<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1998
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
incorporation or organization) Identification No.)
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
Not Applicable
-------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X
-----
No
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
One Class - 59,039,352 Shares as of March 31, 1998
<PAGE> 2
Part 1 - Financial Statements
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
-------- -----------
(thousands of dollars)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 84,601 $ 73,673
Accounts and notes receivable, less
allowance of $5,661 (1997 - $5,803) 283,295 256,892
Inventories
Finished products 230,202 217,398
Raw materials 57,055 51,984
Supplies 29,959 28,793
----------- -----------
Total inventories 317,216 298,175
Prepaid expenses 28,807 39,806
----------- -----------
Total current assets 713,919 668,546
Plant and Equipment 1,177,554 1,140,617
Less allowance for depreciation (506,042) (481,982)
----------- -----------
Net plant and equipment 671,512 658,635
Goodwill 115,407 114,902
Investments in and Advances to
Unconsolidated Affiliates 73,418 72,716
Other Assets 27,902 29,052
Net Assets of Discontinued Operations 714,033 726,540
----------- -----------
$ 2,316,191 $ 2,270,391
=========== ===========
</TABLE>
1
<PAGE> 3
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
-------------------------------------------------
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
-------- -----------
(thousands of dollars)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 114,097 $ 140,310
Accrued expenses 130,430 134,547
Income taxes payable 29,346 13,511
Dividends payable 9,447 9,431
Notes payable and current portion
of long-term debt 6,907 6,557
----------- -----------
Total current liabilities 290,227 304,356
Long-Term Debt, less Current Portion 579,811 561,455
Other Noncurrent Liabilities 41,753 28,692
Deferred Income Taxes 65,113 68,445
Stockholders' Equity
Common stock, $1 par value,
authorized 200,000,000 shares,
issued 72,659,868
(1997 - 72,572,602 shares) 72,660 72,573
Additional paid-in capital 125,019 123,379
Retained earnings 1,945,843 1,912,468
Minimum pension liability adjustment (2,543) (2,543)
Cumulative translation adjustment (56,539) (52,855)
Less treasury stock, at cost,
13,620,516 shares
(1997 - 13,628,300 shares) (745,153) (745,579)
----------- -----------
Total stockholders' equity 1,339,287 1,307,443
----------- -----------
$ 2,316,191 $ 2,270,391
=========== ===========
</TABLE>
2
<PAGE> 4
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1998 1997
---- ----
(thousands of dollars
except per share data)
<S> <C> <C>
Net Sales $ 334,764 $ 319,618
Operating Expenses
Cost of products sold 241,390 230,753
Selling, administrative
and research expenses 61,562 44,647
----------- -----------
302,952 275,400
----------- -----------
Operating Income 31,812 44,218
Interest and Other Income 8,204 5,915
Interest and Other Expenses 12,453 9,104
----------- -----------
Income from Continuing Operations
before Income Taxes 27,563 41,029
Income Taxes 10,300 14,700
----------- -----------
Net Income from Continuing Operations 17,263 26,329
Net Income from Discontinued Operations 25,559 26,539
----------- -----------
Net Income $ 42,822 $ 52,868
=========== ===========
Earnings per Share:
Basic
Continuing Operations $ 0.29 $ 0.43
Discontinued Operations 0.44 0.44
----------- -----------
$ 0.73 $ 0.87
=========== ===========
Diluted
Continuing Operations $ 0.29 $ 0.43
Discontinued Operations 0.43 0.43
----------- -----------
$ 0.72 $ 0.86
=========== ===========
Cash Dividends Declared per Share $ 0.16 $ 0.15
</TABLE>
3
<PAGE> 5
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------------
1998 1997
(thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net income from continuing operations $ 17,263 $ 26,329
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization 19,786 16,870
Changes in deferred items and other (2,300) 345
----------- -----------
Cash provided by continuing operations
excluding changes in working capital 34,749 43,544
Changes in working capital other than
debt, net of effect from business
combinations (42,054) (43,845)
Other noncurrent liabilities 7,600 3,969
----------- -----------
Net Cash Provided by Operating Activities
from Continuing Operations 295 3,668
Discontinued Operations:
Net income 25,559 26,539
Change in net assets 9,805 18,202
----------- -----------
Net Cash Provided by Operating Activities 35,659 48,409
INVESTING ACTIVITIES
Plant and equipment additions (33,666) (34,772)
Business combinations, net of cash acquired (2,124) (999)
Other 261 (6,269)
----------- -----------
Net Cash Used in Investing Activities (35,529) (42,040)
FINANCING ACTIVITIES
Net borrowings under short-term
credit lines 324 1,208
Net increase in commercial paper and
other long-term obligations 17,286 85,437
Proceeds from stock options exercised 1,727 34
Cash dividends (9,447) (8,981)
Repurchase of common stock -- (81,956)
Other 426 --
----------- -----------
Net Cash Provided (Used) by Financing
Activities 10,316 (4,258)
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 482 (2,240)
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents 10,928 (129)
Cash and Cash Equivalents at Beginning
of Year 73,673 141,439
----------- -----------
Cash and Cash Equivalents at End of Year $ 84,601 $ 141,310
=========== ===========
</TABLE>
4
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE MONTHS ENDED MARCH 31, 1998
-----------------------------------------------
CONTINUING OPERATIONS
- - ---------------------
The following table sets forth the percentage relationship to net sales of
certain income statement items for the Company's continuing operations:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Net Sales 100.0% 100.0%
Gross Profits 27.9 27.8
Selling, Administrative & Research 13.8 14.0
CEO Transition Costs 4.6 --
----- -----
Operating Income 9.5 13.8
Interest and Other Income 2.4 1.6
Interest and Other Expense 3.6 1.9
----- -----
Income before Taxes 8.3 12.8
Income Taxes 3.1 4.6
----- -----
Net Income 5.2% 8.2%
===== =====
</TABLE>
Sales for the first quarter were $335 million, an increase of $15 million over
the prior year. The table below shows sales by business unit:
<TABLE>
<CAPTION>
1998 1997 Change
---- ---- ------
<S> <C> <C> <C>
Flame Retardants $ 84 $ 76 11%
Intermediates and Fine Chemicals 51 48 6%
Polymer Stabilizers 62 61 2%
Specialized Services 48 46 4%
Water Treatment 90 89 1%
---- ----
$335 $320 5%
==== ====
</TABLE>
The increase in sales is attributable to the following:
<TABLE>
<S> <C>
Selling Price Decrease $ (1)
Volume Improvements 11
Foreign Exchange (9)
Acquisitions 14
----
$ 15
====
</TABLE>
Flame Retardants sales increased as a result of the acquisition of Anzon, a
producer of antimony-based products. Sales volume of brominated flame
retardants were lower than a year ago due to economic weakness in Japan and
Southeast Asia. Also negatively effecting sales was the relative strength of
the dollar vis-a-vis most European currencies and the Japanese yen.
The Polymer Stabilizers business benefited from strong volume gains due to the
growth of proprietary blends and increased market
5
<PAGE> 7
presence in certain regions of the world. Price comparisons continue to be
negative due to competitive activity. Currency effects were negative.
The improvement in Intermediates and Fine Chemicals sales was primarily volume
driven.
All of the businesses in the Specialized Services business unit - fluorine
derivatives, oil field services, toxicological testing - posted modest
volume-related improvements.
Water Treatment sales were up slightly over the prior year as volume gains of
approximately 5 percent were offset by adverse currency effects in Europe and
some deterioration in average selling prices.
Gross profits for the period amounted to $93 million, or an increase of $4
million over the prior year. As a percentage of sales, gross profits were
essentially unchanged from the prior year. Volume gains, favorable product mix
and the Anzon acquisition added $9 million to gross profits, while foreign
exchange had a $3 million negative effect. Manufacturing costs and selling
prices combined to negatively effect gross profits by about $2 million. Raw
material costs were comparable to the year-ago period as the Company is yet to
benefit from posted chlorine price reductions.
SAR expense, excluding the aforementioned CEO transition costs, were 13.8
percent of sales, a slight improvement from the prior year.
Operating margins, again excluding the CEO transition costs, improved 0.3
percentage points to 14.1 percent of sales.
Interest and other income showed a $2 million improvement, primarily due to an
insurance recovery.
Interest and other expense increased $3 million due primarily to higher
interest expense.
FINANCIAL CONDITION
- - -------------------
Trade accounts receivable and days sales outstanding increased $32 million and
5 days, respectively, from December 31, 1997 due to the seasonality of the
Water Treatment business. Days sales outstanding compared to a year ago
improved 6 days.
Inventories increased about $19 million from year-end 1997 while the turnover
rate remained steady at 3.3 times. The increase is spread over all the
business units and, in part, reflects the seasonality of Water Treatment and
Fine Chemicals as well as estimated requirements to meet future demand.
Accounts payable and accrued liabilities decreased slightly from year-end 1997.
6
<PAGE> 8
Cash generated by the operating activities of the continuing operations was
break-even due to the aforementioned changes in working capital.
Capital spending for the period amounted to $34 million. Capital spending for
the year is estimated to be in the $150 million range.
Cash generated by the discontinued operations and borrowings of about $19
million provided the financing necessary for these activities and the payment
of a $9 million dividend.
DISCONTINUED OPERATIONS
- - -----------------------
Petroleum Additives sales and net income were comparable to the prior year.
The decline in TEL volumes was approximately 7 percent compared to the prior
year. The sales mix was favorable as retail TEL sales accounted for 81 percent
of sales compared to 67 percent of sales a year ago. Average retail tetraethyl
lead (TEL) selling prices declined slightly. The business continues to benefit
from cost reduction initiatives.
The results of the other discontinued businesses for the period were break-even
and the Company continues to make progress towards completing their
dispositions by the end of the year.
Great Lakes Chemical Corporation's Board of Directors approved the spin-off of
the Company's Petroleum Additives business, creating Octel Corp., an
independent, publicly traded company. The Board of Directors declared a stock
dividend pursuant to which each Great Lakes shareholder will receive one share
of Octel Corp. common stock for every four shares of Great Lakes common
stock owned on the record date of May 15, 1998. Great Lakes expects Octel
Corp. stock will begin trading on the New York Stock Exchange on or around May
22, 1998.
FORWARD LOOKING STATEMENT
- - -------------------------
This report contains forward looking statements involving risks and
uncertainties that affect the Company's operations as discussed in the 1997
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Accordingly, there is no assurance that the Company's expectations will be
realized.
7
<PAGE> 9
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------
NOTE A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes necessary for a comprehensive presentation of financial position and
results of operations.
It is management's opinion, however, that all material adjustments (consisting
of normal recurring accruals) have been made which are necessary for a fair
financial statement presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the year.
For further information, refer to the consolidated financial statements and
footnotes included in the Company's Annual Report on form 10-K for the year
ended December 31, 1997.
NOTE B - Income Taxes
The provision for income taxes at the effective tax rates reconciles with the
statutory U.S. Federal tax rate as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1998 1997
---- ----
<S> <C> <C>
Statutory U.S. Federal tax rate 35.0% 35.0%
State income taxes 2.1 2.4
Change in taxes relating to
various minor items (3.4) (1.6)
Non-deductible Compensation 3.7 --
---- ----
37.4% 35.8%
==== ====
</TABLE>
NOTE C - Comprehensive Income
As of January 1, 1998, the Company adopted the Financial Accounting Standards
Board's Statement 130, Reporting Comprehensive Income. Statement 130
establishes new rules for reporting and display of comprehensive income and its
components. However, the adoption of this Statement had no impact on the
Company's net income or stockholders' equity. Statement 130 requires foreign
currency translation adjustments and minimum pension liability adjustments,
which are reported separately in stockholders' equity, to be included in other
comprehensive income. Prior year financial statements have been reclassified
to conform to the requirements of Statement 130.
8
<PAGE> 10
During the first quarter of 1998 and 1997, total comprehensive income was
$39,138,000 and $8,779,000, respectively.
Note D - Earnings Per Share
The computation of basic and diluted earnings per share is determined by
dividing net income as reported as the numerator, by the number of shares
included in the denominator as follows:
<TABLE>
<CAPTION>
(in thousands) Three Months Ended
1998 1997
---- ----
<S> <C> <C>
Weighted average shares used for
calculating basic earnings
per share 58,991 60,869
Effect of potentially dilutive
stock options and restricted
stock used for calculating
diluted earnings per share 237 231
------ ------
Denominator for diluted earnings
per share 59,228 61,100
------ ------
</TABLE>
Item 4. Submission of Matters to a Vote of Security Holder
At the Company's annual meeting of shareholders held on May 7, 1998, three
items were submitted to a vote of the security holders, which are more fully
described in the Company's proxy statement dated March 31, 1998. The matters
voted on at the meeting and the results of those votes were as follows:
1. To elect two directors to serve until the 2001 Annual Meeting:
Director For Withheld
-------- --- --------
Louis E. Lataif 52,017,774 896,654
Mack G. Nichols 52,014,956 899,473
2. To Approve the 1998 Stock Compensation Plan for officers, nonemployee
directors and key employees of the corporation.
For Withheld Abstained
--- -------- ---------
49,419,731 3,217,007 277,688
3. To request that the Board of Directors take the necessary steps to
declassify the Board and establish annual election of all directors.
For Withheld Abstained
--- -------- ---------
26,060,016 21,328,382 677,602
9
<PAGE> 11
Part II. Other Financial Information
- - ------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed as part of the report are listed below:
<TABLE>
<CAPTION>
SEC Exhibit
-----------
<S> <C>
10(a) Agreement upon Separation of Employment with Robert B. McDonald
effective April 15, 1998
10(b) Employment Agreement with Mark P. Bulriss effective April 1, 1998
27 Financial Data Schedule
</TABLE>
(b) The Company did not file, nor was it required to file, a form 8-K because
of a change in independent auditors or because of any material unusual
charges or credits to income occurring during the quarter for which this
report was filed.
SIGNATURES
----------
Pursuant to the requirements 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.
Date May 13, 1998 By /s/ Robert J. Smith
------------ ---------------------------------
Robert J. Smith
Vice President, Controller
10
<PAGE> 1
EXHIBIT 10(a)
RELEASE AND SETTLEMENT AGREEMENT
THIS RELEASE AND SETTLEMENT AGREEMENT ("Agreement") is made and entered
into this 15th day of April, 1998 by and between Great Lakes Chemical
Corporation (hereinafter "the Company") and Robert B. McDonald (hereinafter
"Mr. McDonald").
WITNESSETH:
WHEREAS, Mr. McDonald has been serving as President and Chief Executive
Officer of the Company; and
WHEREAS, the Company and Mr. McDonald have agreed that Mr. McDonald's
employment with the Company shall be terminated by his voluntary resignation as
hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties to this Agreement, including but not limited to the Company's
agreement to pay Mr. McDonald, subsequent to his termination, the amounts
described in this Agreement, the Company and Mr. McDonald agree as follows:
1. Resignation and Press Release. (a) Mr. McDonald hereby submits, and
the Company hereby accepts, his voluntary and irrevocable written resignation
as President and Chief Executive Officer of the Company, as an employee of the
Company, as an officer and employee of any affiliate of the Company, and as a
member of each committee or board of any affiliate of the Company on which he
currently serves, effective as of April 6, 1998 (hereinafter "Termination
Date"). From and after the Termination Date, Mr. McDonald shall no longer be
an elected officer of the Company or an officer or director of any of its
affiliates and, except as may be expressly provided in Sections 13 and 16 of
this Agreement, shall not for any purpose be considered to be or treated as an
elected officer of the Company or an officer or director of any of its
affiliates. During the completion of his current term on the Company's Board
of Directors (hereinafter "Board") after the Termination Date, Mr. McDonald's
committee assignments thereon shall be subject to the appointment by the
Chairman of the Board with the approval of the Board. Mr. McDonald will
resign from the Board after the completion of his current term and will not be
renominated to the Board.
(b) Mr. McDonald and the Company acknowledge that a press release in the
form appended hereto as Attachment A has been issued in connection with his
resignation (the "Press Release"). Mr. McDonald approved the language of the
Press Release prior to its issuance.
<PAGE> 2
2. Severance Payments. Immediately upon expiration of the seven-day
period described in Section II below or at such other times as specifically
provided in this Section 2, the Company shall pay or commence to pay or provide
to or on behalf of Mr. McDonald as follows:
(a) The unpaid base salary to which Mr. McDonald is entitled through the
Termination Date and accrued but unused vacation days to the extent and in the
amounts, if any, provided under the Company's usual policies, such amounts to
be payable in a regular payroll check at the time and in the manner consistent
with the Company's general policies regarding compensation of executive
employees.
(b) From and after the Termination Date, the Company shall pay Mr.
McDonald, on a bi-weekly basis at the rate of $700,000 per year, for the period
beginning on the Termination Date and ending on the earliest to occur of (i)
October 31, 2001, (ii) Mr. McDonald's death or (iii) the date as of which Mr.
McDonald elects to begin to receive retirement benefits to which he is entitled
under either or both of the Retirement Plan For Certain Employees of Great
Lakes Chemical Corporation as in effect as of the Termination Date (hereinafter
"Qualified Retirement Plan") or the Great Lakes Chemical Corporation
Supplemental Retirement Plan as in effect as of the Termination Date
(hereinafter "SERP"). If and to the extent Mr. McDonald continues on the Board
after the Termination Date, he shall not be entitled to any compensation
payable to non-employee directors and solely for purposes of director
compensation shall not be considered as a non-employee director. Mr. McDonald
shall be entitled to reimbursement for expenses as a member of the Board in
accordance with Company policies.
(c) A cash payment in the amount of $1,130,000, in lieu of any bonuses for
1998 or subsequent years under the Company's Management Incentive Compensation
Plan or any other annual bonus or incentive plan, program or arrangement of the
Company or any affiliate.
(d) A cash payment in the amount of $102,000, in lieu of any Company match
under the Great Lakes Savings Plan (hereinafter "401(k) Plan") and the Great
Lakes Chemical Corporation Supplemental Savings Plan (hereinafter "Supplemental
Savings Plan"), for periods after the Termination Date.
(e) A cash payment of $3,432,153, in lieu of any further rights in or
under any and all outstanding stock options (other than the 1989 stock options
which are the subject of Section 2(l) below) previously granted to Mr. McDonald
by the Company or any predecessor thereto, which options (other than the 1989
stock options which are the subject of Section 2(l) below) without further
action are hereby surrendered by Mr. McDonald for cancellation as of the
Termination Date and are hereby canceled as of the Termination Date. Mr.
McDonald agrees to deliver to the Executive Vice President and Chief Financial
Officer of the Company at the time of payment of the amount provided for in
this Section 2(e) all agreements evidencing such canceled outstanding stock
options.
(f) For the period from and after the Termination Date until October
31, 2001 or Mr. McDonald's earlier death, the Company will arrange to provide
Mr. McDonald the
<PAGE> 3
opportunity to participate in the Company's group medical, dental and vision
plans as though he had continued as an employee of the Company. To the extent,
however, such coverage cannot be provided under such Company plans, the
Company, at its election, will either (i) arrange to make available to Mr.
McDonald coverage through an insured arrangement which provides benefits
substantially similar and on the same terms and conditions (including employee
contributions toward premium payments) to those provided under such Company
plans (except that such arrangement need not provide an annual maximum limit in
excess of $1 million, an annual deductible of less than $500, coverage for drug
or alcohol abuse or mental health coverage), or (ii) pay such benefits as
described in clause (i) above directly but, to the extent it elects to do so
and any such payment results in Mr. McDonald incurring additional federal,
state or local income taxes that would otherwise not have been incurred had
such benefit been provided on an insured basis, the Company shall promptly pay
Mr. McDonald, on an after-tax basis, an additional payment in an amount equal
to all taxes imposed on Mr. McDonald as a result of the payment of such benefit
by the Company. The Company's obligations, however, under the preceding
sentence are expressly conditional on Mr. McDonald taking all reasonable
actions and providing all reasonable information, as the Company shall request,
as is necessary for the Company to fulfill such obligations, and the Company
will notify Mr. McDonald of the coverage provided. For purposes of the group
medical, dental and vision plans, Mr. McDonald's "qualifying event" for
purposes of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), shall be the Termination Date. The Company does not
guarantee a favorable tax consequence to Mr. McDonald for any coverage provided
pursuant to this Section 2(f) nor will it indemnify him for such results.
(g) A cash payment of $200,000, in lieu of the payment of any further
premiums under the Split-Dollar Life Insurance Agreement dated January 1, 1996
between the Company and Mr. McDonald (hereinafter "Split-Dollar Agreement").
In addition, as of the Termination Date the Company agrees to waive its rights
to and under Mr. McDonald's assignment to the Company of the policy that is the
subject of the Split-Dollar Agreement, with the result that from and after the
Termination Date, the Company shall have no further interest in said policy.
(h) Mr. McDonald shall be entitled, at the Company's expense, to purchase
a new car in 1998 upon the same terms and conditions that would have been
applicable to him under the Company's current automobile policy for senior
executives of the Company had he continued in employment. Until such new car
is delivered, Mr. McDonald shall be permitted to retain his current car.
(i) Mr. McDonald shall be entitled, upon substantiation of payment, to
reimbursement for all membership dues at his current country club in the
Lafayette, Indiana area paid by him, as and when due in the normal course, for
the period from the Termination Date until October 31, 2001 or his earlier
death. By written notice filed with the Company, however, Mr. McDonald may
elect to have the Company pay such membership dues directly, in which case Mr.
McDonald shall arrange to have such membership dues billed directly to the
Company which shall then pay such membership dues directly as and when due
rather than reimburse Mr. McDonald for payment.
<PAGE> 4
(j) The Company shall contribute payments in the aggregate amount of
$200,000 to one or more charitable organizations designated by Mr.
McDonald, such payments to be made in approximately equal annual
installments during 1998, 1999, and 2000.
(k) A cash payment of $4,706,000 to be paid to Mr. McDonald on November
1, 2001, in lieu of any benefit payments to which Mr. McDonald (or his
spouse or beneficiary) would otherwise then or thereafter be entitled
under the SERP including any accruals for the period after the
Termination Date had he continued in employment; provided, however, that
Mr. McDonald shall not be entitled to such cash payment if he elects to
receive retirement benefits under either or both of the Qualified
Retirement Plan or the SERP prior to November 1, 2001. Upon such lump
sum payment to Mr. McDonald pursuant to this Section 2(k), Mr. McDonald
agrees that, without further need to amend the SERP, neither he (nor his
spouse or beneficiary) shall be entitled to and he hereby waives all
rights to any further benefits under the SERP, but such payment shall not
affect his rights to benefits under the Qualified Retirement Plan.
(l) Mr. McDonald shall, notwithstanding any provision to the contrary in
his 1989 stock option agreement or in any related plan, be entitled to retain
the outstanding stock options granted to him by the Company during 1989 for
10,000 shares at an exercise price of $16.625, which options shall otherwise be
exercised in accordance with their terms at any time prior to March 1, 1999.
Any payments under the Section 2 shall not be taken into account for purposes
of any retirement or other benefit plan maintained by the Company or an
affiliate (including, without limitation, the Qualified Retirement Plan, the
SERP, the 401(k) Plan and the Supplemental Savings Plan).
3. Release. (a) As a condition to the Company's performance of this
Agreement, except as provided in subsection (c) of this Section 3, Mr.
McDonald, on behalf of himself, and his heirs, executors, administrators,
beneficiaries, successors and assigns, hereby
(i) acknowledges that the payments set forth in Section 2 constitute
satisfaction in full of Mr. McDonald's rights to any payment with respect to
Mr. McDonald's employment with the Company, and termination of such employment,
or any agreement, policy, practice, plan, arrangement or program of the Company
or any of its affiliates, including, but not limited to, any rights under the
Change in Control Agreement dated March 5, 1997 between the Company and Mr.
McDonald and any severance plan maintained by the Company or any affiliate, and
(ii) fully releases and forever discharges the Company, and its
affiliates, divisions, subsidiaries, facilities, parents, successors, assigns,
officers, directors, shareholders, agents, representatives, attorneys and
employees, (hereinafter collectively referred to as the "Released Parties"),
from any claims, demands, liabilities, obligations, charges, damages and causes
of action, known or unknown, fixed or contingent, with respect to any such
employment or termination, or any agreement, policy, practice, plan,
arrangement or program of the
<PAGE> 5
Company or any affiliate of the Company, or which may be based upon, related
to, or connected therewith, including, but not limited to, any claim or action
under any of the following (as amended): Title VII of the Civil Rights Act of
1964, the Civil Rights Act of 1866, the National Labor Relations Act, the Fair
Labor Standards Act, the Employee Retirement Income Security Act of 1974, the
Labor Management Relations Act, the Age Discrimination in Employment Act
("ADEA"), the Older Workers Benefit Protection Act, the Civil Rights Act of
1991, the Worker Adjustment and Retraining Notification Act, the Americans with
Disabilities Act, any state human rights act, state wage payment and collection
act, state anti-discrimination statutes, federal common law, state common law,
and/or any federal, state or local statute, law, ordinance, regulation or
order, and claims under any express or implied contract, including, but not
limited, to the Change in Control Agreement dated March 5, 1997 between the
Company and Mr. McDonald, and any severance plan maintained by the Company or
any affiliate, which Mr. McDonald or his heirs, executors, administrators,
beneficiaries, successors or assigns may claim exist or existed with the
Company or against any of the Released Parties.
(b) Mr. McDonald covenants and agrees never to commence, voluntarily aid
in any way, prosecute, or authorize to be commenced against any other party,
any action or other proceeding based upon any claims, demands, causes of
action, obligations, damages, or liabilities which are being released by this
Agreement. Mr. McDonald declares that, prior to the execution of this
Agreement, he has apprised himself of sufficient relevant data, either through
experts or other sources of his own selection, in order that he might
intelligently exercise his judgment in deciding whether to execute, and in
deciding on the contents of, this Agreement. Mr. McDonald further declares
that his decision is not predicated on or influenced by any declaration or
representations of the Company or any predecessors in interest, successors,
assigns, officers, directors, employees or agents of the Company. Mr. McDonald
states that the contents of this Agreement have been explained to him by his
counsel and that this document is executed voluntarily with full knowledge of
its significance.
(c) Notwithstanding any other provision in this Agreement to the contrary,
this Agreement does not constitute any waiver by Mr. McDonald of any rights
that he may have (i) under the Qualified Retirement Plan, (ii) the 40 1 (k)
Plan, (iii) except as otherwise provided in Section 2(k), the SERP, (iv) the
Supplemental Savings Plan, (v) as a holder of shares of Company stock, (vi)
under applicable law which cannot be waived pursuant to this Agreement, (vii)
as provided in Section 16, to indemnification under the charter or by-laws of
the Company or under the Company's directors 'and officers liability insurance
policy, or (viii) pursuant to this Agreement.
(d) Without limiting the generality of subsection (a) of this Section 3,
but subject to subsection (c) of this Section 3, Mr. McDonald agrees that the
payments provided for in Section 2 include and are made in lieu of, and shall
be considered as fulfilling, all financial obligations to Mr. McDonald,
including without limitation, salary or vested or accrued vacation pay,
bonuses, life insurance coverage, fringe benefits, and any amounts payable
under any employment separation or severance plan or policy of the Company, and
any agreement or contract previously entered into with the Company. Mr.
McDonald fully releases and forever discharges the Company, and its respective
affiliates, successors, assigns, officers, directors,
<PAGE> 6
agents, representatives, attorneys and employees, from any liability or
obligation to pay any compensation, salary continuation pay, separation or
severance pay, commission, bonus, or other benefit which otherwise may have
been payable to him as a result of his termination under benefit plans,
policies, agreements, arrangements, programs or pay practice of the Company or
any affiliate in effect at the time of his termination of employment,
including, but not limited, to any rights under the Change in Control Agreement
dated March 5, 1997 or severance plan maintained by the Company or any
affiliate, it being the intent of the parties hereto to convert and merge all
such rights into this Agreement.
4. No Admission. Nothing in this Agreement shall be construed as an
admission by any party as to any liability or that any claim has any factual or
other reasonable basis whatsoever. The parties agree and acknowledge that the
terms hereof are contractual in nature, and that the parties have jointly
agreed to enter into this Agreement in order to avoid and completely resolve
any and all claims.
5. Non-disparagement. (a) Mr. McDonald shall not disclose to any person
other than his lawyer, financial advisor, accountant and members of his
immediate family any matter relating to, including the terms and conditions of,
this Agreement, other than in a manner consistent with the Press Release, and
this Section 5, unless such disclosure shall be required by law, government
regulation, or the order of any court, administrative authority or other
government agency. Any statements by Mr. McDonald consistent with the Press
Release, and this Section 5, shall not be deemed to violate this Agreement.
(b) The Company, including its officers and directors, will not make or
publish any statements with regard to this Agreement or the circumstances under
which it was made other than in a manner consistent with the Press Release, and
this Section 5, unless such disclosure shall be required by law, government
regulation, or the order of any court, administrative authority or other
government agency. Any statements by the Company, including its officers and
directors, consistent with the Press Release, and this Section 5, shall not be
deemed to violate this Agreement.
(c) From and after the date of this Agreement, neither party shall
publicly or privately make any defamatory statement, regardless of the context
in which such statement is made, regarding the other party, the relationship
between the parties during the period of Mr. McDonald's relationship with the
Company, or the business acumen or performance of the other party.
(d) In the event the Company receives an inquiry from a prospective
employer regarding Mr. McDonald, the Company agrees to provide a positive
reference as to Mr. McDonald's skills and performance of his assigned duties
while employed by the Company. Mr. McDonald hereby expressly authorizes the
Company to respond to any such inquiry, and Mr. McDonald acknowledges that
responding to such an inquiry will not constitute a violation of this Section 5
nor will subject the Company to any claim against it by Mr. McDonald.
<PAGE> 7
6. Confidentiality. Mr. McDonald recognizes that he has a duty and
obligation to the Company to continue to protect the confidentiality of this
Agreement and of the Company's confidential and proprietary information and any
trade secrets belonging to the Company, and therefore agrees that:
(a) Any and all of the Company's confidential information produced or
received by Mr. McDonald during his employment is the property of the Company;
(b) Mr. McDonald shall not at any time in the future divulge or
communicate to any third person any confidential or proprietary information or
trade secrets belonging to the Company or its affiliates until such time as
such information or secrets become known by legitimate means such as public
disclosure by the Company or through no wrongful act by Mr. McDonald.
7. Non-Solicitation and Non-Competition. (a) Mr. McDonald shall not for a
period beginning on the Termination Date and ending on October 31, 2001
directly or indirectly participate in soliciting, recruiting, or hiring any
employees of the Company, and will not communicate to any other person or
entity regarding the nature, quality or quantity of work or any special
knowledge or personal characteristics of any person employed by the Company.
The parties expressly agree that if Mr. McDonald is contacted by a
prospective employer of any employee Mr. McDonald supervised while at the
Company, and is directly asked for a personal reference for such employee, Mr.
McDonald can respond to such an inquiry, and such response will not constitute
a violation of this Section 7, unless at the time such inquiry is made or such
response is provided, Mr. McDonald is employed by, or has an agreement to
provide services to, the prospective employer.
(b) Mr. McDonald hereby covenants and agrees that for the period beginning
on the Termination Date and ending on October 31, 2001 he will not, without the
prior written consent of the Chief Executive Officer of the Company, which
consent shall not be unreasonably withheld, engage in Competition (as defined
below) with the Company. For purposes of this Agreement, if Mr. McDonald takes
any of the following actions he will be engaged in "Competition": engaging in
or carrying on, directly or indirectly, any enterprise, whether as an advisor,
principal, agent, partner, sole-proprietor, officer, director, employee,
stockholder, associate or consultant to any person, partnership, corporation or
any other business entity, that is engaged in North America in the business of
producing and marketing speciality chemicals or other products competitive with
those of the Company and its affiliates; provided, however, that "Competition"
will not include (a) the mere ownership of securities in any enterprise and
exercise of rights appurtenant thereto or (b) participation in management of
any enterprise or business operation thereof other than in connection with the
competitive operation of such enterprise. Mr. McDonald agrees that the
geographical application of this clause is justified by the international scope
of the Company's operations.
<PAGE> 8
8. Acknowledgment and Consideration. The consideration described in
Section 2 is being provided in return for Mr. McDonald's accepting the terms of
this Agreement, including the giving of a release, a covenant not to sue, and
not revoking under Section I I so that this Agreement becomes effective. Mr.
McDonald acknowledges that the Company's payments set forth in Section 2 are in
the aggregate more than the Company is required to provide under its normal
policies and procedures, and are amounts to which he would not otherwise be
entitled by virtue of any contract, Company policy or practice, or any federal,
state or local statute, ordinance, order or law.
9. Assertion of Claims. Mr. McDonald represents and warrants, with the
understanding that such representation and warranty is material to this
transaction, that (a) no person or entity has asserted with any federal, state
or local judicial or administrative agency or body any claim of any kind or
character based on or arising out of or alleged to be suffered in or as a
consequence of Mr. McDonald's employment with the Company, its termination, or
his contacts or relationships with the Company or any Released Party, and (b)
Mr. McDonald has no current intention to assert, in any manner or by any means,
any such claim before any federal, state or local judicial or administrative
agency or body. If any such claim is asserted in the future by Mr. McDonald or
any person or entity authorized by Mr. McDonald to do so, Mr. McDonald agrees
and acknowledges that this Agreement and release set forth in Section 3 hereof
shall act as a total and complete bar to his reemployment or to recovery of any
sum or amount whatsoever from the Company, whether labeled "award, liability,
damages, judgment, back pay, wages, or fine" or otherwise resulting directly or
indirectly from any lawsuit, remedy, charge or complaint whether brought
privately by him or by any one else, including any federal, state or local
agency, whether or not on his behalf or at his request.
10. Re-employment. Mr. McDonald hereby releases and waives any and all
rights or claims he may have to reemployment by the Company or any of the
Company's affiliates and agrees that he shall not reapply for any position with
the Company or any of the Company's affiliates.
11. CONSIDERATION OF TERMS AND EFFECTIVE DATE. MR. MCDONALD ACKNOWLEDGES
THAT HE HAS CAREFULLY READ THIS AGREEMENT, THAT HE KNOWS AND UNDERSTANDS THE
CONTENTS THEREOF AND THAT HE EXECUTES THE SAME AS HIS OWN FREE, KNOWING AND
VOLUNTARY ACT AND DEED. MR. MCDONALD FURTHER REPRESENTS AND ACKNOWLEDGES THAT
HE HAS BEEN ADVISED BY THE COMPANY IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR
TO EXECUTING THIS AGREEMENT IF HE CHOSE TO DO SO, THAT HE HAS HAD AN
OPPORTUNITY TO CONSULT FULLY WITH HIS PERSONAL ATTORNEY REGARDING THE TERMS OF
THIS AGREEMENT, AND THAT HE FULLY UNDERSTANDS THE TERMS, CONDITIONS, AND FINAL
BINDING EFFECT OF THIS AGREEMENT, AND THAT THE RELEASE CONTAINED HEREIN IS A
RELEASE OF ALL CLAIMS WITH FINAL AND BINDING EFFECT. MR. MCDONALD ACKNOWLEDGES
THAT HE HAS BEEN GIVEN A PERIOD OF AT LEAST 21 DAYS WITHIN WHICH TO CONSIDER
THIS AGREEMENT PRIOR TO HIS EXECUTION HEREOF. FURTHERMORE, IT IS AGREED THAT
MR.
<PAGE> 9
MCDONALD SHALL HAVE THE RIGHT TO REVOKE THIS AGREEMENT BY WRITTEN NOTICE TO
THE COMPANY WITHIN THE SEVEN-DAY PERIOD FOLLOWING ITS EXECUTION. FOR THIS
REVOCATION TO BE EFFECTIVE, WRITTEN NOTICE MUST BE RECEIVED BY THE COMPANY'S
CHIEF EXECUTIVE OFFICER NO LATER THAN THE CLOSE OF BUSINESS ON THE SEVENTH DAY
AFTER MR. MCDONALD SIGNS THIS AGREEMENT. IF MR. MCDONALD DOES SO REVOKE, THIS
AGREEMENT WILL BE NULL AND VOID AND, SUBJECT TO APPLICABLE LAW, THE COMPANY
SHALL HAVE NO OBLIGATION WHATSOEVER TO MR. MCDONALD, AND MR. MCDONALD WILL NOT
RECEIVE THE CONSIDERATION DESCRIBED IN SECTION 2. THIS AGREEMENT SHALL NOT
BECOME EFFECTIVE AND ENFORCEABLE UNTIL AFTER THE EXPIRATION OF THIS SEVEN-DAY
REVOCATION PERIOD; AFTER SUCH TIME, IF THERE HAS BEEN NO REVOCATION, THIS
AGREEMENT SHALL BE FULLY EFFECTIVE AND ENFORCEABLE. IF THIS AGREEMENT IS
REVOKED BY MR. MCDONALD IN ACCORDANCE WITH THIS SECTION 11, MR. MCDONALD SHALL
RETURN TO THE COMPANY ALL CONSIDERATION AND BENEFITS PROVIDED BY THE COMPANY TO
WHICH MR. MCDONALD WOULD NOT BE ENTITLED ABSENT THIS AGREEMENT.
12. Remedies for Violation. Mr. McDonald acknowledges that this Agreement
prohibits him from initiating a lawsuit for any claims released in Section 3
and prohibits him from recovering any amounts or obtaining any remedy for
himself for any claim released in Section 3 through an action or proceeding
brought by others. Without limiting any other remedies available to the
Company at law or in equity, if Mr. McDonald materially breaches any of his
covenants or commitments set forth in this Agreement, including, but not
limited, to the provisions of Section 7, the Company shall be entitled to
recover and/or discontinue any or all of the consideration provided in Section
2 of this Agreement. In the event of any breach of the provisions of the
Agreement by Mr. McDonald, the parties acknowledge and agree that the Company
may suffer irreparable injury that could not be reasonably or adequately
compensated in damages in any action at law. Accordingly, Mr. McDonald
expressly agrees that the Company shall be entitled to injunctive relief,
specific performance or other equitable relief prohibiting Mr. McDonald from
violating or threatening to violate any provision of this Agreement, which
injunction or order shall be granted without requiring the Company to prove
damage or furnish any bond or other security.
13. No Authority or Responsibilities . Except as may be requested in
writing by the Chief Executive Officer of the Company, Mr. McDonald
acknowledges that he shall have no supervisory or managerial responsibility or
authority from and after the Termination Date and agrees not to involve himself
in any activities of the Company other than as a director. Mr. McDonald also
acknowledges that effective as of the Termination Date, he does not have
authority to bind the Company to any contracts or commitments and agrees that
he shall not create any obligation for the Company or bind or attempt to bind
the Company in any manner whatsoever. Mr. McDonald shall cooperate with the
Company and its counsel as the Company may reasonably request in connection
with any investigation or litigation relating to any matter in which Mr.
McDonald was involved during, or has knowledge as a result of, his employment
with the Company; provided, however, that the Company will make an effort to
reasonably accommodate Mr. McDonald's schedule and other commitments, and shall
reimburse Mr. McDonald for Mr. McDonald's reasonable
<PAGE> 10
out-of-pocket expenses incurred as a result of such request, and shall also
reimburse Mr. McDonald on a reasonable per them basis for his time in the event
Mr. McDonald is asked by the Company to travel outside the Lafayette, Indiana
area.
14. Expenses. Mr. McDonald shall settle any outstanding expenses and cash
advances in accordance with normal Company policies and procedures within
thirty (30) days following the execution of this Agreement.
15. Books and Records. Mr. McDonald shall return within seven (7) days
after the Termination Date, or at a time otherwise mutually agreed to, any
property of the Company or its affiliates now or hereafter in his possession or
under his control including, without limitation, all computer equipment, credit
cards, books, records, customer lists, manuals and pricing documents; provided,
however, that the parties agree that Mr. McDonald can keep copies of documents
relating to his benefits. In addition, Mr. McDonald shall promptly deliver to
the Company all papers (whether stored on computer or otherwise), descriptions,
summaries and other documents (and all copies thereof and notes with respect
thereto) containing any confidential or proprietary information or trade
secrets of the Company or its affiliates, including, without limitation,
personnel records, lists of employees, customers and suppliers, specifications
and designs of products, inventions, pending patent applications, product
styles, models, product manuals, lists of suppliers, sources and costs of parts
and raw materials, marketing methods and procedures, dealer volume, product
preference, credit standing, budgets and strategic plans. Notwithstanding the
foregoing provisions of this Section 15, Mr. McDonald shall not be required to
return any papers or other documents which he holds solely in his capacity as a
director of the Company.
16. Indemnification. This Agreement shall not affect Mr. McDonald's
rights to indemnification under the charter or by-laws of the Company as in
effect on or prior to the Termination Date, with respect to acts of commission
or omission or events occurring on or prior to the Termination Date, which
rights to indemnification shall also apply to Mr. McDonald with respect to acts
of commission or omission or events on or after the Termination Date in
connection with requests of the Company pursuant to Section 13 and, if
applicable, in connection with his service as a director of the Company
following the Termination Date. The Company shall continue to cover Mr.
McDonald under the Company's directors' and officers' liability insurance
policy for as long as and to the extent that such coverage is provided to
former officers by the directors' and officers' liability insurance policy.
Under no circumstances shall the Company be required to purchase insurance
specifically for Mr. McDonald's benefit. Instead, Mr. McDonald shall be
entitled to the same coverage which any other former officer would be entitled
to receive under the policies normally maintained by the Company, and for as
long as Mr. McDonald continues as a director of the Company following the
Termination Date, he shall be entitled to the same coverage non-employee
directors are entitled to receive under such policies.
<PAGE> 11
17. Miscellaneous.
(a) Affiliate Definition. "Affiliate" shall mean any person, firm or
corporation which directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the persons
specified.
(b) Amendments. This Agreement may be amended only by a writing executed
by each of the parties hereto.
(c) Entire Agreement. This Agreement sets forth the entire understanding
of the parties hereto with respect to the subject matter hereof, and supersedes
all prior contracts, agreements, arrangements, communications, discussions,
representations and warranties, whether oral or written, between the parties
other than any confidentiality agreement executed by Mr. McDonald while an
employee of the Company.
(d) Governing Law. This Agreement shall in respects be governed by
and construed in accordance with the laws of the State of Indiana.
(e) Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given (a) when received if personally delivered, (b) within 12 hours after
being sent by telecopy, with telecopy confirmation, and (c) when received (as
established by written receipt) if sent by established overnight courier to the
parties (and to the persons to whom copies shall be sent) at:
To the Company: Great Lakes Chemical Corporation
One Great Lakes Boulevard
P.O. Box 2200
West Lafayette, Indiana 47906-0200
Attention: Chief Executive Officer
With a copy to: Jones, Day, Reavis & Pogue 77 West Wacker
Chicago, Illinois 60601-1692 Attention: Williain
S. McKay, Jr. Telecopy No.: (312) 782-8585
To Mr. McDonald: Mr. Robert B. McDonald
<PAGE> 12
Any party by notice given to the other party in accordance with this Section
17(e) may change the address or the persons to whom notices or copies thereof
shall be directed.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same instrument.
(g) Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns and
heirs, as set forth herein, but no rights, obligations or liabilities hereunder
shall be assignable by either party without the prior written consent of the
other party.
(h) Waivers. Any waiver by any party of any violation of, breach of or
default under any provision of this Agreement or any other agreements provided
for herein, by the other parties shall not be construed as, or constitute, a
continuing waiver of such provision, or waiver of any other violation of,
breach of or default under any other provision of this Agreement or any other
agreements provided for herein.
(i) Third Parties. Nothing expressed or implied in this Agreement is
intended, or shall be construed, to confer upon or give any person or entity
other than Mr. McDonald and his heirs, and the Company (including any Released
Parties) any rights or remedies under or by reason of this Agreement.
(j) Headings. The headings in this Agreement are solely for convenience
of reference and shall not be given any effect in the construction or
interpretation of this Agreement.
(k) Withholding, of Taxes. The Company may withhold from any amounts
payable under the Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
(1) No Obligation to Mitigate. Mr. McDonald is under no obligation to
mitigate damages or the amount of any payment provided for hereunder by seeking
other employment or otherwise.
(m) Expense Reimbursement. The Company will reimburse Mr. McDonald for
reasonable fees of his attorney and tax advisors in connection with their
review of this Agreement and consultation with Mr. McDonald on its
implications; provided, however, that the Company's obligations hereunder shall
be limited to $10,000.
<PAGE> 13
IN WITNESS WHEREOF, Mr. McDonald has executed, and the Company has caused
its duly authorized representative to execute, this Agreement as of the date
first above written.
GREAT LAKES CHEMICAL CORPORATION
By /s/ Martin M. Hale
----------------------------------
Chairman of the Board
ROBERT B. MCDONALD
By /s/ Robert B. McDonald
----------------------------------
<PAGE> 1
EXHIBIT 10(b)
EMPLOYMENT AGREEMENT
by and between
GREAT LAKES CHEMICAL CORPORATION
and
MARK BULRISS
Effective as of April 1, 1998
<PAGE> 2
EMPLOYMENT AGREEMENT
AGREEMENT, effective as of April 1, 1998 (the "Effective Date"), by and
between Mark Bulriss (the "Executive"), and Great Lakes Chemical Corporation
(the "Company").
WHEREAS, the Board of Directors of the Company (the "Board") desires that
the Executive furnish services to the Company and the Executive desires to
furnish services to the Company on the terms and conditions hereinafter set
forth; and
WHEREAS, the parties desire to enter into this agreement setting forth the
terms and conditions of the employment relationship of the Executive with the
Company; and
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, on the terms and conditions
hereinafter set forth.
2. Employment Period. The period during which the Executive is employed
by the Company hereunder (the "Employment Period") shall commence on the
Effective Date and shall end on the fifth anniversary thereof, subject to the
extension of such period as hereinafter provided and subject to earlier
termination as provided in Section 5, below. Beginning on April 1, 2000, the
Employment Period shall be extended automatically for one (1) additional day
for each day which has been elapsed since April 1, 2000, unless, at any time
after April 1, 2000, neither the Company or the Executive gives written notice
to the other that such automatic extension of the Employment Period shall
cease. Any such notice shall be effective immediately upon delivery.
<PAGE> 3
3. Position and Duties; Place of Performance. (a) During the Employment
Period, the Executive shall serve as President and Chief Executive Officer of
the Company. The Executive shall report directly to the Board. During the
Employment Period, the Executive shall have those powers and duties consistent
with his position as President and Chief Executive Officer, subject to the
supervisory powers of the Board. The Executive agrees to devote substantially
all his working time to the performance of his duties for the Company;
provided, however, that it shall not be a violation of this Agreement for the
Executive to serve on corporate, civic or charitable boards or committees,
provided that his service on corporate boards or committees shall be subject to
the consent of the Board, (ii) give speeches and make media appearances to
discuss matters of public interest and (iii) manage his personal investments,
so long as such activities do not interfere substantially with the performance
of the Executives responsibilities in accordance with this Agreement.
(b) As soon as practicable following the Effective Date, the Succession
Planning Committee of the Board shall nominate the Executive (and the Board
shall elect the Executive) as a director of the Company. So long as the
Executive serves as President and Chief Executive officer of the Company, the
Company shall cause the Executive to be included in the slate of nominees
recommended by the Board to the Company's stockholders for election as
directors at each annual meeting of the stockholders of the Company at which
his class of directors is standing for election, and the Company shall use its
best efforts to cause the election of the Executive, including soliciting
proxies in favor of the election of the Executive. Upon Executives ceasing to
be an employee of the Company for any reason, he shall immediately resign as
a director of the Company.
(c) The principal place of employment of the Executive shall be at the
Company's principal executive offices at such location as may be agreed to by
the Board and the Executive.
<PAGE> 4
4. Compensation and Related Matters.
(a) Base Salary; Bonus. The Executive shall be entitled to the
following base salary and bonuses:
(i) Base Salary. During the Employment Period, as compensation
for the performance by the Executive of his duties hereunder, the
Company shall pay the Executive a base salary at an annual rate of
$650,000 (the base salary, at the rate in effect from time to time,
is hereinafter referred to as the "Base Salary"). The Base Salary
shall be payable in accordance with the Company's normal payroll
practice and may be increased from time to time at the discretion of
the Company's Compensation Committee (or any successor thereof) of
the Board. During the Employment Period, the Base Salary shall be
reviewed no less frequently than annually by the Board to determine
whether or not the same should be increased in light of the duties
and responsibilities of the Executive and the performance thereof.
The Base Salary shall not be subject to unilateral reduction by the
Company at any time during the Employment Period.
(ii) Annual Bonus. So long as the Executive is employed by the
Company, he shall be eligible to receive annual incentive awards or
bonuses (the "Annual Bonus") pursuant to and subject to the terms and
conditions of any incentive compensation plan of the Company;
Provided, however, that, the Executives Annual Bonus in respect of
the period ending on December 31, 1998 shall in no event be less than
seventy-five percent (75%) of his Base Salary as of the Effective
Date (i.e., $487,500); and Provided further that the target amount
for the Executives Annual Bonus for each year after 1998 shall in no
event be less than seventy-five percent (75%) of his Base Salary for
each such year.
<PAGE> 5
(iii) Signing Bonus. On the Effective Date, the Company shall
pay a signing bonus to the Executive in the sum of $850,000. The
payment of that signing bonus is not contingent on the performance of
services for the company and does not represent compensation for
services rendered.
(b) Equity Grants.
(i) Stock Options. Effective as of the Effective Date, the
Executive shall be granted a nonqualified stock option (the "Option")
to purchase 700,000 shares of the Company's common stock, par value
$1.00 per share ("Common Stock"). The number of shares of Common
Stock subject to the Option shall not be subject to equitable
adjustment to reflect consummation of the Company's proposed spin-off
of Octel (the "Spin-off"), so that, after giving effect to the
Spin-off, the Option shall represent an option to acquire 700,000
shares of Common Stock of the post-Spin-off Company. The option
grant shall be reflected in an option agreement, substantially in the
form of Exhibit A hereto. As promptly as practicable, and in any
event within six (6) months after the Effective Date, the Company
shall, at its expense, cause all shares subject to the Option to be
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and registered or qualified under applicable state
laws, to be freely resold. The Company shall maintain the
effectiveness of such registration and qualification for so long as
the Executive or any member of the Executives Immediate Family (as
defined below) holds such Option or owns the underlying shares of
Common Stock or until such earlier date as all such shares, without
such registration or qualification, may be freely sold without any
restrictions under the Securities Act.
<PAGE> 6
(ii) Future Stock Options. At such time during each of the
years 1999-2001 as the Compensation Committee of the Board approves
annual stock option grants to employees of the Company under the
Great Lakes Chemical Corporation 1993 Stock Compensation Plan or any
successor thereto (the "Option Plan"), and provided that the
Executive is then still employed by the Company, the Company shall
grant to the Executive under the Option Plan in each of those three
(3) years a nonqualified stock option (collectively, the "Future
Options" and together with the Option, the "Option Awards") to
purchase 100,000 shares of Common Stock (on a post-Spin-off basis).
The terms of the Future options, including the exercise price and
vesting schedule, shall be subject to the terms of the Option Plan,
and shall be evidenced by an option agreement which provides, among
other things, for a legend evidencing the restrictions contained in
Section 4(b)(iv) hereof.
The Company shall, at its expense, cause all shares subject to
the Future Options to be registered under the Securities Act on Form
S-8 and registered or qualified under applicable state laws to be
freely resold. The Company shall maintain the effectiveness of such
registration and qualification for so long as the Executive or any
member of the Executive's Immediate Family holds such Future Options
or owns the underlying shares of Common Stock or until such earlier
date as all such shares, without such registration or qualification,
may be freely sold without any restrictions under the Securities Act.
(iii) Restricted Stock. Effective as of the consummation of
the Spin-off, the Company shall grant to the Executive an aggregate
of 50,000 shares of Common Stock (the "Restricted Shares"), pursuant
to the terms of a restricted stock agreement, substantially in the
form of Exhibit B hereto (the "Restricted
<PAGE> 7
Stock Agreement"). As promptly as practicable, and in any event
within six (6) months after the Effective Date, the Company shall,
at its expense, cause all Restricted Shares to be registered under
the Securities Act and registered or qualified under applicable
state laws, to be freely resold. The Company shall maintain the
effectiveness of such registration and qualification for so long as
the Executive or any member of his Immediate Family owns such
Restricted Shares or such earlier date as all such shares, without
such registration or qualification, may be freely sold without any
restrictions under the Securities Act. In the event that the
Spin-off is not consummated within six months after the Effective
Date or if the Executives employment with the Company terminates for
any reason prior to the consummation of the Spin-off, the Company and
the Executive shall negotiate in good faith a mutually acceptable
alternative compensation arrangement (if feasible, in the form of an
equity-based award) providing economic value to the Executive which
is substantially equivalent to the grant of 50,000 restricted shares
of the post-Spin-off Company on the terms and conditions contemplated
in the Restricted Stock Agreement (including immediate vesting of 50%
of the value of such alternative compensation).
(iv) Restrictions on Restricted Shares and Option Shares
A. Until the third anniversary of the Effective Date (unless the
Executives employment with the Company shall have previously terminated),
the Executive shall not sell, transfer or dispose of (1) any portion of
the Restricted Shares which, in accordance with the Restricted Stock
Agreement, have ceased to be subject to any forfeiture conditions or (2)
any of the shares of Common Stock acquired pursuant to the exercise of
the Option Awards, other than (i) a transfer to a member of the Executives
Immediate Family, who shall not subsequently sell, transfer or dispose of
any of such trans-
<PAGE> 8
ferred shares until the third anniversary of the Effective Date (unless
the Executive's employment with the Company shall have previously
terminated), (ii) a transfer for the purpose of exercising all or any
portion of the Option Awards, or (iii) a sale, transfer or other
disposition to the extent necessary to satisfy tax withholding obligations
associated with the vesting of Restricted Shares or the exercise of the
Option Awards; provided, however, that the Board will consider and act
reasonably and in good faith upon any request by the Executive for
permission to sell all or any portion of the Restricted Shares prior to
the third anniversary of the Effective Date in order to meet any special
financial need of the Executive. For purposes of this Agreement, a
transfer by the Executive to his "Immediate Family" shall mean a transfer,
without the receipt of consideration in exchange therefor, to the
Executives children, grandchildren or spouse, to a charity or to a trust
exclusively for the benefit of such family members and/or charity or to
corporations, partnerships or other entities in which such family members
are the only shareholders, partners, equity holders or beneficiaries.
B. Nothing in clause (A) above shall be construed to prohibit the
Executive or any member of the Executives Immediate Family from selling,
transferring or otherwise disposing of any shares of Common Stock in any
transaction giving rise to a Change in Control (as defined in the Option Plan),
and all restrictions in clause (A) above shall cease to apply after a Change in
Control.
(c) Expenses; Relocation.
(i) During the Employment Period, the Company shall reimburse the
Executive for all reasonable business expenses in accordance with
applicable policies and procedures then in force.
(ii) The Executive shall be reimbursed for (or the Company shall make
direct payment of) all reasonable costs and expenses incurred by the
Executive in connection with
<PAGE> 9
relocating to the vicinity of the Company's principal executive offices
at such location as may be agreed to by the Board and the Executive and,
in connection with the sale of Executives current principal residence in
Richmond, Virginia, shall pay to Executive, as soon as practicable
following such sale, the excess (if any) of (1) the higher of (A) the
Executives original purchase price for such residence, plus the cost of
all documented capital improvements paid for by the Executive or (B) the
current appraised value of such residence, determined by an appraisal firm
reasonably satisfactory to the Company and the Executive over (2) the
sales price for such residence.
(d) Vacation and Other Absences. The Executive shall be entitled to paid
vacation and other paid absences, whether for holidays, illness, personal time
or any similar purposes during the Employment Period, in accordance with
policies applicable generally to senior executives of the Company; Provided,
however, that the Executive shall in any event be entitled to a minimum of four
(4) weeks of paid vacation for the period commencing on the Effective Date and
ending December 31, 1998, and for each subsequent calendar year during the
Employment Period.
(e) Retirement Benefits. The Company agrees that, to the extent
practicable, it shall amend the Retirement Plan for Certain Employees of Great
Lakes Chemical Corporation (the "Pension Plan") to provide for the Executive an
annual pension (expressed as a life annuity commencing at age sixty-five (65))
of fifty-five percent (55%) of "Final Average Pay" (as currently defined in the
Pension Plan) upon retirement with twenty-five (25) years of Benefit Service
thereunder (together with a fifty percent (50%) survivor benefit in the event
of the participant's death), such benefit to accrue as ratably (i.e., at the
rate of 2.2% per year of Benefit Service) over the Executives Benefit Service
period as is practicable. The Company further agrees that, for purposes of
calculating the Executives benefits pursuant to the Pension Plan and his
vested interest therein
<PAGE> 10
(which benefits and interest shall not be reduced as a result of any amendments
to the Pension Plan after the Effective Date), Executive shall be credited with
six (6) years of Vesting Service and Benefit Service as of the Effective Date
and shall be deemed to have become a Participant in the Pension Plan as of the
date which is six (6) years prior to the Effective Date. To the extent the
benefits contemplated by the preceding sentence are not provided under the
Pension Plan (including by reason of benefit or compensation limitations
imposed on taxqualified plans), the Company agrees to provide such benefits on
an unfunded, nonqualified basis. The retirement benefits provided pursuant to
this paragraph shall not be offset by retirement benefits provided to Executive
from prior employers.
(f) Legal Fees. The Company shall pay the reasonable legal fees and
disbursements incurred by the Executive in connection with the negotiation and
preparation of this Agreement, subject to a maximum amount of twenty-five
thousand dollars ($25,000). In addition, the Company agrees to pay promptly as
incurred, to the fullest extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest by the
Company, the Executive or others of the validity or enforceability of, or
liability under, any provisions of this Agreement (including as a result of any
contest initiated by the Executive about the amount of any payment due pursuant
to this Agreement), plus in each case interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended; provided, however, that the Company shall not
be obligated to make such payment (and any payments previously made by the
Company shall promptly be repaid by the Executive, with interest at the rate
provided for in this sentence) with respect to any contest in which the Company
prevails over the Executive.
(g) Other Benefits. During the Employment Period, the Executive shall be
eligible to participate in all other employee benefit plans and programs
(including group life insurance plan, medical and dental insurance plan, and
accident and disability insurance plan) ("Bene-
<PAGE> 11
fit Plans"), applicable generally to employees and/or senior executives of
the Company, in accordance with the terms and conditions of such Benefit Plans,
but with all waiting periods waived to the maximum extent permitted by the
Benefit Plans; and shall be entitled to such perquisites as are made available
to senior executives of the Company or as are provided to the Executive by the
Board. In addition, if the Executive elects to participate fully in the
Company's split-dollar life insurance program, the Company shall provide
through that program and other life insurance programs life insurance coverage
which will pay to the beneficiaries designated by the Executive death benefits
equal (after recovery of premiums by the Company) to at least three (3) times
the Executives annual Base Salary at the time of his death.
5. Termination. The Executives employment hereunder may be terminated
as follows:
(a) Death. The Executives employment shall terminate upon his death, in
which event the date of his death shall be the Date of Termination.
(b) Disability. If the Executive is unable to perform the essential
functions of his position, even with reasonable accommodation, on a full-time
basis for a period of one hundred twenty (120) consecutive days or for a total
of six (6) months in any nine (9)-month period, the Company may terminate the
Executives services hereunder, in which event the Date of Termination shall be
thirty (30) days after Notice of Termination is given.
(c) Cause. The Company may terminate the Executives employment hereunder
for Cause. For purposes of this Agreement, the Company shall have "Cause" to
terminate the Executives employment hereunder (i) upon the Executives
conviction for the commission of a felony (or appeal of nolo contenders
thereto), but specifically excluding any conviction or plea based entirely on
vicarious liability (where vicarious liability means, and only means, any
liability which is based on acts of the Company for which the Executive is
charged solely as a result of his offices with the Company and in which he
<PAGE> 12
was not directly involved and did not have prior knowledge of such actions or
intended actions) or (ii) upon the Executives willful failure substantially to
perform his duties hereunder (other than any such failure resulting from the
Executives physical or mental incapacity). For purposes hereof, no act or
failure to act by the Executive shall be considered "willful" unless done or
omitted to be done by him not in good faith or without reasonable belief that
his action or omission was in the best interests of the Company, and no act or
failure to act by the Executive shall be considered Cause unless the Company
has given detailed written notice thereof to the Executive and, where remedial
action is feasible, he has failed to remedy the act or omission within twenty
(20) business days after receiving such notice. Cause shall not exist under
clause (ii) above unless and until there shall have been delivered to the
Executive a copy of a resolution, duly adopted by the affirmative vote of not
less than two-thirds of the entire membership of the Board at a meeting of the
Board held for the purpose (after ten (10) days' prior notice to the Executive
of such meeting and the purpose thereof and an opportunity for him, together
with his counsel, to be heard before the Board at such meeting), finding that
in the good faith opinion of the Board, the Executive was guilty of conduct set
forth above in clause (ii) of this Section 5(c) and specifying the particulars
thereof in detail. In the event of a termination hereunder, the Date of
Termination shall be the date set forth in the Notice of Termination; provided,
that, in the case of a termination pursuant to clause (ii) above, the Date of
Termination shall not be earlier than thirty (30) days after delivery of the
Notice of Termination.
(d) Good Reason. The Executive may terminate his employment
hereunder for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without the Executives express written consent, the occurrence of any of
the following which is not remedied by the Company within a reasonable time
after receipt of the Executives Notice of Termination:
(i) Any material breach of this Agreement by the Company;
<PAGE> 13
(ii) The assignment to the Executive of any duties
inconsistent with the Executives position, authority, duties,
responsibilities and status, or any other action by the Company which
results in a substantial diminution of such position, authority,
duties, responsibilities or status;
(iii) A material change in the Executive's reporting
responsibilities, titles or offices;
(iv) Any removal of the Executive from, or failure to re-elect
the Executive to, the positions of President and Chief Executive
officer or failure to nominate the Executive to the position of
director;
(v) The Company giving notice to the Executive that the
automatic extension of the Employment Period under Section 2,
above, shall cease; or
(vi) Resignation by the Executive for any reason during the
thirty (30)-day period commencing on the ninetieth (90") day after
a "Change in Control" of the Company (as defined in the Option Plan):
In the event of a termination for Good Reason, the Date of Termination
shall be the date specified in the Notice of Termination, which shall be not
less than twenty (20) business days after the Notice of Termination is
delivered.
(e) Other Terminations. The Company may terminate the Executives
employment hereunder (other than for Cause or Disability), and the Executive
may terminate his employment (other than for Good Reason), in each case subject
to the provisions of Sections 6(d) and 6(e). If the Executives employment is
terminated pursuant to this Section S(e), the date on which a Notice of
Termination is given or any later date (within 30 days)
<PAGE> 14
set forth in such Notice of Termination shall be the Date
of Termination.
(f) Notice of Termination. Any termination of the Executives
employment hereunder by the Company or by the Executive (other than termination
pursuant to Section 5(a) hereof) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 10 hereof.
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 the Executives
employment under the provision so indicated.
6. Compensation Upon Termination or During Disability.
(a) Disability Period. During any portion of the Employment Period
during which the Executive fails to perform his duties hereunder as a result of
incapacity due to physical or mental illness ("Disability Period"), the
Executive shall continue to (i) receive his full Base Salary, (ii) be eligible
to receive the Annual Bonus and (iii) participate in the Benefit Plans.
Payments made to the Executive during the Disability Period shall be reduced by
the sum of the amounts, if any, payable to the Executive at or prior to the
time of any such payment under disability benefit plans of the Company or under
the Social Security disability insurance program, to the extent such amounts
were not previously applied to reduce any such payment.
(b) Death. If the Executives employment hereunder is terminated as a
result of death, then:
(i) the Company shall pay the Executives estate or designated
beneficiary, (A) as soon as practicable after the Date of Termination, any
Base Salary and any bonus and reimbursable expenses, accrued or owing the
Executive hereunder as of the Date of Termination and (B) all benefits due
and owing to or in
<PAGE> 15
respect of the Executive under all Benefit Plans, in accordance with
the terms of such Benefit Plans (the benefits described in this clause (B)
being hereinafter referred to collectively as the "Plan Benefits");
(ii) all then outstanding Restricted Shares, to the extent not then
fully vested, shall become fully vested and free of all restrictions as
of the Date of Termination; and
(iii) all then outstanding Option Awards shall become fully vested
and exercisable, as of the Date of Termination, and shall remain
exercisable until the earliest of (1) the third anniversary of the Date
of Termination, (2) the date on which the Executive shall have breached
the provisions of Section 8 hereof (other than an isolated, inadvertent
breach), and (3) the expiration of their then remaining terms (such
period being hereinafter referred to as the "Post-Employment Option
Exercise Period").
(c) Disability. If the Executives employment hereunder is
terminated as a result of Disability, then:
(i) the Company shall pay the Executive, (A) as soon as
practicable after the Date of Termination, any Base Salary and bonus
and any reimbursable expenses, accrued or owing the Executive
hereunder for services as of the Date of Termination and (B) pay or
provide all Plan Benefits in accordance with the terms of the
Benefits Plans;
(ii) all then outstanding Restricted Shares, to the extent not
then fully vested, shall become fully vested and free of all
restrictions as of the Date of Termination; and
(iii) all then outstanding option Awards shall become fully
vested and exercise-
<PAGE> 16
able, as of the Date of Termination, and shall remain exercisable
until expiration of the Post-Employment Option Exercise Period.
(d) Cause or By Executive (other than for Good Reason). If the
Executive's employment hereunder is terminated by the Company for Cause or by
the Executive (other than for Good Reason), then:
(i) the Company shall pay the Executive, (A) as soon as practicable
after the Date of Termination, any Base Salary and any reimbursable
expenses accrued or owing the Executive hereunder for services as of
the Date of Termination, and (B) pay or provide all Plan Benefits in
accordance with the terms of the Benefits Plans; and
(ii) the Executive shall immediately forfeit any unvested
portion of then outstanding Restricted Shares and Option Awards and
the vested unexercised portion of then outstanding Option Awards
shall remain exercisable until the earliest of (1) six (6) months
following the Date of Termination, (2) the date on which the
Executive shall have breached the provisions of Section 8 hereof
(other than an isolated, inadvertent breach), or (3) the expiration
of their then remaining terms.
(e) Termination by the Company (other than for Cause or Disability) or
by the Executive for Good Reason. If the Executives employment hereunder is
terminated by the Company (other than for Cause or Disability) or by the
Executive for Good Reason, then:
(i) the Company shall pay the Executive, (A) as soon as practicable
after the Date of Termination, any Base Salary and bonus, and any
reimbursable expenses, accrued or owing the Executive hereunder for
services as of the Date of Termination and (B) pay or provide
all Plan Benefits in accordance with the terms of the Benefits Plans;
<PAGE> 17
(ii) the Company shall pay the Executive, within ten (10)
business days following the Date of Termination, an Annual Bonus
for the year of termination, calculated as a prorated portion of the
greater of (A) the Executives target Annual Bonus for the year in
which the Date of Termination occurs or (B) the average of the Annual
Bonuses paid or payable to the Executive for the three (3) calendar
years immediately preceding the year in which the Date of Termination
occurs (the greater of said amounts (A) and (B) being referred to
hereinafter as the "Reference Bonus Amount");
(iii) the Company shall pay to the Executive, as liquidated
damages and not as a penalty, within ten (10) business days following
the Date of Termination, a lump sum amount equal to (3) three times
the sum of (A) the Executives Base Salary at the annual rate in
effect at the time of delivery of the Notice of Termination and (B)
the Executives Reference Bonus Amount;
(iv) all then outstanding Restricted Shares, to the extent not
then fully vested, shall become fully vested and free of all
restrictions as of the Date of termination;
(v) all then outstanding option Awards, to the extent
not then vested and exercisable, shall become fully vested and
exercisable on the Date of Termination and shall remain exercisable
until expiration of the Post Employment Option Exercise Period;
(vi) for a period of three (3) years following the Date of
Termination, the Executive shall continue to participate in all
Benefit Plans in which the Executive was entitled to participate
immediately prior to the Date of Termination, in accordance with the
terms of such Benefit Plans (provided that the Executives continued
participation is permitted
<PAGE> 18
under the general terms and provisions of such Benefit Plans).
In the event that the Executives participation in any Benefit Plan is
barred, the Company shall arrange to provide the Executive and his
dependents with benefits substantially the same as those which the
Executive and his dependents would otherwise have been entitled to
receive under such Benefit Plans from which their continued
participation is barred or provide their economic equivalent;
(vii) for purposes of the retirement benefits provided
pursuant to Section 4(e) hereof, Executives service shall be
determined as if he had remained employed by the Company through the
third anniversary of the Date of Termination; and
(viii) the Company shall pay for reasonable outplacement
services for the Executive from a provider selected by the Executive
and which is reasonably acceptable to the Company.
7. Mitigation. The Executive shall not be required to mitigate
amounts payable pursuant to Section 6 hereof by seeking other employment or
otherwise, nor shall such payments be reduced on account of any
remuneration earned by the Executive attributable to employment by another
employer, by retirement benefits, by offset against any amount claimed to
be owed by the Executive to the Company, or otherwise.
8. Confidential Information, Removal of Documents, Noncompetition,
etc.
(a) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets,
confidential information, and knowledge or data relating to the Company
and the businesses and investments of the Company, which shall have been
obtained by the Executive during the Executive's employment by the
Company, including such information with respect to any products,
improvements, formulas,
<PAGE> 19
designs or styles, processes, services, customers, suppliers, marketing
techniques, methods, future plans or operating practices ("Confidential
Information"); provided, however, that Confidential Information shall not
include any information known generally to the public (other than as a result
of unauthorized disclosure by the Executive) or any specific information or
type of information generally not considered confidential by persons engaged in
the same business as the Company, or information disclosed by the Company or
any officer thereof to a third party without restrictions on the disclosure of
such information. Except as may be required or appropriate in connection with
his carrying out his duties under this Agreement, the Executive shall not,
without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such Confidential
Information to anyone other than the Company and those designated by the
Company.
(b) Removal of Documents. All records, files, drawings, documents,
models, and the like relating to the business of the Company, which the
Executive prepares, uses or comes into contact with and which contain
Confidential Information shall not be removed by the Executive from the
premises of the Company (without the written consent of the Company) during or
after the Employment Period unless such removal shall be required or
appropriate in connection with his carrying out his duties under this
Agreement, and, if so removed by the Executive, shall be returned to the
Company immediately upon termination of the Executive's employment hereunder.
(c) Noncompetition; Nonsolicitation. The
Executive covenants that upon termination of his employment hereunder, he shall
not, for a period of one (1) year following the Date of Termination:
(i) anywhere within the geographic areas in which the Company
or any of its subsidiaries is then conducting its business
operations, engage or be interested, whether alone or together with
or on behalf or through any other person, firm, association, trust,
venture or corporation, whether as sole proprietor,
<PAGE> 20
partner, shareholder, agent, officer, director, employee, adviser,
consultant, trustee, beneficiary or otherwise, in any business
(a "competing business") which competes with any business then
being conducted by the Company or any of its subsidiaries;
(ii) assist others in conducting any competing business; or
(iii) own any capital stock or any other securities of, or have
any other direct or indirect interest in, any entity which owns or
operates a competing business, other than the ownership of (x) less
than one percent (1%) of any such entity whose stock is listed on a
national securities exchange or traded in the over-the-counter market
and which is not controlled by the Executive or any affiliate of the
Executive or (y) any limited partnership interest in such an entity.
The Executive further covenants that during the applicable period set forth
above in this Section 8(c), he shall not directly or indirectly recruit any
person who is an employee of the Company or any of its subsidiaries or solicit,
encourage or induce any such employee to leave the Company's employ.
(d) Remedies. Without prejudice to any other remedies that the Company
may have for breach of this Agreement by the Executive, in the event of a
breach or threatened breach of this Section 8, the Executive agrees that the
Company shall be entitled to apply for injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened breach, the
Executive acknowledging that damages would be inadequate and insufficient.
(e) Continuing Operation. Any termination of the Executives employment or
of this Agreement shall have no effect on the continuing operation of this
Section 8.
<PAGE> 21
9. Certain Additional Payments by the Company. The Company agrees that:
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 9) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or if any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, being
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payment.
(b) Subject to the provisions of paragraph(c), below, all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the
accounting firm which is then serving as the auditors for the Company (the
"Accounting Firm"), which shall provide detailed supporting calculations both
to the Company and the Executive within fifteen (15) business days of the
receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder
(which accounting firm
<PAGE> 22
shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by
the Company to the Executive within five (5) days of the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the Executives
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any good faith determination by the Accounting
Firm shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
paragraph (c), below, and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than fifteen (15) business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim prior to the expiration of the thirty (30)-day period following
the date on which the Executive gives such notice to the Company (or such
shorter, period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
<PAGE> 23
(i) Give the Company any information reasonably requested by
the Company relating to such claim;
(ii) Take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company;
(iii) Cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) Permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limiting
the foregoing provisions of this paragraph (c), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner; and the
Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more
<PAGE> 24
appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and
sue for a refund, the Company shall advance the amount of such
payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties
with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and
further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to paragraph (c), above, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of said paragraph(c)) promptly
pay to the Company the amount of such refund (together with any interest paid
or credited thereon, after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to said paragraph
(c), a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the Executive
in writing of its intent to contest such denial of refund prior to the
expiration of thirty (30) days after such determination, then such advance
shall be forgiven and shall not be required to be repaid; and the amount of
such advance shall offset, to
<PAGE> 25
the extent thereof, the amount of the Gross-Up Payment required to be paid.
10. Indemnification. To the fullest extent permitted by law, the
Company shall indemnify the Executive (including the advancement of expenses)
for any judgments, fines, amounts paid in settlement and reasonable expenses,
including attorneys' fees, incurred by the Executive in connection with the
defense of any lawsuit or other claim to which he is made a party by reason of
being an officer, director or employee of the Company or any of its
subsidiaries. During the Employment Period and for at least three (3) years
thereafter, the Company shall make every reasonable effort to maintain
customary director and officer liability insurance covering the Executive for
acts and omissions during the Employment Period.
11. Successors; Binding Agreement.
(a) Company's Successors. No rights or obligations of the Company
under this Agreement may be assigned or transferred by the Company except that
such rights or obligations may be assigned or transferred pursuant to a merger
or consolidation in which the Company is not the continuing entity, or the sale
or liquidation of all or substantially all of the business and/or assets of the
Company, provided that the assignee or transferee is the successor to all or
substantially all of the business and/or assets of the Company and such
assignee or transferee assumes the liabilities, obligations and duties of the
Company, as contained in this Agreement, either contractually or as a matter of
law. The Company will require any such successor expressly to assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place4 As
used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and shall include any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for-in this
Section 9 or which otherwise becomes bound by all the terms and provisions of
this Agreement.
<PAGE> 26
(b) Executives Successors. This Agreement shall not be assignable by
the Executive. This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executives personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. Upon the Executive's death, all amounts to which he is
entitled hereunder, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executives devisee, legatee,
or other designee or, if there be no such designee, to the Executives estate.
12. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Mark Bulriss
11425 Barrington Bridge Court
Richmond, Virginia 23233
If to the Company:
Great Lakes Chemical Corporation
One Great Lakes Boulevard
P.O. Box 2200
West Lafayette, Indiana 47906-0200
Attention: General Counsel
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.
13. Miscellaneous. No provisions of this Agreement may be modified
unless such modification is
<PAGE> 27
agreed to in writing signed by the Executive and an authorized officer of the
Company. Any waiver or discharge must be in writing and signed by the
Executive or such an authorized officer of the Company, as the case may be. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without regard
to its conflicts of law principles.
14. Withholding. Any payments provided for in this Agreement
shall be paid net of any applicable withholding of taxes required
under federal, state or local law.
15. Arbitration. Except as otherwise provided herein, all
controversies, claims or disputes arising out of or related to this Agreement
shall be settled in Chicago, Illinois, under the rules of the American
Arbitration Association then in effect, and judgment upon such award rendered
by the arbitrator(s) may be entered in any court of competent jurisdiction.
Except as otherwise provided in Section 4(f) hereof, the costs of the
arbitration shall be borne by the Company.
16. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
17. 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.
18. Entire Agreement. This Agreement (together with any option and
restricted stock agreements evidencing the awards contemplated hereby) set
forth the
<PAGE> 28
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by the parties hereto in respect of the subject matter contained
herein; and any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and canceled.
19. No Conflict. The Executive hereby represents and warrants that
the execution and delivery of this Agreement does not, and the performance of
his obligations set forth herein will not, violate, conflict with, contravene or
result in a breach or violation of any contract or any other agreement to which
he is a party or by which he is bound.
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
March 20, 1998 to be effective as of the Effective Date.
GREAT LAKES CHEMICAL CORPORATION
By: /s/ Martin M. Hale
--------------------------------
Name: Martin M. Hale
Title: Chairman of the Board
/s/ Mark Bulriss
-----------------------------------
Mark Bulriss
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME, and STATEMENT OF CASH FLOW AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 84,601
<SECURITIES> 0
<RECEIVABLES> 288,956
<ALLOWANCES> 5,661
<INVENTORY> 317,216
<CURRENT-ASSETS> 713,919
<PP&E> 1,177,554
<DEPRECIATION> 506,042
<TOTAL-ASSETS> 2,316,191
<CURRENT-LIABILITIES> 290,227
<BONDS> 579,811
0
0
<COMMON> 72,660
<OTHER-SE> 1,266,627
<TOTAL-LIABILITY-AND-EQUITY> 2,316,191
<SALES> 334,764
<TOTAL-REVENUES> 342,968
<CGS> 241,390
<TOTAL-COSTS> 302,811
<OTHER-EXPENSES> 4,662
<LOSS-PROVISION> 141
<INTEREST-EXPENSE> 7,791
<INCOME-PRETAX> 27,563
<INCOME-TAX> 10,300
<INCOME-CONTINUING> 17,263
<DISCONTINUED> 25,559
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,822
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.72
</TABLE>
