to these
new requirements. As a consequence of this change, certain reclassifications
will be necessary for previously reported amounts to achieve the required
presentation of comprehensive income.
In June 1997 SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," was issued. Under provisions of this statement, the
Company will be required to provide financial statement disclosures for
operating segments, products and services and geographic areas, beginning in
1998.
In December 1997 SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," was issued and is effective for the Company's
1998 fiscal year. The statement revises current disclosure requirements for
employers' pensions and other retiree benefits. Implementation of these
disclosure standards will not affect the Company's financial position or
results of operations.
24 Great Lakes Chemical Corporation
<PAGE> 18
MANAGEMENT'S STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Great Lakes Chemical Corporation is responsible for the
preparation and presentation of the accompanying consolidated financial
statements and all other information in this Annual Report. The financial
statements are prepared in accordance with generally accepted accounting
principles and include amounts that are based on management's informed
judgements and estimates.
The Company maintains accounting systems and internal accounting controls
which management believes provide reasonable assurance that the Company's
financial reporting is reliable, that assets are safeguarded, and that
transactions are executed in accordance with proper authorization. This
internal control structure is supported by the selection and training of
qualified personnel and an organizational structure which permits the
delegation of authority and responsibility. The systems are monitored
worldwide by an internal audit function that reports its findings to
management.
The Company's financial statements have been audited by Ernst & Young LLP,
independent auditors, in accordance with generally accepted auditing
standards. These standards provide for the review of internal accounting
control systems to plan the audit and determine auditing procedures and tests
of transactions to the extent they deem appropriate.
The Audit Committee of the Board of Directors, which consists solely of
non-employee directors, is responsible for overseeing the functioning of the
accounting systems and related internal controls and the preparation of annual
financial statements. The Audit Committee periodically meets with management
and the independent auditors to review and evaluate their accounting, auditing
and financial reporting activities and responsibilities. The independent
auditors and internal auditors have full and free access to the Audit
Committee without management's presence to discuss internal accounting
controls, results of their audits and financial reporting matters.
/s/ Robert T. Jeffares
Robert T. Jeffares
Executive Vice President and Chief Financial Officer
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the accompanying consolidated balance sheets of Great Lakes
Chemical Corporation and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of income and retained earnings and cash
flows for each of the three years in the period ended December 31, 1997. 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 Great Lakes
Chemical Corporation and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Indianapolis, Indiana
February 3, 1998
Great Lakes Chemical Corporation 25
<PAGE> 19
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
(in thousands of dollars, except per share data)
YEAR ENDED DECEMBER 31 1997 1996 1995
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $1,311,227 $1,352,279 $1,291,552
OPERATING EXPENSES
Cost of products sold 937,523 969,030 897,309
Selling, administrative and research expenses 182,084 199,386 195,899
Special charge 49,800 -- --
- - -------------------------------------------------------------------------------------------------------------------
1,169,407 1,168,416 1,093,208
- - -------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 141,820 183,863 198,344
INTEREST AND OTHER INCOME 31,668 56,660 27,097
INTEREST AND OTHER EXPENSES 56,318 56,508 25,219
- - -------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 117,170 184,015 200,222
INCOME TAXES 45,400 63,400 68,000
- - -------------------------------------------------------------------------------------------------------------------
NET INCOME FROM CONTINUING OPERATIONS 71,770 120,615 132,222
NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS (14,825) 129,681 163,351
- - -------------------------------------------------------------------------------------------------------------------
NET INCOME 56,945 250,296 295,573
- - -------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT BEGINNING OF YEAR 1,893,104 1,678,834 1,411,890
CASH DIVIDENDS DECLARED 37,581 36,026 28,629
- - -------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF YEAR $1,912,468 $1,893,104 $1,678,834
===================================================================================================================
EARNINGS (LOSS) PER SHARE:
BASIC
Continuing Operations $ 1.20 $ 1.90 $ 2.02
Discontinued Operations (0.25) 2.04 2.50
- - -------------------------------------------------------------------------------------------------------------------
$ 0.95 $ 3.94 $ 4.52
- - -------------------------------------------------------------------------------------------------------------------
DILUTED
Continuing Operations $ 1.19 $ 1.89 $ 2.00
Discontinued Operations (0.25) 2.02 2.48
- - -------------------------------------------------------------------------------------------------------------------
$ 0.94 $ 3.91 $ 4.48
- - -------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS DECLARED PER SHARE $ 0.63 $ 0.57 $ 0.44
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
26 Great Lakes Chemical Corporation
<PAGE> 20
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
(in thousands of dollars)
DECEMBER 31 1997 1996
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 73,673 $ 141,439
Accounts and notes receivable, less allowance of
$5,803 and $7,321, respectively 256,892 253,368
Inventories 298,175 276,787
Prepaid expenses 39,806 32,356
- - ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 668,546 703,950
- - ---------------------------------------------------------------------------------------------------------------------
PLANT AND EQUIPMENT 658,635 636,560
GOODWILL 114,902 79,055
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES 72,716 66,307
OTHER ASSETS 29,052 32,008
NET ASSETS OF DISCONTINUED OPERATIONS 726,540 834,818
- - ---------------------------------------------------------------------------------------------------------------------
$2,270,391 $2,352,698
=====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 140,310 $ 117,579
Accrued expenses 134,547 108,529
Income taxes payable 13,511 38,230
Dividends payable 9,431 9,242
Notes payable and current portion of long-term debt 6,557 6,284
- - ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 304,356 279,864
- - ---------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT, LESS CURRENT PORTION 561,455 496,246
OTHER NONCURRENT LIABILITIES 28,692 27,642
DEFERRED INCOME TAXES 68,445 62,047
STOCKHOLDERS' EQUITY
Common stock, $1 par value, authorized 200,000,000 shares,
issued 72,572,602 and 72,455,051 shares, respectively 72,573 72,455
Additional paid-in capital 123,379 121,224
Retained earnings 1,912,468 1,893,104
Minimum pension liability adjustment (2,543) --
Cumulative translation adjustment (52,855) 17,064
Less treasury stock, at cost, 13,628,300 and 10,842,200 shares, respectively (745,579) (616,948)
- - ---------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,307,443 1,486,899
- - ---------------------------------------------------------------------------------------------------------------------
$2,270,391 $2,352,698
=====================================================================================================================
</TABLE>
See notes to consolidated financial statements.
Great Lakes Chemical Corporation 27
<PAGE> 21
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
(in thousands of dollars)
YEAR ENDED DECEMBER 31 1997 1996 1995
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income from continuing operations $71,770 $120,615 $132,222
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and depletion 69,918 61,180 57,452
Amortization of intangible assets 3,770 4,164 4,799
Deferred income taxes (500) 859 7,003
Net (unremitted) remitted earnings of affiliates (1,892) (1,085) 42
Loss on disposition of assets 313 7,577 182
Special charge 49,800 -- --
Other (6,847) (11,179) (510)
Change in operating assets and liabilities,
net of effects from business combinations:
Accounts receivable 1,873 962 (40,559)
Inventories (22,297) 4,469 (63,868)
Other current assets (7,885) (3,575) (7,913)
Accounts payable and accrued expenses 40,524 18,810 33,724
Income taxes and other current liabilities (15,896) 5,016 9,127
Other noncurrent liabilities 10,342 962 2,598
- - --------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS 192,993 208,775 134,299
DISCONTINUED OPERATIONS:
Net (loss) income (14,825) 129,681 163,351
Change in net assets 78,688 (98,076) (52,769)
- - --------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 256,856 240,380 244,881
INVESTING ACTIVITIES
Plant and equipment additions (132,981) (168,661) (182,947)
Business combinations, net of cash acquired (91,142) (6,341) (4,399)
Proceeds from sale of assets 1,177 2,755 334
Other (2,052) 23,254 (21,342)
- - --------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (224,998) (148,993) (208,354)
FINANCING ACTIVITIES
Net borrowings and (repayments) under short-term credit lines 3,644 (15,013) 1,011
Net proceeds from and (payments) of long-term borrowings 6,556 (8,036) (2,399)
Net increase in commercial paper and other long-term obligations 58,132 175,159 209,644
Proceeds from stock options exercised 2,272 7,923 1,065
Cash dividends (37,581) (36,026) (28,629)
Repurchase of common stock (128,631) (191,720) (164,816)
- - --------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (95,608) (67,713) 15,876
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (4,016) 1,331 (1,527)
- - --------------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (67,766) 25,005 50,876
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 141,439 116,434 65,558
- - --------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $73,673 $141,439 $116,434
====================================================================================================================
</TABLE>
See notes to consolidated financial statements.
Parentheses indicate decrease in cash and cash equivalents.
28 Great Lakes Chemical Corporation
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars, except as indicated)
ACCOUNTING POLICIES
Basis of Presentation
In 1997 the Company took a number of actions that will enable it to focus on
core specialty chemical operations. These include the announced spin-off of
the petroleum additives business (Octel) to shareholders and the decision to
exit the furfural and derivatives, Eastern European trading (Chemol) and
environmental services businesses. The net assets and results of operations of
these businesses are reflected in the accompanying financial statements as
discontinued operations. Consolidated results of continuing operations,
financial position and cash flows in the accompanying financial statements
refer to the continuing specialty chemical operations of the Company.
Nature of Operations
The Company is a diversified specialty chemical company. Primary manufacturing
operations are located in the United States and Europe. Principal product
lines ranked in order of sales are: Water Treatment, Flame Retardants, Polymer
Stabilizers, Intermediates and Fine Chemicals and Specialized Services and
Manufacturing. The Company's products are sold globally. The principal markets
include: Computer and Business Equipment, Consumer Electronics, Data
Processing, Construction Materials, Telecommunications, Pharmaceuticals, and
Pool and Spa Dealers and Distributors.
Principles of Consolidation
The consolidated financial statements include all subsidiaries of the Company
after elimination of significant intercompany accounts and transactions.
Investments in less than majority-owned companies in which the Company has the
ability to exercise significant influence over operating and financial
policies of the investees are recorded at cost, plus equity in their
undistributed earnings since acquisition.
Use of Estimates
The preparation of the consolidated financial statements requires management
to make estimates and assumptions that affect the amount reported in the
financial statements and accompanying notes. Significant estimates are used in
the accounting for restructuring, asset impairments and losses on discontinued
operations. Actual results could differ from those estimates.
Revenue Recognition
Revenue from sales of products is recognized at the time products are shipped
to the customer. Revenue from services is recognized when the services are
provided to the customer.
Cash Equivalents
Investment securities with maturities of three months or less when purchased
are considered to be cash equivalents.
Inventories
The Company values its inventories at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
Plant and Equipment
Plant and equipment are stated at cost. Depreciation is provided over the
estimated useful lives of the assets using the straight-line method.
Goodwill
Goodwill, the excess of investment over net assets of subsidiaries acquired is
amortized over periods of eight to 40 years. The Company regularly evaluates
the realizability of goodwill based on projected undiscounted cash flows and
operating income for each business having material goodwill balances. Based on
its most recent analysis, the Company believes that no impairment of goodwill
exists. As of December 31, 1997, and 1996, accumulated amortization was $13
million and $11 million, respectively.
Environmental Compliance and Remediation
Environmental compliance costs include ongoing maintenance, monitoring and
similar costs. Such costs are expensed as incurred. Environmental remediation
costs are accrued, except to the extent costs can be capitalized, when
environmental assessments or remedial efforts are probable, and the cost can
be reasonably estimated. Environmental costs which improve the condition of a
property as compared to the condition when constructed or acquired are
capitalized.
Income Taxes
Income taxes are provided on the portion of the income of foreign affiliates
that is expected to be remitted to the parent company and be taxable.
Earnings per Share
In 1997 the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share" (SFAS 128). SFAS 128 requires the calculation of both
basic and diluted earnings per share. Basic earnings per share is based on the
weighted-average number of common shares outstanding during the period, while
diluted earnings per share includes the effect of options and restricted stock
that were dilutive and outstanding during the period. All earnings per share
amounts for all periods have been presented, and where appropriate, restated
to conform to SFAS 128 requirements.
Stock-Based Compensation
In 1996 the Company adopted Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation." As allowed under SFAS No. 123,
the Company has chosen to continue to account for stock-based compensation
cost in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Under this opinion, compensation
cost is recorded when the fair market value of the Company's stock
Great Lakes Chemical Corporation 29
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
at the date of grant for fixed options exceeds the exercise price of the stock
option. The Company's policy is to grant stock options at a value equal to its
common stock's fair market value on the date of grant. Compensation cost for
restricted stock awards is accrued over the life of the award based on the
quoted market price of the Company's stock at the date of the award.
Derivative Financial Instruments
The Company uses various derivative instruments including swaps, forward
contracts and options to manage certain foreign currency exposures. These
instruments are entered into under the Company's corporate risk management
policy to minimize exposure and are not for speculative trading purposes.
Management periodically reviews the effectiveness of the use of derivative
instruments.
Derivatives used for hedging purposes must be designated as, and effective as,
a hedge of the identified risk exposure at the inception of the contract.
Accordingly, changes in the market value of the derivative contract must be
highly correlated with changes in the market value of the underlying hedged
item at inception of the hedge and over the life of the hedge contract. Any
derivative instrument designated but no longer effective as a hedge would be
reported at market value and the related gains and losses would be recognized
in earnings.
Derivatives that are designated as, and effective as, a hedge of firm foreign
currency commitments are accounted for using the deferral method. Gains and
losses from instruments that hedge firm commitments are deferred and
recognized as part of the economic basis of the transactions underlying the
commitments when the associated hedged transaction occurs. Gains and losses
from instruments that hedge foreign-currency-denominated receivables, payables
and debt instruments are reported in earnings and offset the effects of
foreign exchange gains and losses from the associated hedged items.
ACQUISITIONS
On November 3, 1997, the Company completed the acquisition of Cookson Group
plc's global antimony products business, Anzon, for $90 million including
approximately $46 million of goodwill which will be amortized over a period of
40 years. Anzon is a global producer of antimony-based compounds for use as
flame retardants.
In 1995 the Company completed acquisitions in the Water Treatment and
Intermediates and Fine Chemicals business units at a cost of $11 million,
including $6 million excess purchase price over the book value of net assets
acquired.
All acquisitions have been accounted for as purchases and the results of
operations of the acquired businesses are included in the consolidated
financial statements from the dates of acquisition. The following represents
the unaudited pro forma results of operations as if the above-noted business
combinations had occurred at the beginning of the respective year in which the
companies were acquired as well as at the beginning of the immediately
preceding year:
<TABLE>
<CAPTION>
Year Ended December 31 1997 1996 1995
<S> <C> <C> <C>
Net sales $1,376,927 $1,430,126 $1,384,624
Net income 73,915 123,215 139,422
Earnings per share $ 1.23 $ 1.93 $ 2.11
</TABLE>
The pro forma results do not represent the Company's actual operating results
had the acquisitions been made at the beginning of the respective years, or
the results which may be expected in the future.
DISPOSITIONS
During 1996 the Company sold its pool equipment distribution business and its
engineered surface treatment business. On an annual basis, these operations
accounted for approximately $150 million in sales. These transactions did not
have a material impact on the Company's results of operations.
DISCONTINUED OPERATIONS
During 1997 the Board of Directors approved a plan to spin off the Company's
petroleum additives business to the shareholders and to exit furfural and
derivatives, Eastern European trading (Chemol) and environmental services
businesses. These operations are included in discontinued operations along
with a special provision of $137 million net of income tax benefits of $49
million related to the estimated losses on divestitures and an income tax
provision of $38 million related to the anticipated repatriation of Octel
earnings.
The Octel spin-off will be affected through a tax-free distribution of shares
in the new company to Great Lakes' shareholders. The transaction is subject to
the receipt of a favorable tax ruling from the Internal Revenue Service and the
final approval by the Great Lakes Board of Directors. Prior to the spin-off, it
is anticipated that Octel will borrow approximately $450 million and use part of
the proceeds to repay Great Lakes $117 million for the November 1997 acquisition
of Chevron Chemical Company's interest in Octel. The remainder of the borrowing,
plus available cash from Octel, less taxes and transaction costs, will be
distributed to Great Lakes in the form of a special dividend of approximately
$300 million. Great Lakes will contribute Octel's remaining net assets to Octel
reducing Great Lakes shareholders' equity.
The Company expects the other businesses included in discontinued operations
to be sold during 1998.
30 Great Lakes Chemical Corporation
<PAGE> 24
Summary statements of income and financial position for the discontinued
operations as a whole and Octel alone are set forth below (in millions):
Summary Statements of Income
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------
Year Ended December 31 1997 1996 1995
- - -------------------------------------------------------------------
<S> <C> <C> <C>
Total Discontinued Operations:
Net Sales $769 $866 $1,065
Income before Income Taxes 181 196 237
Income Taxes 59 66 74
- - -------------------------------------------------------------------
Income from Operations
(Net of Taxes) 122 130 163
Special Provision
(Net of Taxes) 137 -- --
- - -------------------------------------------------------------------
Net (Loss) Income from
Discontinued Operations $(15) $130 $ 163
===================================================================
Petroleum Additives (Octel):
Net Sales $531 $590 $ 622
Income before Income Taxes 177 195 221
Income Taxes 58 64 72
- - -------------------------------------------------------------------
Income from Operations
(Net of Taxes) 119 131 149
Special Provision
(Net of Taxes) 41 -- --
- - -------------------------------------------------------------------
Net Income $ 78 $131 $ 149
===================================================================
</TABLE>
Summary Statements of Net Assets
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------
December 31 1997 1996
- - -------------------------------------------------------------------
<S> <C> <C>
Total Discontinued Operations:
Current Assets $ 434 $ 473
Net Plant & Equipment 205 222
Goodwill and Other Assets 480 438
- - -------------------------------------------------------------------
Total Assets 1,119 1,133
Current Liabilities 306 151
Other Liabilities 86 147
- - -------------------------------------------------------------------
Net Assets $ 727 $ 835
===================================================================
Petroleum Additives (Octel):
Current Assets $ 283 $ 340
Net Plant & Equipment 109 115
Goodwill and Other Assets 434 383
- - -------------------------------------------------------------------
Total Assets 826 838
Current Liabilities 138 125
Other Liabilities 78 131
- - -------------------------------------------------------------------
Net Assets $ 610 $ 582
===================================================================
</TABLE>
SPECIAL CHARGE
In December 1997 the Board of Directors approved a series of measures designed
to improve operating efficiency, responsiveness to customers and return on
assets. These measures include restructuring the Company's European water
treatment business, closing its BCDMH manufacturing facility in Louisiana and a
pharmaceutical intermediates production plant in Arkansas, and withdrawing from
a bromine production joint venture in Europe.
The consolidated statement of income for 1997 includes pre-tax charges of $50
million ($39 million after income taxes, or $0.64 per share) related to these
initiatives. The components of the pre-tax charges were $2 million for
employee severance costs, $2 million for facility closure costs, $5 million
for joint venture withdrawal expenses and $41 million for asset write-offs.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------
December 31 1997 1996
- - ------------------------------------------------------------------------------------
<S> <C> <C>
Cash $38,705 $ 49,651
Time deposits 34,968 91,788
- - ------------------------------------------------------------------------------------
$73,673 $141,439
====================================================================================
</TABLE>
INVENTORIES
The major components of inventories are as follows:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------
December 31 1997 1996
- - ------------------------------------------------------------------------------------
<S> <C> <C>
Finished products $217,398 $205,812
Raw materials 51,984 43,498
Supplies 28,793 27,477
- - ------------------------------------------------------------------------------------
$298,175 $276,787
====================================================================================
</TABLE>
PLANT AND EQUIPMENT
Plant and equipment consist of the following:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------
December 31 1997 1996
- - ------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 19,861 $ 20,552
Buildings and land improvements 122,520 116,810
Equipment and
leasehold improvements 871,734 848,751
Construction in progress (estimated
additional cost to complete at
December 31, 1997, $78,000) 126,502 101,502
- - ------------------------------------------------------------------------------------
1,140,617 1,087,615
Less allowances for depreciation,
depletion and amortization 481,982 451,055
- - ------------------------------------------------------------------------------------
$658,635 $636,560
====================================================================================
</TABLE>
Great Lakes Chemical Corporation 31
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The estimated useful lives for purposes of computing depreciation are:
buildings and land improvements, 7-40 years and equipment and leasehold
improvements, 2-17 years.
Maintenance and repairs charged to costs and expenses were $60 million, $63
million and $63 million for 1997, 1996 and 1995, respectively.
Rent expense for all operating leases amounted to $16 million, $19 million and
$20 million for 1997, 1996 and 1995, respectively. Under long-term operating
leases, minimum annual rentals are $13 million in 1998, $10 million in 1999,
$9 million in 2000, $5 million in 2001 and $4 million in 2002.
DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------
December 31 1997 1996
- - ----------------------------------------------------------------------
<S> <C> <C>
Commercial paper, 1997 year-end
average interest rate of 6.0% $529,665 $467,283
Industrial development bonds, at
fixed and variable interest rates from
4.0% to 7.0% at December 31, 1997
(weighted average 4.4%) with
maturities to May 2025 14,185 14,185
Other 22,775 20,774
- - ----------------------------------------------------------------------
566,625 502,242
Less current portion 5,170 5,996
- - ----------------------------------------------------------------------
$561,455 $496,246
======================================================================
</TABLE>
The Company has a $600 million revolving credit agreement with nine banks
which serves as a backup for the Company's commercial paper program that
expires in 2001. The agreement provides various interest rate options,
including the banks' prime interest rate, and contains restrictive financial
covenants, including an interest coverage ratio. The Company's commercial
paper is rated A1 by Standard and Poor's and P1 by Moody's.
Long-term debt matures as follows: 1998, $5 million; 1999, $3 million; 2000,
$12 million; 2001, $532 million; and 2002, $3 million.
At December 31, 1997, the Company had notes payable of approximately $1
million at an interest rate of 5.9 percent.
The Company has no confirmed short-term credit lines, but has available for
its use substantial non-confirmed credit lines.
During 1997, 1996 and 1995, interest costs were $34 million, $24 million and
$20 million, respectively, of which $6 million per year was capitalized as
additional costs of equipment and leasehold improvements in connection with
the expansion of physical facilities. In these years, interest payments were
$34 million, $25 million and $20 million, respectively.
INCOME TAXES
The following is a summary of domestic and foreign income before income taxes,
the components of the provisions for income taxes, a reconciliation of the
U.S. statutory income tax rate to the effective income tax rate, and the
components of deferred tax assets and liabilities.
Income Before Income Taxes:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------
Year Ended December 31 1997 1996 1995
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ 79,917 $145,523 $143,583
Foreign 37,253 38,492 56,639
- - ---------------------------------------------------------------------------
$117,170 $184,015 $200,222
===========================================================================
</TABLE>
Provisions for Income Taxes:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------
Year Ended December 31 1997 1996 1995
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $32,800 $42,500 $37,100
State 4,400 6,900 5,100
Foreign 8,700 13,141 18,797
- - ---------------------------------------------------------------------------
45,900 62,541 60,997
- - ---------------------------------------------------------------------------
Deferred:
Domestic (2,800) (2,600) 6,300
Foreign 2,300 3,459 703
- - ---------------------------------------------------------------------------
(500) 859 7,003
- - ---------------------------------------------------------------------------
$45,400 $63,400 $68,000
===========================================================================
</TABLE>
Effective Income Tax Rate Reconciliation:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------
Year Ended December 31 1997 1996 1995
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory
income tax rate 35.0% 35.0% 35.0%
Decrease resulting from:
State income tax 2.4 2.5 1.7
Depletion (2.2) (1.3) (1.2)
Foreign Sales Corp. (3.5) (1.4) (1.2)
Statutory tax
rate changes (2.1) -- --
Special charge
rate differential 4.8 -- --
Other 4.3 (0.3) (0.3)
- - ---------------------------------------------------------------------------
Effective income tax rate 38.7% 34.5% 34.0%
===========================================================================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
32 Great Lakes Chemical Corporation
<PAGE> 26
Components of Deferred Tax Assets and Liabilities:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------
December 31 1997 1996
- - ---------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Accrued expenses $13,400 $10,500
Other 15,400 19,000
- - ---------------------------------------------------------------------
$28,800 $29,500
- - ---------------------------------------------------------------------
Deferred tax liabilities
Depreciation $46,200 $44,000
Foreign liabilities pending settlements 20,000 20,000
Other 20,079 18,561
- - ---------------------------------------------------------------------
$86,279 $82,561
=====================================================================
</TABLE>
Cash payments for income taxes were $36 million, $73 million and $49 million
in 1997, 1996 and 1995, respectively.
Statutory tax rate decreases resulted in a tax benefit in 1997 of $3 million.
STOCKHOLDERS' EQUITY
Changes in common stock and additional paid-in capital accounts are summarized
as follows:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------
Additional
Common Stock Paid-In
Shares Amount Capital
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at
December 31, 1994 72,024,520 $72,025 $112,667
Exercise of stock options,
net of shares exchanged 84,957 84 400
Tax benefit from early
disposition of stock
by optionees -- -- 580
- - ------------------------------------------------------------------------
Balance at
December 31, 1995 72,109,477 72,109 113,647
Exercise of stock options,
net of shares exchanged 345,574 346 1,357
Tax benefit from early
disposition of stock
by optionees -- -- 6,220
- - ------------------------------------------------------------------------
Balance at
December 31, 1996 72,455,051 72,455 121,224
Exercise of stock options,
net of shares exchanged 117,551 118 1,175
Tax benefit from early
disposition of stock
by optionees -- -- 980
- - ------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1997 72,572,602 $72,573 $123,379
========================================================================
</TABLE>
The Company has a Stockholder Rights Plan. Under the Plan, the stockholders
have received a right (the "Right") for each outstanding share of common stock
of the Company. Each Right entitles the holder under certain circumstances to
purchase from the Company at an exercise price of $92.50 per Right (after
adjustment pursuant to the Plan) one unit consisting initially of one-tenth of a
share of the Company's common stock and a note in a principal amount equal to
nine-tenths of the market price of a share of the Company's common stock on the
date of exercise.
The Rights become exercisable and transferable apart from the common stock if
a person acquires 15 percent or more of the Company's outstanding common stock
or the Company declares a 10 percent-or-more stockholder an "adverse person"
because such stockholder meets certain criteria set forth in the Plan. In such
event, each Right entitles the holder, except the acquiring person or adverse
person, to purchase, at the Right's then-current exercise price, the number of
Great Lakes common shares having a market value equal to twice the Right's
exercise price.
If after one of the triggering events described above, the Company is acquired
in a merger or other business combination, and the Rights have not been
redeemed, the holder of each Right is entitled to purchase, at the Right's
then-current exercise price, that number of the acquiring company's common
shares having a market value equal to twice the Right's exercise price.
Under certain conditions, the Rights may be redeemed by the Company at a price
of $.0025 per Right (after adjustment pursuant to the Plan) prior to their
expiration on September 22, 1999.
The Company has repurchased shares of its common stock as follows:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------
Number of
Shares Cost
- - ---------------------------------------------------------------
<S> <C> <C>
1997 2,786,100 $128,631
1996 3,337,100 $191,720
1995 2,778,000 $164,816
- - ---------------------------------------------------------------
</TABLE>
Changes in the cumulative translation adjustment account are
as follows:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------
Year Ended December 31 1997 1996 1995
- - ----------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 17,064 $(23,179) $(25,222)
Translation adjustments and
gains and losses from
hedging transactions (69,919) 40,243 2,043
- - ----------------------------------------------------------------------
Balance at end of year $(52,855) $ 17,064 $(23,179)
======================================================================
</TABLE>
The 1997 change in the cumulative translation adjustment is due to the
approximate 17 percent weakening of European currencies and the approximate 4
percent weakening of the British pound sterling against the U.S. dollar. The
1996 and 1995 increase in the cumulative translation adjustment account was
principally due to the effect of the weakening U.S. dollar in relation to the
currencies of the various foreign countries in which the Company operates.
Great Lakes Chemical Corporation 33
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS PER SHARE
The computation of basic and diluted earnings per share is determined by
dividing net income or loss as reported as the numerator, by the number of
shares included in the denominator as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
Year Ended December 31 1997 1996 1995
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Denominator for basic
earnings per share -
weighted-average shares 60,041,081 63,538,759 65,364,066
Effect of dilutive securities:
Employee stock options 248,511 433,317 626,736
Restricted stock 8,045 -- --
- - -------------------------------------------------------------------------
Dilutive potential
common shares 256,556 433,317 626,736
Denominator for diluted
earnings per share 60,297,637 63,972,076 65,990,802
=========================================================================
</TABLE>
Options to purchase shares of common stock of 1,070,422 in 1997, 836,308 in
1996 and 564,656 in 1995 were outstanding, but were excluded from the
computation of diluted earnings per share because the exercise prices were
greater than the average market price of the common shares during those years,
and therefore the effect would have been antidilutive.
STOCK OPTIONS
In May 1993 the stockholders adopted the 1993 Employee Stock Compensation Plan
for officers and other key employees, authorizing the issuance of 2 million
shares of the Company's common stock upon exercise of incentive stock options,
non-qualified stock options or other stock-based awards. The Plan replaced the
1984 Plan which expired in May 1994. Under the Plan, options are granted at
the market value at date of grant, become exercisable over periods of one to
five years after grant and expire 10 years from the date of grant.
The following summarizes the changes in options under the Plans:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------
Weighted-
Shares Average
Under Option Exercise Price
- - -----------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1994 1,850,637 $39.47
Granted 309,030 59.71
Exercised (98,280) 15.29
Terminated (14,319) 61.94
- - -----------------------------------------------------------------------
Outstanding at December 31, 1995 2,047,068 43.53
Granted 260,610 74.94
Exercised (529,039) 26.26
Terminated (77,883) 67.64
- - -----------------------------------------------------------------------
Outstanding at December 31, 1996 1,700,756 52.61
GRANTED 458,130 43.05
EXERCISED (141,170) 16.82
TERMINATED (98,822) 55.89
- - -----------------------------------------------------------------------
OUTSTANDING AT DECEMBER 31, 1997 1,918,894 $52.79
=======================================================================
CURRENTLY EXERCISABLE 1,258,619 $52.72
=======================================================================
</TABLE>
Options outstanding at December 31, 1997, expire from March 7, 1998, to
October 27, 2007. A total of 1 million shares are reserved for future grants
as of December 31, 1997.
The following table summarizes information concerning outstanding and
exercisable options at December 31, 1997:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------
Range of Exercise Prices $10 - $25 $26 - $50 $51 - $80
- - --------------------------------------------------------------------
<S> <C> <C> <C>
Options Outstanding:
Weighted-Average
Remaining
Contractual Life 2.1 yrs. 8.1 yrs. 7.3 yrs.
Weighted-Average
Exercise Price $18.98 $42.23 $69.41
Number 312,025 594,547 1,012,322
Options Exercisable:
Weighted-Average
Exercise Price $18.98 $40.79 $69.44
Number 312,025 185,067 761,527
- - --------------------------------------------------------------------
</TABLE>
The weighted-average fair value of options granted during 1997, 1996 and 1995
is estimated at $13.14, $24.61 and $22.34 per share, respectively, on the date
of grant using the Black-Scholes option-pricing model with the following
assumptions:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------
1997 1996 1995
- - ---------------------------------------------------------------------
<S> <C> <C> <C>
Expected volatility 21.0% 22.8% 26.5%
Expected life in years 6.5 6.0 5.5
Risk-free interest rate 6.15% 5.27% 7.34%
Dividend yield 1.40% 0.60% 0.64%
- - ---------------------------------------------------------------------
</TABLE>
Had compensation cost for the Company's 1997, 1996 and 1995 grants for
stock-based compensation plans been recognized consistent with SFAS 123, the
Company's net income and earnings per share for 1997, 1996 and 1995 would
approximate the pro forma amounts below:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------
Year Ended December 31 1997 1996 1995
- - -------------------------------------------------------------------
<S> <C> <C> <C>
Net income from
Continuing Operations -
as reported $71,770 $120,615 $132,222
Net income from
Continuing Operations -
pro forma $69,017 $116,107 $129,356
Diluted earnings
per share - as reported $1.19 $1.89 $2.00
Diluted earnings
per share - pro forma $1.15 $1.82 $1.96
- - -------------------------------------------------------------------
</TABLE>
34 Great Lakes Chemical Corporation
<PAGE> 28
For the purpose of pro forma disclosure, the estimated compensation costs are
amortized to expense over the options' vesting period, primarily three years.
Therefore, because SFAS 123 is applicable only to options granted subsequent
to December 31, 1994, its pro forma effect will not be fully reflected until
1998.
RETIREMENT PLANS
The Company maintains several noncontributory defined benefit pension plans
covering substantially all U.S. employees. Benefits are based on total
compensation, as defined, and years of credited service reduced by social
security benefits according to a plan formula. Normal retirement age is 65,
but provisions are made for early retirement. The Company's funding policy is
to contribute amounts to the plans to meet the funding requirements of federal
laws and regulations, as determined by the Company's actuary. The plans'
assets are invested by an insurance company, one bank and nine investment
management companies in various commingled and segregated funds holding
equities, bonds, guaranteed income contracts and cash or cash equivalents.
The Company maintains three contributory defined benefit pension plans
covering substantially all United Kingdom employees. Benefits are based on
final salary and years of credited service, reduced by social security
benefits according to a plan formula. Normal retirement age is 65, but
provisions are made for early retirement. The Company's funding policy is to
contribute amounts to the plans to cover service costs to date as recommended
by the Company's actuary. The plans' assets are invested by three investment
management companies in funds holding U.K. and overseas equities, U.K. and
overseas fixed interest securities, index linked securities, property unit
trusts and cash or cash equivalents.
The Company provides no significant postretirement benefits other than
pensions.
A summary of the components of net periodic pension cost for U.S. and U.K.
pension plans is as follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------
Year Ended December 31 1997 1996 1995
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 7,172 $ 5,340 $ 4,351
Interest cost on projected
benefit obligation 9,942 7,598 7,099
Actual return
on plan assets (31,681) (12,241) (14,296)
Net amortization
and deferral 20,869 4,910 7,865
- - --------------------------------------------------------------------------------------------------------
Net pension cost $ 6,302 $ 5,607 $ 5,019
========================================================================================================
</TABLE>
The funded status and accrued pension cost for the U.S. and U.K. pension plans
are as follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------
December 31 1997 1996 1995
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actual present value
of accumulated
plan benefits:
Vested $94,513 $80,869 $72,066
Non-vested 3,168 2,712 1,540
- - --------------------------------------------------------------------------------------------------------
Total accumulated
benefit obligation 97,681 83,581 73,606
Additional amounts
related to projected
salary increases 24,189 25,059 21,814
- - --------------------------------------------------------------------------------------------------------
Total projected
benefit obligation 121,870 108,640 95,420
Plan assets at fair value 130,642 108,007 88,547
- - --------------------------------------------------------------------------------------------------------
Plan assets (over)
under projected
benefit obligation (8,772) 633 6,873
Unrecognized net gain 20,145 9,756 4,400
Unrecognized prior
service cost (177) (459) 527
Unrecognized net
transition obligation (1,070) (1,261) (1,452)
Additional
minimum liability 5,456 3,046 819
- - --------------------------------------------------------------------------------------------------------
Accrued pension cost 15,582 11,715 11,167
Estimated transfers
from discontinued
operations (7,064) (7,500) (5,800)
- - --------------------------------------------------------------------------------------------------------
Net accrued
pension cost $8,518 $4,215 $5,367
========================================================================================================
</TABLE>
The estimated transfer represents prepaid pension cost attributable to
employees who participate in the Octel retirement plans that will remain with
the Company. Ultimate determination of the transfer is subject to, among other
things, a final actuarial evaluation and election of the employee.
Assumptions used in determining the actuarial present value of the projected
benefit obligations are set forth below. Assumptions used in 1997 are
consistent with the prior year.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------
<S> <C>
Weighted-average discount rates 7.7% to 7.75%
Rates of increase in compensation levels 4.8% to 5.5%
Expected long-term return on assets 8.5% to 9.0%
- - -----------------------------------------------------------------------
</TABLE>
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses were approximately $42 million, $43 million
and $41 million in 1997, 1996 and 1995, respectively.
Great Lakes Chemical Corporation 35
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INDUSTRY SEGMENTS AND FOREIGN OPERATIONS
The Company's operations consist of one dominant industry segment, chemicals
and allied products.
Net sales, income before income taxes and identifiable assets by geographic
areas follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------
Year Ended December 31 1997 1996 1995
- - -------------------------------------------------------------------
<S> <C> <C> <C>
Net sales to
unaffiliated customers:
United States $ 920,778 $ 954,287 $ 907,460
Foreign 390,449 397,992 384,092
- - -------------------------------------------------------------------
$1,311,227 $1,352,279 $1,291,552
===================================================================
Intercompany
sales between
geographic areas:
United States $ 82,940 $ 72,962 $ 61,758
Foreign 59,536 37,841 31,934
- - -------------------------------------------------------------------
$ 142,476 $ 110,803 $93,692
===================================================================
Income before
income taxes:
United States $ 129,093 $ 178,613 $ 170,723
Foreign 13,397 22,089 41,724
Earnings of affiliates 2,410 788 (43)
Corporate
interest expense (27,730) (17,475) (12,182)
- - -------------------------------------------------------------------
$ 117,170 $ 184,015 $ 200,222
===================================================================
Identifiable assets
at year-end:
United States $ 988,830 $ 906,573 $ 904,976
Foreign 482,305 545,000 498,421
Affiliates 72,716 66,307 53,882
Discontinued
operations 726,540 834,818 722,653
- - -------------------------------------------------------------------
$2,270,391 $2,352,698 $2,179,932
===================================================================
</TABLE>
Most of the Company's foreign operations are conducted by European
subsidiaries or U.S. branch offices. Sales between the United States and its
foreign operations are generally priced to recover cost plus an appropriate
markup for profit and are eliminated in the consolidated financial statements.
Identifiable assets include assets directly identified with the operations,
principally: accounts receivable, inventories and plant and equipment, plus an
allocation of goodwill.
Export sales for 1997, 1996 and 1995 were approximately $214 million, $226
million and $194 million, respectively, of which 89 percent, 88 percent and 86
percent, respectively, were outside the Western Hemisphere.
INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
As of December 31, 1997, the Company's investment in unconsolidated affiliates
consists mainly of a 50 percent interest in Tetrabrom Technologies, Ltd., an
Israeli manufacturer of tetrabromobisphenol-A, and a preferred stock interest
in Huntsman Chemical Corporation (HCC) consisting of 58,700 shares of series A
cumulative preferred stock with an annual dividend rate of 14 percent.
Beginning in the year 2000, the annual dividend rate will increase 1 percent
per year to a maximum rate of 25 percent. The preferred shares have a face
value of $59 million. The Company is a limited partner in certain low income
housing investments that generate benefits in the form of tax credits.
The Company's equity in earnings of unconsolidated affiliates was $2 million
and $1 million for 1997 and 1996, respectively. Preferred dividends from HCC
amounted to $8 million in 1997 and 1996.
FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
The carrying amounts reported in the balance sheet of cash and cash
equivalents, notes payable and long-term debt do not materially differ from
their fair value at December 31, 1997. The fair value of the Company's debt
was estimated using a discounted cash flow analysis based upon the Company's
current incremental borrowing rates for similar borrowing arrangements.
The Company sells a broad range of products to a diverse group of customers
operating throughout the world. These industries generally are not
significantly affected by changes in economic or other factors. Credit limits,
ongoing credit evaluation and account monitoring procedures are utilized to
minimize the risk of loss. Collateral is generally not required.
The Company hedges certain portions of its exposure to foreign currency
fluctuations in revenues and net foreign investments through the use of
options and forward exchange contracts. Gains and losses arising from the use
of such instruments are recorded in the income statement concurrently with
gains and losses arising from the underlying hedged transactions.
The Company enters into currency option contracts to hedge anticipated foreign
currency transactions during the next 12 months. At December 31, 1997, the
Company had outstanding option contracts with a notional value of
approximately $6 million. The cost to acquire the contracts that hedge 1998
net foreign currency transactions was approximately $1 million, and that
amount was deferred as of December 31, 1997. Had these contracts been acquired
at December 31, 1997, their cost to acquire would have been approximately $1
million. The Company had outstanding option contracts in place at December 31,
1996, with a notional value of approximately $37 million.
The Company uses currency swap contracts to hedge long-term intercompany loans
and the related interest. The terms of the swap contracts match the loan
payment terms. Swap contracts in existence at December 31, 1997, were for
French francs, German marks and Italian lira against the British pound
sterling. The U.S. dollar equivalent of the notional amount of the contracts
outstanding as of December 31, 1997, was approximately $118 million.
Liquidating the position at December 31, 1997, would have generated gains of
approximately $11 million. It is the Company's intention to hold the swap
contracts to maturity.
Counterparties to the currency swap agreements are major financial
institutions. Credit losses from counterparty nonperformance are not
anticipated.
36 Great Lakes Chemical Corporation
<PAGE> 30
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------
(in thousands of dollars, except per share data)
1997 - THREE MONTHS ENDED Mar. 31 Jun. 30 Sept. 30 Dec. 31
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $319,618 $356,373 $309,570 $ 325,666
Operating Expenses
Cost of products sold 230,753 253,794 220,508 232,468
Selling, administrative and research expenses 44,647 45,658 42,210 49,569
Special charge -- -- -- 49,800
- - ---------------------------------------------------------------------------------------------------------------
275,400 299,452 262,718 331,837
- - ---------------------------------------------------------------------------------------------------------------
Operating Income (Loss) 44,218 56,921 46,852 (6,171)
Interest and Other Income 5,915 6,501 8,368 10,884
Interest and Other Expenses 9,104 11,488 10,170 25,556
- - ---------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations before Income Taxes 41,029 51,934 45,050 (20,843)
Income Taxes 14,700 18,800 16,000 (4,100)
- - ---------------------------------------------------------------------------------------------------------------
Net Income (Loss) from Continuing Operations 26,329 33,134 29,050 (16,743)
Net Income (Loss) from Discontinued Operations 26,539 29,257 29,768 (100,389)
- - ---------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 52,868 $ 62,391 $ 58,818 $(117,132)
===============================================================================================================
Earnings (Loss) per Share:
Basic
Continuing Operations $ 0.43 $ 0.55 $ 0.48 $ (0.28)
Discontinued Operations 0.44 0.49 0.50 (1.68)
- - ---------------------------------------------------------------------------------------------------------------
$ 0.87 $ 1.04 $ 0.98 $ (1.96)
- - ---------------------------------------------------------------------------------------------------------------
Diluted
Continuing Operations $ 0.43 $ 0.55 $ 0.48 $ (0.28)
Discontinued Operations 0.43 0.49 0.50 (1.68)
- - ---------------------------------------------------------------------------------------------------------------
$ 0.86 $ 1.04 $ 0.98 $ (1.96)
- - ---------------------------------------------------------------------------------------------------------------
Cash Dividends Paid per Share $ .15 $ .15 $ .16 $ .16
===============================================================================================================
Stock Price Data
High 50 3/4 52 7/8 54 7/8 53
Low 41 5/8 41 1/2 45 9/16 42 1/16
Year-End Close 44 7/8
- - ---------------------------------------------------------------------------------------------------------------
1996 - THREE MONTHS ENDED Mar. 31 Jun. 30 Sept. 30 Dec. 31
- - ---------------------------------------------------------------------------------------------------------------
Net Sales $324,459 $394,033 $347,498 $ 286,289
Operating Expenses
Cost of products sold 225,514 277,779 251,123 214,614
Selling, administrative and research expenses 48,685 52,656 50,668 47,377
- - ---------------------------------------------------------------------------------------------------------------
274,199 330,435 301,791 261,991
- - ---------------------------------------------------------------------------------------------------------------
Operating Income 50,260 63,598 45,707 24,298
Interest and Other Income 6,905 25,706 5,437 18,612
Interest and Other Expenses 9,052 19,994 7,299 20,163
- - ---------------------------------------------------------------------------------------------------------------
Income from Continuing Operations before Income Taxes 48,113 69,310 43,845 22,747
Income Taxes 16,600 24,200 14,400 8,200
- - ---------------------------------------------------------------------------------------------------------------
Net Income from Continuing Operations 31,513 45,110 29,445 14,547
Net Income from Discontinued Operations 34,709 32,848 38,900 23,224
- - ---------------------------------------------------------------------------------------------------------------
Net Income $ 66,222 $ 77,958 $ 68,345 $ 37,771
===============================================================================================================
Earnings per Share:
Basic
Continuing Operations $ 0.49 $ 0.71 $ 0.46 $ 0.23
Discontinued Operations 0.54 0.51 0.62 0.38
- - ---------------------------------------------------------------------------------------------------------------
$ 1.03 $ 1.22 $ 1.08 $ 0.61
- - ---------------------------------------------------------------------------------------------------------------
Diluted
Continuing Operations $ 0.48 $ 0.70 $ 0.46 $ 0.23
Discontinued Operations 0.54 0.51 0.61 0.37
- - ---------------------------------------------------------------------------------------------------------------
$ 1.02 $ 1.21 $ 1.07 $ 0.60
- - ---------------------------------------------------------------------------------------------------------------
Cash Dividends Paid per Share $ .115 $ .12 $ .15 $ .15
===============================================================================================================
Stock Price Data
High 78 5/8 69 3/8 62 7/8 57 1/2
Low 65 61 46 1/2 44 1/4
Year-End Close 46 3/4
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
Great Lakes Chemical Corporation 37
<PAGE> 31
CORPORATE OFFICERS
Robert B. McDonald
Chief Executive Officer and President
Robert T. Jeffares
Executive Vice President and Chief Financial Officer
L. Donald Simpson
Executive Vice President
Dennis J. Kerrison
Group Vice President
Marshall E. Bloom
Vice President, Water Treatment
David R. Bouchard
Vice President, Bromine and Bromine Derivatives
Stephen D. Clark
Vice President, Corporate R&D
Mark S. Esselman
Vice President, Human Resources
Richard R. Ferguson
Vice President, Treasurer and Asst. Secretary
Otto K. Furuta
Vice President, Purchasing and Logistics
Robert L. Hollier
Vice President, and President of OSCA, Inc.
John V. Lacci
Vice President, General Counsel
J. Larry Robertson
Vice President, LINX
Robert J. Smith
Vice President, Controller
John B. Talpas
Vice President, Manufacturing
David C. Sanders
Associate Vice President, New Product Development
Mary P. McClanahan
Corporate Secretary
Stephen E. Brewer
Asst. Treasurer
DIRECTORS
Evan Bayh 3, 5
Partner, Baker & Daniels
Attorneys-at-law
Director since 1997
William H. Congleton 1, 6
General Partner, Palmer Partners L.P.
Private investment partnership
Director since 1973
John S. Day 1, 2, 4
Vice President and Dean Emeritus, Purdue University
Director since 1975
Thomas M. Fulton 2, 3
President and Chief Executive Officer
Landauer, Inc.
Director since 1995
Martin M. Hale, 1, 4, 5, 6
Chairman of the Board of Great Lakes;
Executive Vice President
Hellman Jordan Management Company, Inc.
Investment advisors
Director since 1978
Louis E. Lataif 1, 2
Dean of the School of Management, Boston University
Director since 1995
Richard H. Leet 2, 3, 4
Retired Vice Chairman and Director
Amoco Corporation
Director since 1994
Robert B. McDonald 4, 5, 6
Chief Executive Officer and President
Director since 1994
Mack G. Nichols
President and Chief Operating Officer
Mallinckrodt Inc.
Director since February 1998
Jay D. Proops 4, 5, 6
Former Vice Chairman
The Vigoro Corporation
Director since 1996
1 Audit Committee
2 Compensation and Incentive Committee
3 Environmental, Safety and Health Committee
4 Executive Committee
5 Finance Committee
6 Succession Planning Committee
[LOGO] [LOGO]
Economic Value Added(R) is a Registered trademark of Stern Stewart & Co.
Responsible Care(R) is a registered trademark of Chemical Manufacturers
Association.
38 Great Lakes Chemical Corporation
<PAGE> 32
WHOLLY OWNED SUBSIDIARIES AND AFFILIATES
Bayrol Chemische Fabrik GmbH
Swimming Pool and Spa Products
Bio-Lab, Inc.
Swimming Pool and Spa Products
Great Lakes Chemical (Europe), Ltd.
Specialty Chemicals
Great Lakes Chemical France S.A.
Specialty Chemicals
Great Lakes Chemical International, Inc.
Export Sales-FSC
Great Lakes Chemical Italia S.r.l.
Specialty Chemicals
Great Lakes Fine Chemicals, Ltd.
Manufacturer of Fine and Specialty Chemicals
and Intermediates
LOWI Polymer Stabilizers GmbH
Specialty Chemicals
Octel Associates and
The Associated Octel Company, Limited
Petroleum Additives
OSCA, Inc.
Oil Field Services
WIL Research Laboratories, Inc.
Toxicological Testing
SHAREHOLDER INFORMATION
TRANSFER AGENT AND REGISTRAR
The stock transfer agent and registrar for Great Lakes' stock is Harris Trust
and Savings Bank. Stockholders who wish to transfer their stock, or change the
name in which the shares are registered, should contact:
Harris Trust and Savings Bank
Attn: Shareholder Services
311 West Monroe Street, 11th Floor
Chicago, Illinois 60606-4607
(312) 461-6001
hearing impaired: (312) 461-5633
www.harrisbank.com
AUDITORS
Ernst & Young LLP
Indianapolis, Indiana
LISTINGS
New York Stock Exchange
New York, New York
Pacific Stock Exchange
Los Angeles and San Francisco, California
Ticker Symbol: GLK
ANNUAL MEETING
The Annual Meeting of the Stockholders will be held at 11:00 a.m., Thursday,
May 7, 1998, at the Harris Trust and Savings Bank, 111 West Monroe Street, 8th
Floor Auditorium, Chicago, Illinois.
FORM 10-K AND OTHER INFORMATION
A complimentary copy of the company's 1997 Annual Report to the Securities and
Exchange Commission on Form 10-K is available upon request. For this, or for
other information concerning the company, please contact:
Jeffrey Potrzebowski
Director, Investor Relations
or
Gregory J. Griffith
Director, Public Affairs and Administration
Great Lakes Chemical Corporation
One Great Lakes Boulevard
West Lafayette, Indiana 47996-2200
Phone: (765) 497-6100
www.greatlakeschem.com
<PAGE> 1
Exhibit 23
Great Lakes Chemical Corporation and Subsidiaries
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent
to the incorporation by reference in this Annual Report (Form 10-K) of Great
Lakes Chemical Corporation of our report dated February 3, 1998, included in the
1997 Annual Report to Stockholders of Great Lakes Chemical Corporation.
Our audits also included the financial statement schedule of Great Lakes
Chemical Corporation listed in Item 14(a). This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. 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 set forth
therein.
We also consent to the incorporation by reference in Registration Statement
Number 33-02069 on Form S-3, dated December 11, 1985, in Post-Effective
Amendment Number 1 to the Registration Statement Number 33-02074 on Form S-8,
dated February 3, 1995, in Registration Statement Number 33-02075 on Form S-8,
dated December 11, 1985, in Registration Statement Number 33-42477 on Form S-3,
dated August 28, 1991, in Registration Statement Number 33-57589 on Form S-8,
dated February 3, 1995, and in Registration Statement Number 33-300543 on Form
S-8, dated January 30, 1996, of our report dated February 3, 1998, with respect
to the consolidated financial statements incorporated herein by reference, and
our report included in the preceding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of Great Lakes
Chemical Corporation for the year ended December 31, 1997.
ERNST & YOUNG LLP
Indianapolis, Indiana
March 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME, AND STATEMENT OF CASHFLOW AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997<F1> JUN-30-1997<F2> SEP-30-1997<F3> DEC-31-1997
<CASH> 141,310 186,952 247,158 73,673
<SECURITIES> 0 0 0 0
<RECEIVABLES> 303,088 298,962 235,891 262,695
<ALLOWANCES> 6,890 7,013 6,833 5,803
<INVENTORY> 275,756 273,912 281,941 298,175
<CURRENT-ASSETS> 744,608 782,307 786,791 668,546
<PP&E> 1,098,282 1,126,288 1,151,775 1,140,617
<DEPRECIATION> 459,214 474,127 489,301 481,982
<TOTAL-ASSETS> 2,366,011 2,385,905 2,370,758 2,270,391
<CURRENT-LIABILITIES> 298,609 295,194 308,200 304,356
<BONDS> 580,726 562,354 498,147 561,455
0 0 0 0
0 0 0 0
<COMMON> 72,472 72,491 72,525 72,573
<OTHER-SE> 1,328,274 1,370,100 1,405,462 1,234,870
<TOTAL-LIABILITY-AND-EQUITY> 2,366,011 2,385,905 2,370,758 2,270,391
<SALES> 320,526 675,991 985,561 1,311,227
<TOTAL-REVENUES> 326,441 688,407 1,006,345 1,342,895
<CGS> 231,661 484,547 705,055 937,523
<TOTAL-COSTS> 276,086 574,620 837,134 1,169,759
<OTHER-EXPENSES> 2,624 6,532 10,314 27,910
<LOSS-PROVISION> 222 232 436 (352)
<INTEREST-EXPENSE> 6,480 14,060 20,448 28,408
<INCOME-PRETAX> 41,029 92,963 138,013 117,170
<INCOME-TAX> 14,700 33,500 49,500 45,400
<INCOME-CONTINUING> 26,329 59,463 88,513 71,770
<DISCONTINUED> 26,539 55,796 85,564 (14,825)
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 52,868 115,259 174,077 56,945
<EPS-PRIMARY> 0.87 1.91 2.89 0.95
<EPS-DILUTED> 0.86 1.90 2.88 0.94
<FN>
<F1>RESTATED BALANCE AT 03/31/1997.
<F2>RESTATED BALANCE AT 06/30/1997.
<F3>RESTATED BALANCE AT 09/30/1997.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME, AND STATEMENT OF CASHFLOW AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> MAR-31-1996<F1> JUN-30-1996<F2> SEP-30-1996<F3> DEC-31-1996<F4>
<CASH> 190,446 116,051 141,249 141,439
<SECURITIES> 0 0 0 0
<RECEIVABLES> 547,168 555,896 524,789 260,689
<ALLOWANCES> 7,520 8,001 9,159 7,321
<INVENTORY> 423,052 437,979 407,764 276,787
<CURRENT-ASSETS> 1,186,002 1,134,538 1,096,377 703,950
<PP&E> 1,304,317 1,312,005 1,376,915 1,087,615
<DEPRECIATION> 522,662 535,281 553,685 451,055
<TOTAL-ASSETS> 2,557,320 2,499,384 2,499,758 2,352,698
<CURRENT-LIABILITIES> 483,835 468,581 470,618 279,864
<BONDS> 379,126 387,543 346,883 496,246
0 0 0 0
0 0 0 0
<COMMON> 72,189 72,423 72,442 72,455
<OTHER-SE> 1,378,657 1,381,588 1,418,209 1,414,444
<TOTAL-LIABILITY-AND-EQUITY> 2,557,320 2,499,384 2,499,758 2,352,698
<SALES> 324,459 718,492 1,065,990 1,352,279
<TOTAL-REVENUES> 331,364 751,103 1,104,038 1,408,939
<CGS> 225,514 503,293 754,416 969,030
<TOTAL-COSTS> 273,934 603,741 904,455 1,166,485
<OTHER-EXPENSES> 4,690 20,173 23,215 38,012
<LOSS-PROVISION> 265 893 1,970 1,931
<INTEREST-EXPENSE> 4,362 8,873 13,130 18,496
<INCOME-PRETAX> 48,113 117,423 161,268 184,015
<INCOME-TAX> 16,600 40,800 55,200 63,400
<INCOME-CONTINUING> 31,513 76,623 106,068 120,615
<DISCONTINUED> 34,709 67,557 106,457 129,681
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 66,222 144,180 212,525 250,296
<EPS-PRIMARY> 1.03 2.24 3.32 3.94
<EPS-DILUTED> 1.02 2.22 3.30 3.91
<FN>
<F1>RESTATED BALANCE AT 03/31/1996
<F2>RESTATED BALANCE AT 06/30/1996.
<F3>RESTATED BALANCE AT 09/30/1996.
<F4>RESTATED BALANCE AT 12/31/1996
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME, AND STATEMENT OF CASHFLOW AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995<F1>
<CASH> 116,434
<SECURITIES> 0
<RECEIVABLES> 264,512
<ALLOWANCES> 5,998
<INVENTORY> 278,665
<CURRENT-ASSETS> 682,038
<PP&E> 993,308
<DEPRECIATION> 407,405
<TOTAL-ASSETS> 2,179,932
<CURRENT-LIABILITIES> 282,293
<BONDS> 331,228
0
0
<COMMON> 72,109
<OTHER-SE> 1,344,074
<TOTAL-LIABILITY-AND-EQUITY> 2,179,932
<SALES> 1,291,552
<TOTAL-REVENUES> 1,318,649
<CGS> 897,309
<TOTAL-COSTS> 1,092,560
<OTHER-EXPENSES> 11,681
<LOSS-PROVISION> 648
<INTEREST-EXPENSE> 13,538
<INCOME-PRETAX> 200,222
<INCOME-TAX> 68,000
<INCOME-CONTINUING> 132,222
<DISCONTINUED> 163,351
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 295,573
<EPS-PRIMARY> 4.52
<EPS-DILUTED> 4.48
<FN>
<F1>RESTATED BALANCE AT 12/31/1995.
</FN>
</TABLE>
