<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[Great Lakes Chemical]
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
[COMPANY NAME]
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
- - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- - --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- - --------------------------------------------------------------------------------
(3) Filing party:
- - --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
LOGO
Notice of
1998 ANNUAL MEETING OF SHAREHOLDERS
and
PROXY STATEMENT
- - --------------------------------------------------------------------------------
Thursday, May 7, 1998
Harris Trust and Savings Bank Auditorium
111 West Monroe Street, Chicago, Illinois
Meeting 11:00 a.m.
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, YOU ARE URGED TO INDICATE YOUR VOTE ON THE ENCLOSED PROXY,
DATE, SIGN AND RETURN IT PROMPTLY IN THE ENCLOSED REPLY ENVELOPE WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 3
GREAT LAKES CHEMICAL CORPORATION
WEST LAFAYETTE, INDIANA
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1998
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of GREAT
LAKES CHEMICAL CORPORATION (the "Corporation") will be held at Harris Trust and
Savings Bank (8th floor auditorium), 111 West Monroe Street, Chicago, Illinois,
on Thursday, May 7, 1998, at 11:00 a.m. (Central Standard Time) for the
following purposes:
1. To elect two directors to serve until the 2001 Annual Meeting;
2. To approve the 1998 Stock Compensation Plan for officers,
nonemployee directors and key employees of the corporation;
3. To consider and act upon a shareholder proposal requesting
declassification of the Board of Directors; and
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed March 9, 1998, as the date of record for
the meeting, and only shareholders of record at the close of business on that
date will be entitled to vote at the meeting or any adjournment thereof.
A proxy statement, form of proxy and a copy of the annual report of the
Corporation for the year 1997 are enclosed.
By Order of the Board of Directors,
MARY P. MCCLANAHAN
Secretary
March 30, 1998
IMPORTANT
PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN YOUR PROXY CARD
IN THE ENCLOSED ENVELOPE.
<PAGE> 4
GREAT LAKES CHEMICAL CORPORATION
ONE GREAT LAKES BOULEVARD, WEST LAFAYETTE, INDIANA 47996-2200
------------------------
PROXY STATEMENT
MARCH 30, 1998
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 7, 1998
------------------------
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Great Lakes Chemical Corporation (the "Corporation"). It is for use
only at the Annual Meeting of the Shareholders to be held on May 7, 1998, and at
any adjournment thereof.
As of March 9, 1998, the record date of the meeting, 59,032,279 shares of
Common Stock of the Corporation were outstanding, and each share is entitled to
one vote. Only shareholders of record at the close of business on that date will
be entitled to vote at the meeting.
Any shareholder executing a proxy retains the right to revoke it at any
time prior to its use at the Annual Meeting. A proxy may be revoked by delivery
of written notice of revocation to the corporate secretary, by execution and
delivery of a later proxy or by voting the shares in person at the Annual
Meeting. If not revoked, all shares represented by properly executed proxies
will be voted as specified therein.
The election of directors requires a plurality of the votes actually cast
by the shareholders present (in person or by proxy) at the meeting and entitled
to vote. A withheld vote will have no effect on the outcome of the election. If
no voting instruction is given, the accompanying proxy will be voted FOR such
election. Under the New York Stock Exchange rules, brokers who hold street name
shares can vote in their discretion in the election of Directors. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEE DIRECTORS.
Approval of the 1998 Stock Compensation Plan requires a majority of the
votes actually cast by the shareholders present (in person or by proxy) at the
meeting and entitled to vote. If no voting instruction is given, the
accompanying proxy will be voted FOR approval of the Plan. Under the New York
Stock Exchange rules, brokers who hold street name shares can vote in their
discretion to approve the Plan. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE 1998 STOCK COMPENSATION PLAN.
Approval of the Shareholder Proposal requires a majority of the votes
actually cast by the shareholders present (in person or by proxy) at the meeting
and entitled to vote. Since the proposal is simply a request that the Board take
steps to declassify the Board, approval of the proposal would not result in
declassification of the Board or require the Board to initiate steps to
declassify the Board. If no voting instruction is given, the accompanying proxy
will be voted AGAINST Proposal 3. Under the New York Stock Exchange rules,
brokers who hold street name shares cannot vote in their discretion to approve
Proposal 3. THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3.
A quorum will exist if the shares present (including broker non-votes)
constitute a majority of the outstanding shares.
1
<PAGE> 5
PROPOSAL ONE: ELECTION OF DIRECTORS
The Certificate of Incorporation of the Corporation provides that the
number of directors shall be not less than three nor more than eleven, and shall
be divided into three classes of equal size (to the extent possible), with one
class to be elected each year, in rotation, for a term of three years. The Board
is currently comprised of 10 members, divided into one class of four and two
classes of three. Directors William H. Congleton and John S. Day, whose terms
expire in 1998, will retire from the Board on May 7, 1998, and will therefore
not stand for re-election. At the time of their retirement, Mr. Congleton and
Dr. Day will have served as directors of the Corporation for 25 years and 23
years, respectively. Unless otherwise instructed the proxy holders will vote the
proxies received by them for the two nominees, Louis E. Lataif and Mack G.
Nichols, for three-year terms to expire at the Annual Meeting in 2001 and until
their successors are duly elected and qualified. Nominees Lataif and Nichols are
currently serving as directors and have consented to serve for the new term.
Although the nominees are not expected to decline or be unable to serve as
directors, in each such event, the persons named in the enclosed proxy will vote
for another candidate nominated by the Board, and discretionary authority to do
so is included in the proxy.
Information in the biographies that follow is current as of March 1, 1998.
None of the business organizations, other than Great Lakes Chemical Corporation,
with which the named individuals maintain their principal occupation or
employment is a parent, subsidiary or affiliate of the Corporation.
NOMINEES TO SERVE UNTIL THE 2001 ANNUAL MEETING
LOUIS E. LATAIF Director since 1995. (1), (2)
Dr. Lataif, 59, is dean of the School of Management at Boston University, a
position he assumed in 1991 after a distinguished 27-year career with Ford Motor
Corporation which included positions as vice president and general manager of
Ford Division, vice president North American Sales Operations, president of Ford
of Europe and corporate vice president of Worldwide Quality and Marketing. Dean
Lataif also serves on the boards of Bank Audi (USA), Fred Jones Enterprises,
Unitrode Corporation, the Lahey Clinic and the Iacocca Foundation.
MACK G. NICHOLS Director since February 1998.
Mr. Nichols, 59, is president and chief operating officer and a director of
Mallinckrodt Inc., a diversified chemical and healthcare company. He also serves
as a director of A. P. Green Industries, Inc., as a trustee for the St. Louis
Art Museum, and as a member of the Chancellor's Council for the University of
Missouri-St. Louis. In addition, he serves on the boards of the National
Association of Manufacturers and the Chemical Manufacturers Association, and is
a member of the Health Industry Manufacturers Association and the Drug, Chemical
and Allied Trades Association.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES.
DIRECTORS SERVING UNTIL THE 1999 ANNUAL MEETING
EVAN BAYH Director since 1997. (3), (5)
Mr. Bayh, 42, a partner in the law firm of Baker & Daniels in Indianapolis,
Indiana, served as Governor of Indiana for two consecutive terms, stepping down
in January 1997. He also served as Secretary of State for Indiana prior to his
election as governor. Mr. Bayh currently serves on the boards of Eli Lilly and
Company, Indianapolis Life Insurance Corporation, Fortis Inc. and Dominick's
Finer Foods Inc.
2
<PAGE> 6
THOMAS M. FULTON Director since 1995. (2), (3)
Mr. Fulton, 64, serves as president and chief executive officer of
Landauer, Inc., a provider of radiation monitoring services. Prior to joining
Landauer in 1978, his career included various management positions at Union
Carbide Corporation, BASF Corporation and ICN Pharmaceuticals Inc. Mr. Fulton
also serves on the boards of The Advocate South Suburban Hospital and the Bethel
Community Facility, and as chairman of the board of the Chicago Theological
Seminary.
ROBERT B. MCDONALD Director since 1994. (4), (5), (6)
Mr. McDonald, 61, was named chief executive officer and president of the
Corporation in 1994. During his 30-year career with Great Lakes, he has served
in a number of senior management positions. He is involved with several
professional organizations, including The Chemical Manufacturers Association,
and serves on Purdue University's Advisory Board for The Institute of Applied
Neurology and the Dean's Advisory Council for the Krannert School of Management.
Mr. McDonald also serves as a director of The Lafayette Life Insurance
Corporation, is affiliated with the Cystic Fibrosis Foundation, and is active in
local philanthropic and civic organizations.
DIRECTORS SERVING UNTIL THE 2000 ANNUAL MEETING
MARTIN M. HALE Director since 1978. (1), (4), (5), (6)
Mr. Hale, 57, nonexecutive chairman of the Board, is executive vice
president and director of Hellman Jordan Management Co. Inc., a registered
investment advisor specializing in asset management, and a wholly owned
subsidiary of United Asset Management Corporation. Prior to 1983, he was
president and chief executive officer of Marsh & McLennan Asset Management
Corporation. He also serves as a director of the Student Conservation
Association, as chairman of the Board of Governors of the School of The Museum
of Fine Arts, Boston, and as a trustee of The Museum of Fine Arts.
RICHARD H. LEET Director since 1994. (2), (3), (4)
Dr. Leet, 71, retired as vice chairman and director of Amoco Corporation in
1991 following a lifelong career with Amoco which included service as president
of Amoco Chemicals Corporation. Dr. Leet recently retired as a director of
Illinois Tool Works Inc., Vulcan Materials Corporation, and Landauer, Inc., and
serves as vice chairman of the Foundation Board of The Ohio State University and
as a trustee of Brenau University, Gainesville, Georgia. He is also currently a
member of the Executive Board of the National Council of The Boy Scouts of
America which he led as president from 1990-1992. Previously he served as
chairman of the board of both The Industrial Health Council and the YMCA of
Metropolitan Chicago.
JAY D. PROOPS Director since 1996. (4), (5), (6)
Mr. Proops, 56, is the retired co-founder and former vice chairman of The
Vigoro Corporation, a leading North American manufacturer and distributor of
fertilizers and related products. During his career with Vigoro, he served as
its president and chief financial officer and as a director. Prior to founding
Vigoro, Mr. Proops held a number of senior management positions with Emerson
Electric Corporation and Esmark Inc. He currently serves as a member of the
Board of Trustees of The Allendale Association, as a director of The Lincoln
Park Zoological Society, as a trustee of Daniel Webster College and as a board
member of AMCOL International.
- - -------------------------
(1) Audit Committee
(2) Compensation and Incentive Committee
(3) Environmental, Safety and Health Committee
(4) Executive Committee
(5) Finance Committee
(6) Succession Planning Committee
3
<PAGE> 7
DIRECTORS' COMPENSATION
RETAINER, COMMITTEE AND MEETING FEES
Nonemployee directors receive compensation for their services in the form
of an annual retainer, and committee chair and meeting fees. Great Lakes
employees are not paid any fees or compensation for being on the Board or on any
Board committee.
All directors, except Mr. McDonald, receive an annual retainer of $26,000.
In order to better align the directors' interests with those of the
shareholders, the director retainer has been frozen for three years and, in lieu
of an increase in the annual retainer, each director was granted 300 shares of
restricted stock of the Corporation, effective January 1, 1998, under the 1993
Employee Stock Compensation Plan. The shares vest over three years with 100
shares vesting on the first, second and third anniversaries, respectively, of
the grant date. A director's unvested shares will vest upon such director's
retirement from the Board at or after age 70, or when he or she is no longer
able to serve on the Board because of disability. Unvested shares will be
forfeited if a director (a) chooses to leave the Board prior to age 70, (b) is
not elected to serve a subsequent term (prior to age 70) or (c) dies. A director
will be entitled to vote and to receive dividends with respect to such
restricted stock. Awards to new directors will be prorated on a quarterly basis.
An additional $2,000 is paid annually to directors chairing one or more
committees. The nonexecutive chairman of the Board also receives an annual
retainer of $100,000 in recognition of his expanded responsibilities. Directors
receive $1,000 per day for attendance at Board or committee meetings and, with
the exception of the chairman, for special assignments. The fees paid to
directors are reviewed by the Board each year, based on industry surveys of fees
paid to directors in similarly-sized industrial companies.
DEFERRED AND LONG-TERM COMPENSATION
In January 1997 the Board resolved to replace its then existing cash
Directors' Retirement Plan with a new Non-Employee Directors' Deferred and
Long-Term Compensation Plan ("Deferred and Long-Term Compensation Plan"). The
Board made this decision to align director compensation more closely with
shareholder interests. All nonemployee directors received a one-time grant of
phantom stock units based on the actuarially calculated present value of his
retirement rights under the old plan. Cash dividends, stock dividends, stock
splits and similar distributions apply to the phantom stock units and are
credited to a director's account. All phantom stock units become fully vested
after five years of service. Upon a change in control of the Corporation, the
value of each director's phantom stock account will be distributed in cash. Upon
retirement or resignation, each director can elect to receive vested benefits
either as a single lump-sum payment, or in annual installments over 10 years.
The value of each phantom stock unit will be determined on the relevant date by
the fair market value of the Corporation's Common Stock.
Under the Deferred and Long-Term Compensation Plan, each director may
elect, at the time he joins the Board or prior to the commencement of subsequent
calendar years, to have all or some of his cash compensation credited to a
deferred compensation account. Amounts credited to this account will accrue
interest equal to 90 percent of the prime interest rate of The Chase Manhattan
Bank, or at such other rate as may be adopted from time to time by the
Compensation and Incentive Committee of the Board. Such deferrals will be
distributed to the director at the time he retires or resigns from the Board.
OTHER PROGRAMS
The Corporation provides each nonemployee director with a term life
insurance policy of $50,000 and accidental death and dismemberment insurance of
$200,000.
4
<PAGE> 8
STOCK OWNERSHIP GUIDELINES
Stock Ownership Guidelines adopted by the Board in 1997 recommend that each
nonemployee director own 1,500 shares of Common Stock, or a number of shares
having a value equal to three times the annual retainer received as a director
of the Corporation. It is expected that this level of ownership be achieved by
2002 for those directors serving at the time the Guidelines were adopted, and
within five years following their election for any new directors elected to the
Board since 1997.
DIRECTORS' MEETINGS AND COMMITTEES
The Corporation has Audit; Compensation and Incentive; Environmental,
Safety and Health; Executive; Finance; and Succession Planning Committees, the
members of which are as shown above. During 1997 the Board met eight times. Each
of the directors attended at least 97.8 percent of the aggregate of the total
number of Board and committee meetings he was required to attend.
The Audit Committee, which met twice during 1997, reviews the adequacy of
internal controls and the work of the independent and internal auditors,
consults with the independent public accountants concerning the audit report and
the related management letter, and makes recommendations to the Board concerning
the selection of independent accountants.
The Compensation and Incentive Committee, which met five times during 1997,
makes recommendations to the Board with respect to compensation for the
Corporation's executives and administers the Corporation's employee stock option
plans.
The Environmental, Safety and Health Committee, which met once during 1997,
assesses the Corporation's environmental, safety and health policies and
performance, and makes recommendations to the Board and management regarding
promoting and maintaining standards of performance.
The Executive Committee, which met once during 1997, is empowered to act
for the Board, with certain restrictions, on behalf of the Corporation.
The Finance Committee, which met twice during 1997, and includes Mr.
Jeffares, executive vice president and chief financial officer, and Mr.
Ferguson, vice president and treasurer, in addition to Board members, reviews
the financial affairs of the Corporation and presents recommendations for action
to the Board.
The Succession Planning Committee, which met three times during 1997,
monitors and evaluates the Corporation's management resources, structure,
succession planning, executive development and selection processes, recommends
to the Board criteria for Board membership, and identifies candidates for
election as directors. It also considers candidates recommended by shareholders
for election as directors. Any such recommendation should be sent to the
corporate secretary of the Corporation.
5
<PAGE> 9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
Corporation's Common Stock beneficially owned by holders of more than five
percent of its Common Stock, the directors of the Corporation, the executive
officers of the Corporation included in the Summary Compensation Table ("Named
Executives") set forth under the caption "Executive Compensation and Other
Information" who were employed by the Corporation as of such date, and all
directors and executive officers of the Corporation as a group.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP(1)(2)(3)(4)(5)(6) OUTSTANDING
- - --------------------------------------------------------------------------------------------------
<S> <C> <C>
T. Rowe Price Associates Inc........................ 6,704,584 11.36%
Investment Advisor(7)
100 E. Pratt Street
Baltimore, Maryland 21202
State Farm Mutual Automobile Insurance
Corporation....................................... 4,543,600 7.70%
and Related Entities(8)
One State Farm Plaza
Bloomington, Illinois 61710-0001
Robert B. McDonald(9)............................... 184,475 *
Robert T. Jeffares(10).............................. 188,242 *
L. Donald Simpson(11)............................... 46,530 *
Dennis J. Kerrison.................................. 0 *
Marshall E. Bloom(12)............................... 26,206 *
Evan Bayh........................................... 300 *
William H. Congleton(13)............................ 16,300 *
John S. Day(14)..................................... 4,600 *
Thomas M. Fulton.................................... 1,300 *
Martin M. Hale(15).................................. 215,648 *
Louis E. Lataif..................................... 2,300 *
Richard H. Leet..................................... 1,300 *
Mack G. Nichols..................................... 300 *
Jay D. Proops....................................... 2,300
Directors and executive officers as a group......... 973,487 1.6%
</TABLE>
* Less than 1%
- - --------------------------------------------------------------------------------
(1) Information concerning persons known to the Corporation to be beneficial
owners of more than five percent of its Common Stock is based upon the most
recently available reports furnished by such persons to the Corporation on
Schedules 13G filed with the Securities and Exchange Commission.
(2) Information concerning ownership of Common Stock by directors of the
Corporation, Named Executives and directors and executive officers as a
group, as of March 3, 1998.
(3) Unless otherwise indicated, beneficial ownership is direct, and the person
indicated has sole voting and investment power.
(4) In addition to the shares listed in the table as beneficially owned, the
following directors have phantom stock units: E. Bayh, 1,427; W. H.
Congleton, 3,332; T. M. Fulton, 2,875; M. M. Hale, 2,238; L. E. Lataif,
2,398; R. H. Leet, 3,676; M. G. Nichols, 2,296; J. D. Proops, 2,163. These
stock units do not have any voting rights.
(5) Ownership includes 300 shares of restricted stock granted to each
nonemployee director for which investment power has not vested.
6
<PAGE> 10
(6) Ownership of executive officers includes shares of stock options
exercisable within 60 days as disclosed in the table on options exercised
and value of options at end of fiscal year.
(7) These securities are owned by various individual and institutional
investors for which T. Rowe Price Associates Inc. ("Price Associates")
serves as investment advisor with power to direct investments and/or sole
power to vote the securities. For purposes of the reporting requirements of
the Securities Exchange Act of 1934, Price Associates expressly disclaims
that it is, in fact, the beneficial owner of such securities.
(8) Each of the following State Farm entities has reported sole voting power
and sole disposition power and disclaims "beneficial ownership" as to all
shares as to which each has no right to receive the proceeds of sale of the
security and disclaims that it is part of a group: State Farm Mutual
Automobile Insurance Corporation reported 3,484,800 shares; State Farm Life
Insurance Corporation has 53,000 shares; State Farm Investment Management
Corporation has 462,300 shares; and State Farm Insurance Companies Savings
and Thrift Plan for U.S. Employees reported 543,500 shares. State Farm Life
Insurance Corporation is a wholly owned subsidiary of State Farm Mutual
Automobile Insurance Corporation. State Farm Investment Management
Corporation is a wholly owned subsidiary of State Farm Fire and Casualty
Corporation which, in turn, is a wholly owned subsidiary of State Farm Life
Insurance Corporation.
(9) Includes 10 shares held indirectly by Mr. McDonald in the Corporation's
401(k) Plan and 7,000 shares through spousal ownership.
(10) Includes 166 shares held indirectly by Mr. Jeffares in the Corporation's
401(k) Plan, 4,966 shares through spousal ownership, and 600 shares owned
by his stepchildren, for which he disclaims beneficial ownership.
(11) Includes 1,463 shares held indirectly by Mr. Simpson through the
Corporation's 401(k) and Supplemental Savings Plans and 2,000 shares
through spousal ownership.
(12) Includes 339 shares held indirectly by Mr. Bloom through the Corporation's
Supplemental Savings Plan.
(13) Includes 4,400 shares held indirectly by Mr. Congleton through a trust for
Mr. Congleton's grandchildren. Mr. Congleton disclaims beneficial ownership
of these shares.
(14) Includes 1,600 shares held indirectly by Dr. Day through spousal ownership.
(15) Includes 190,840 shares held by Mr. Hale as cotrustee and 1,000 shares held
by his wife as trustee for his children. Mr. Hale disclaims beneficial
ownership of these 191,840 shares.
7
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the Corporation's last three years to Robert B. McDonald,
chief executive officer and president of the Corporation, and to each of the
Corporation's four other most highly compensated executive officers (the "Named
Executives").
SUMMARY COMPENSATION TABLE
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION ALL OTHER
---ANNUAL-COMPENSATION----------AWARDS------COMPENSATION
SECURITIES
UNDERLYING
SALARY BONUS OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)(1) ($)(2)(3)
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert B. McDonald........................ 1997 $650,000 $508,000 60,000 $53,980
President and 1996 645,192 165,000 35,000 57,160
Chief Executive Officer 1995 608,846 325,000 57,500 7,961
Robert T. Jeffares........................ 1997 380,000 213,400 30,000 28,663
Executive Vice President 1996 380,000 78,000 20,000 29,856
and Chief Financial Officer 1995 376,769 142,000 19,500 4,523
L. Donald Simpson......................... 1997 310,000 227,300 20,000 21,107
Group Vice President 1996 303,077 55,000 12,000 20,538
1995 267,861 146,000 10,400 1,850
Dennis J. Kerrison(3)..................... 1997 288,403 126,100 10,000 --
Group Vice President 1996 273,003 25,000 7,000 --
Marshall E. Bloom......................... 1997 245,000 160,200 9,500 15,600
Vice President 1996 245,000 42,000 7,500 15,500
1995 242,288 64,000 6,500 1,500
</TABLE>
- - --------------------------------------------------------------------------------
(1) Options to acquire shares of Common Stock. No restricted stock options were
granted to any of the Named Executives.
(2) Includes two components: a) employer matching contributions under the
Corporation's 401(k) and Supplemental Savings Plans and b) actuarially
determined value of Corporation-paid premiums on "split-dollar" life
insurance. The respective amounts for each of the Named Executives are as
follows: Mr. McDonald, $6,980, $47,000; Mr. Jeffares, $4,663, $24,000; Mr.
Simpson, $3,707, $17,400; and Mr. Bloom, $1,600, $14,000.
(3) Mr. Kerrison joined the Corporation in May 1996 as Group Vice President. He
is not a participant in the Corporation's 401(k) or Supplemental Savings
Plan, and no "split-dollar life insurance premiums are paid on his behalf.
STOCK OPTION PLANS
The Corporation has two stock option plans which provide for grants of
options to key employees and nonemployee directors. The Board is recommending
that the shareholders approve a new plan at its Annual Meeting. See "Proposal
Two: 1998 Stock Compensation Plan." Plan provisions allow grants of incentive
stock options, non-qualified stock options or other stock-based awards, with
terms not to exceed 10 years, at an option price which is not less than the
market value of the Corporation's Common Stock on the date of grant.
8
<PAGE> 12
OPTION GRANTS IN 1997
The following table provides information related to options granted to the
Named Executives during 1997:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(3)(4)
- - ----------------------------------------------------------------------------- --------------------------------------
NUMBER OF % OF TOTAL --------------------------------------
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED #(1) 1997 ($/SH)(2) DATE 0%($)(4) 5%($) 10%($)
- - ----------------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert B. McDonald 60,000 13.1% $ 42.50 03/12/07 $0 $ 1,606,500 $ 4,054,500
Robert T. Jeffares 30,000 6.5% $ 42.50 03/12/07 0 803,250 2,027,250
L. Donald Simpson 20,000 4.4% $ 42.50 03/12/07 0 535,500 1,351,500
Dennis J. Kerrison 10,000 2.2% $ 42.50 03/12/07 0 267,750 675,750
Marshall L. Bloom 9,500 2.1% $ 42.50 03/12/07 0 254,363 641,963
Increase in Market Value to Shareholders(5) $1.6 billion $4.2 billion
</TABLE>
- - --------------------------------------------------------------------------------
(1) All options were granted pursuant to the 1993 Employee Stock Compensation
Plan and have a term of 10 years. Each Named Executive received only a
single grant in 1997. These grants are exercisable in cumulative 33 percent
installments commencing one year from date of grant, with full vesting
occurring on the third anniversary date or on the retirement of an employee
over 62 years of age. For additional information regarding options, see
"Change-in-Control and Severance Agreements."
(2) The exercise price may be paid by remitting cash or already owned shares of
the Corporation's Common Stock, or by a combination thereof. The related tax
withholding obligations may be paid by remitting cash, already owned shares
of the Corporation's Common Stock, or by having the Corporation withhold a
portion of the shares deliverable upon exercise, or by a combination
thereof.
(3) The potential realizable value portion of the foregoing table indicates the
value that might be realized upon exercise of options immediately prior to
the expiration of their term, assuming the specified amount of compounded
rates of appreciation on the Corporation's Common Stock over the terms of
the options.
(4) Without an appreciation in stock price, the optionees will not realize any
gain. A zero percent increase in stock price would result in zero dollars
for the optionee.
(5) Calculated by using a Common Stock price of $42.50 and the average shares
outstanding for February 1997, assuming five and 10 percent compounded
growth rates, the increase in market value to common shareholders is shown
for comparative purposes only. It is not a prediction of future stock
performance.
9
<PAGE> 13
OPTION EXERCISES IN 1997 AND VALUE OF OPTIONS AT DECEMBER 31, 1997
The following table provides information related to options exercised by
the Named Executives during 1997 and the number and value of options held at
year end. The Corporation does not have any stock appreciation rights
outstanding.
OPTION EXERCISES IN 1997 AND VALUE OF OPTIONS AT END OF YEAR
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARE ---DECEMBER-31,-1997-(#)-------DECEMBER-31,-1997-($)(1)--
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert B. McDonald.... 116,961 102,499 $ 728,286 $142,500
Robert T. Jeffares.... 16,000 $545,500 116,667 49,833 1,394,000 71,250
L. Donald Simpson..... 28,934 31,446 -- 47,500
Dennis J. Kerrison.... -- 17,000 -- --
Marshall L. Bloom..... 17,234 16,666 53,500 22,563
</TABLE>
- - --------------------------------------------------------------------------------
(1) Value based on market price of the Corporation's Common Stock at date of
exercise or end of fiscal year minus the exercise price multiplied by the
number of shares to which the exercise relates.
(2) Neither Mr. Simpson's exercisable options nor Mr. Kerrison's unexercisable
options are in the money.
PENSION PLAN
The Corporation has a noncontributory defined benefit pension plan
("Pension Plan") covering substantially all U.S. employees. The Corporation also
has non-qualified Supplemental Retirement Plans ("SERPs"). These SERPs provide
for benefits which, except for the application of the limits of Section 415 and
Section 401(a)(17) of the Internal Revenue Code, would have been payable to
executives under the Pension Plan, and gives an executive approximately the same
retirement benefits he would have received had he been with the Corporation 35
years at the time of his retirement. The retirement benefits of the Named
Executives are computed using the average of the compensation for the highest
three consecutive years. Payments under the SERPs will be paid by the
Corporation out of its general assets. The table below shows the estimated
annual straight life annuity benefits payable to participants of both the
defined benefit plan and the SERPs upon retirement at age 65. The benefits
indicated in the table reflect a reduction for Social Security benefits, as
provided in the plan benefit formula.
The following table shows the estimated annual benefits payable upon normal
retirement under the Pension Plan as augmented by SERPs.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS
NUMBER OF YEARS OF SERVICE
- - -----------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------
ANNUAL COMPENSATION 15 20 25 30 35 40 45
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000................ $ 46,465 $ 61,953 $ 77,442 $ 92,930 $108,418 $123,907 $139,395
300,000............... 71,215 94,953 118,692 142,430 166,168 189,907 213,645
400,000............... 95,965 127,953 159,942 191,930 223,918 255,907 287,895
500,000............... 120,715 160,953 201,192 241,430 281,668 321,907 362,145
600,000............... 145,465 193,953 242,442 290,930 339,418 387,907 436,395
700,000............... 170,215 226,953 283,692 340,430 397,168 453,907 510,645
800,000............... 194,965 259,953 324,942 389,930 454,918 519,907 584,895
900,000............... 219,715 292,953 366,192 439,430 512,668 585,907 659,145
1,000,000............... 244,465 325,953 407,442 488,930 570,418 651,907 733,395
1,200,000............... 293,965 391,953 489,942 587,930 685,918 783,907 881,895
- - -----------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 14
Annual compensation covered by the Pension Plan is defined as gross pay,
which is essentially identical to the total salary and bonus compensation
reported for Named Executives McDonald, Jeffares, Simpson and Bloom as shown in
the Summary Compensation Table. Mr. Kerrison participates in and contributes to
The Associated Octel Company Limited Pension Plan, under which benefits are
computed based on final salary. Credited years of service under the plans as of
December 31, 1997, were: Mr. McDonald, 29; Mr. Jeffares, 14; Mr. Simpson, 6; Mr.
Kerrison 2; Mr. Bloom, 42.
SAVINGS PLANS
Substantially all U.S. employees of the Corporation are eligible to
participate in the Great Lakes Savings Plan [401(k)] (the "Plan") beginning the
first of the quarter following date of hire. Employees may elect to contribute
up to 15 percent of their pay into the Plan, subject to certain limits
prescribed by Section 402(g) of the Internal Revenue Code. Effective January 1,
1998, the Corporation makes matching contributions of $.50 for each dollar
contributed up to the first four percent of salary, plus $.50 for each dollar
contributed of the next two percent of salary, based upon the achievement of an
EVA ("economic value added") performance goal. The match above the first two
percent of salary contributed is in Common Stock of the Corporation. Employees
determine how their salary deferrals and matching contributions are invested by
selecting from several investment alternatives, including the Corporation's
Common Stock. All deferrals and contributions are recorded in individual
accounts and held in trust.
A non-qualified Supplemental Savings Plan provides participants with
benefits which, except for the limitations of the Internal Revenue Code, they
would have received under the Plan. Payments under this supplemental plan are
paid by the Corporation out of its general assets.
EXECUTIVE DEFERRED COMPENSATION PLAN
The Corporation maintains the Great Lakes Chemical Deferred Compensation
Plan, an unfunded, non-qualified, deferred compensation plan under which
eligible employees of the Corporation may elect on a voluntary basis to defer a
portion or all their annual cash compensation until retirement or termination
from the Corporation. Eligible employees must make an annual irrevocable
election to defer compensation which will first be paid, earned or awarded in
the following year.
CHANGE-IN-CONTROL AND SEVERANCE AGREEMENTS
The Corporation recognizes that establishing and maintaining a strong
management team is essential to protecting and enhancing the interests of the
Corporation and its shareholders. In order to ensure management stability and
the continuity of key management personnel, the Corporation has entered into
Change-in-Control Agreements with each of the Named Executives and with certain
other executives of the Corporation.
The material terms and conditions of the Change-in-Control Agreements
provide that if, following a change in control of the Corporation (as defined in
the agreements), the Corporation or a successor terminates the employment of any
covered executive other than for cause, or any such executive terminates his
employment with the Corporation for good reason, then such executive will, with
certain limitations, receive a payment equal to three times the sum of (i) his
annual salary at time of termination or change in control, whichever is higher,
and (ii) the highest annual bonus paid or awarded to him in the year in which
such termination occurs or the two full calendar years immediately preceding the
year of termination. In addition, all stock options issued to such executive
will become vested and immediately exercisable and the executive can receive the
cash value of any or all such options whose current value (as determined by the
market price of the Company's common stock) exceeds the exercise price thereof,
and all restrictions on other Awards will immediately lapse.
An additional payment may also be made by the Corporation to the executive
to compensate the executive for any excise taxes imposed on certain severance
payments under the agreement. The Corporation will also continue the
participation of such executive in the Corporation's or a successor's
11
<PAGE> 15
life, disability, health and other benefit plans (or provide equivalent
benefits) for a maximum period of three years after termination. These
Change-In-Control Agreements may be terminated by the Corporation at any time
prior to the commencement of a change in control of the Corporation.
The Corporation has a Severance Plan (the "Plan") for the Named Executives
and certain other employees (the "Executives"). In order to receive any payments
or benefits under the Plan, an Executive is required to sign an Agreement and
Release Form which prohibits the disclosure of confidential information and any
engagement in certain competitive activities for a specified period of time
after termination of employment. The Plan provides that in the event of a
covered termination of employment (which includes, among other things,
termination of employment other than for cause, as defined in the Plan), the
Executive will receive (a) payments equal to the Executive's then annual salary
("Severance Payments") and (b) reimbursement of certain medical and dental
benefit premiums ("Benefits") for a period of up to 18 months. The Executive
will also receive one additional week of Severance Payments and Benefits for
each year of service. The Plan also provides for certain outplacement services.
All Severance Payments and Benefits will terminate at the time any such
Executive obtains new employment. In the event of death, any remaining Severance
Payments will be paid to the Executive's estate and, if applicable, Benefits
will be payable to the Executive's dependents. If payment becomes due under any
eligible Executive's Change-in-Control Agreement, no Severance Payments,
Benefits or outplacement services will be provided under this Plan.
SPLIT-DOLLAR LIFE INSURANCE
A split-dollar life insurance arrangement (the "Arrangement") provides key
executives who elected to participate with additional life insurance at a
minimal cost to the executive and with complete cost recovery to the
Corporation. This Arrangement provides pre-retirement life insurance to the
designated individuals on the basis of three times salary for the chief
executive officer and two times salary for the other participants. In addition,
each participating executive will receive post-retirement life insurance equal
to one times salary at retirement, decreasing by 10 percent per year until the
end of the fifth post-retirement year. Life insurance equal to the remaining 50
percent of salary will be provided each year thereafter. The Corporation retains
a collateral assignment of the cash value in each of the policies. Upon the
death of an insured executive, the Corporation will receive all proceeds of the
insured's policy in excess of the stated death benefit, which amount will be not
less than the premiums paid for the policy, plus a return to the Corporation of
four percent of the premiums paid. If a policy is surrendered, which cannot
occur before the earlier of the insured's 65th birthday or termination of
employment from the Corporation, the Corporation will recover either the cash
surrender value or the premiums paid for that policy with interest compounded at
four percent interest.
REPORT OF THE COMPENSATION AND INCENTIVE COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation and Incentive Committee (the "Committee") of the Board,
comprised of four independent nonemployee directors, is responsible for
establishing executive compensation programs designed to attract and retain
performance-oriented key executives committed to the long-term success of the
Corporation and to the enhancement of shareholder value. The Corporation's
executive compensation program provides a strong link between executive and
shareholder interests while recognizing individual contributions as well as
overall financial results. The Committee meets periodically with independent
compensation consultants to ensure that compensation practices are competitive
within the specialty chemical industry and with similarly sized industrial
companies.
The Committee approves all compensation programs, including the setting of
annual performance goals, target guidelines and award levels. In conjunction
with the full Board, the Committee reviews corporate and individual performance,
administers and grants awards under all executive compensation plans, and
ensures that compensation levels are externally competitive and internally
equitable. It
12
<PAGE> 16
is also responsible for recommending to the Board the overall compensation of
the chief executive officer and approving the compensation of the other key
executives.
The Committee conducts a full review of the Corporation's executive
compensation program each year. This includes a review of various external
compensation surveys of similarly sized industrial companies, as well as a
comprehensive evaluation of the executive compensation practices of a benchmark
group of peer chemical companies.
COMPENSATION COMPONENTS
Corporate and individual performances are recognized through both short-
and long-term incentive compensation plans designed to align the interests of
executives and shareholders. The total compensation program consists of three
components: base salary, which reflects the executive's level of responsibility
and individual performance; annual incentive compensation awards in the form of
cash bonuses, which reflect both corporate and individual performance; and
long-term incentive compensation in the form of stock options, which create
value for the executive only if the price of the Corporation's stock
appreciates. The latter two components provide at-risk compensation which is
linked directly to financial results. The Committee considers all elements of
compensation when determining an individual's total compensation.
SHORT-TERM INCENTIVE COMPENSATION
Each year the Committee reviews the base salary of the chief executive
officer and, in conjunction with the chief executive officer, reviews the base
salaries of other corporate officers; however, the Committee makes the final
compensation decisions concerning such officers. The median level of the
executive market as assessed by external surveys is used as the main criteria in
determining base salary. The level and scope of responsibility, experience, and
corporate and business unit performances, as well as individual performance, are
also key criteria in base salary determination.
A Management Incentive Compensation Plan ("MICP") provides incentive
compensation in the form of cash bonuses to executive officers, managers and
other selected key employees who have a broad impact on performance. The
philosophy for incentive compensation is to provide awards when financial
objectives are achieved and provide no or reduced awards when the objectives are
not achieved. The awards granted in 1997 were based on corporate pre-tax
earnings per share, business unit pre-tax earnings, return on assets and
individual achievement. The key determinant for awards under the 1998 MICP will
be the attainment of EVA ("economic value added") goals.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentive compensation is comprised of annual grants of stock
options which are designed to encourage key employees to remain with the
Corporation by providing them with a long-term interest in the Corporation's
overall performance and to motivate them to maximize long-term shareholder
value. The Corporation's stock option grant guidelines were designed and have
been revised periodically with the assistance of external compensation
consultants. The Committee administers the stock compensation plans. Stock
options with three-year vesting are generally granted annually and cannot be
exercised for at least one year from the date of grant. Options expire after 10
years. The Committee has available information as to the level of past awards
and individual stock ownership of the executive officers. During 1997 the Board
endorsed a management recommendation establishing stock ownership guidelines for
key executives at a multiple of their base salary to better align the interests
of management with the interests of the Corporation's shareholders The multiple
varies from between one and one-half to five times salary, with the multiple
increasing with one's position within the Corporation. Individuals are given
five years to achieve the target ownership levels.
The stock option grant guidelines provide clear and consistent guidance for
the granting of stock options, participation eligibility and administration of
the program. Stock option awards are based on corporate and individual
performance and the degree of impact which the Committee feels the
13
<PAGE> 17
individual can have on future performance. The grant guidelines were developed
based on competitive surveys.
CHIEF EXECUTIVE COMPENSATION
Mr. McDonald's compensation includes base salary, incentive compensation
and stock options. Consistent with all other executive officers, the chief
executive officer's compensation was determined in accordance with the salary
policy, bonus programs and stock option guidelines previously discussed, which
are the same for the chief executive officer and other corporate officers.
The Committee determined that in order to better align Mr. McDonald's
compensation with shareholder interests, a greater portion of his compensation
would be at-risk and directly linked to financial results. Mr. McDonald's base
compensation in 1997 remained unchanged from his 1996 base compensation of
$650,000. A bonus of $508,000 was granted to Mr. McDonald on February 7, 1998.
Consideration was given to improvement in the Corporation's overall financial
performance and the leadership he provided regarding the decisions to
restructure the Corporation.
An option to purchase 60,000 shares of the Corporation's Common Stock was
granted to Mr. McDonald on February 11, 1997, based on the 1997 Stock Option
Grant Guidelines. This option was granted at an exercise price equal to the fair
market value of the Common Stock on the date of grant and has a term of 10 years
with a three-year vesting period.
POSITION ON DEDUCTIBILITY OF COMPENSATION
The Omnibus Budget Reconciliation Act of 1993 (the "Act") limits the
deductibility of pay in excess of $1 million paid to the Corporation's chief
executive officer, and the next four highest paid officers during any fiscal
year, unless such pay meets certain requirements. In 1997, for the first time,
the compensation of the chief executive officer exceeded the $1 million cap.
It is the general intention of the Committee to ensure that executive
compensation will meet the requirements for deductibility under the Act.
However, the Committee reserves the right to authorize compensation payments
which may not be fully tax deductible by the Corporation, if it believes that it
would be in the best interests of the Corporation and its shareholders under the
circumstances.
SUMMARY
With a significant portion of the Corporation's executive compensation
linked directly to individual and corporate performance and stock price
appreciation over the long term, the Committee believes that these compensation
practices will help ensure alignment with the interests of the Corporation's
shareholders. While recognizing that fluctuations of the business cycle may
negatively impact financial performance from time to time, the Committee
believes that the strong leadership provided by the Corporation's senior
executives, the recent restructuring of the Corporation and the infrastructure
that they have put in place have positioned the Corporation to capitalize on the
opportunities that lie ahead.
This report is submitted by the members of the Compensation and Incentive
Committee, none of whom is or has been a former employee of the Corporation.
Compensation and Incentive Committee
John S. Day
Thomas M. Fulton
Louis E. Lataif
Richard H. Leet
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<PAGE> 18
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return to shareholders on the
Common Stock of the Corporation for the last five years to the cumulative total
return on the S&P 500 Composite and S&P Specialty Chemical Indices over the same
period.
GREAT LAKES CHEMICAL CORPORATION VS. S&P EQUITY INDICES
TOTAL RETURN TO SHAREHOLDERS OVER FIVE YEARS
<TABLE>
<S> <C> <C>
S&P 500 COMPOSITE INDEX S&P CHEMICALS(SPECIALLY)INDEX
DEC-92 100 100
DEC-93 110.08 114.02
DEC-94 111.53 99.64
DEC-95 163.45 130.83
DEC-96 188.88 134.18
DEC-97 251.63 166.17
<CAPTION>
<S> <C>
GREAT LAKES CHEMICAL CORPORATION(GLK)
DEC-92 100
DEC-93 108.28
DEC-94 83.25
DEC-95 105.86
DEC-96 69.43
DEC-97 67.16
</TABLE>
15
<PAGE> 19
The form of the above chart is in accordance with SEC requirements. Past
results are not necessarily indicative of future performance, and this chart
does not reflect the Corporation's forecast for future share price performance.
It should be noted that in late 1997, action was taken to aggressively
restructure the Corporation, including divestiture of its furfural and
derivatives, Eastern European trading and environmental services businesses,
which were reported as discontinued operations in the fourth quarter of 1997. In
addition, steps were taken to spin off the Corporation's petroleum additives
business.
Management believes that these actions will enhance the Corporation's focus
on its core specialty chemical businesses and increase shareholder value by
building on the Corporation's established growth platforms in polymer additives,
fine chemicals and other performance chemicals.
PROPOSAL TWO: 1998 STOCK COMPENSATION PLAN
The Board of Directors has approved and recommends that the shareholders
approve the proposed 1998 Stock Compensation Plan (the "1998 Plan"). The
complete 1998 Plan is set out in Exhibit A attached. The following is a brief
description of some of its features which is qualified in its entirety by
reference to the terms of the 1998 Plan.
The affirmative vote of the holders of a majority of the shares of Common
Stock of the Corporation present and voting, in person or by proxy, at the 1998
Annual Meeting will be necessary for the approval of the 1998 Plan.
The purpose of the 1998 Plan is to provide an attractive compensation
vehicle to attract and retain executives and other key employees with
outstanding ability and motivate them to hold a significant financial interest
in the Corporation's future success through stock ownership. In addition, the
1998 Plan will promote the interests of the Corporation and its shareholders by
providing executive officers and key employees with incentives to devote their
best efforts to the Corporation by aligning employee interests with those of the
Corporation's shareholders.
The Corporation has two stock compensation plans. The 1984 Plan was
approved by the shareholders on May 3, 1984, authorizing the sale of 3,600,000
shares of Common Stock (after adjustment for the 100 percent stock dividends in
1989 and 1991), and terminated on May 3, 1994. From May 4, 1984, to March 8,
1993, the Corporation granted options to officers and key employees for a total
of 3,600,000 shares of its Common Stock. Of that total, options covering
2,900,000 shares have been exercised and options covering 700,000 shares remain
outstanding. The 1993 Plan, which was approved by the shareholders on May 6,
1993, and will terminate on May 6, 2003, authorized the issuance of 2,000,000
shares of Common Stock. From May 6, 1993, to March 1, 1998, the Corporation
awarded options to executives and key employees totaling 1,500,000 shares of its
Common Stock. None of these options have been exercised and options covering
1,500,000 shares remain outstanding. In addition, the Corporation awarded
restricted stock to nine nonemployee directors totaling 2,700 shares of its
Common Stock. None of these restricted stock awards have yet vested.
PRINCIPAL FEATURES OF THE 1998 PLAN
- The aggregate number of shares proposed will not exceed 3.8 percent of
the Corporation's total shares outstanding as of March 9, 1998.
- Taking into consideration the unexercised options under the 1984 Plan,
the ungranted and unexercised shares under the 1993 Plan, and the shares
available for award under the 1998 Plan, the dilutive impact of these
stock plans will be 8.4 percent of outstanding shares.
- The Compensation and Incentive Committee (the "Committee"), empowered by
the Board of Directors to grant awards under the 1998 Plan, is a fully
independent committee comprised of four nonemployee directors.
16
<PAGE> 20
- No discounted options will be awarded.
- Only 20 percent of the shares available under the 1998 Plan can be
allocated to other stock-based awards.
- There is an annual limit of 150,000 shares for award to any individual.
- All options will be priced at fair market value.
- All options granted will qualify as performance-based compensation for
purposes of Section 162(m) of the Internal Revenue Code.
- No stock options have been re-priced in the last 10 years.
GENERAL PROVISIONS
1. The 1998 Plan will be administered by the Committee, which shall have
complete authority to interpret the 1998 Plan and to make all determinations
necessary or advisable for the administration of the 1998 Plan.
2. The Committee may award incentive stock options meeting the requirements
of Section 422(a) of the Internal Revenue Code, and non-qualified stock options,
as well as other stock-based awards, collectively referred to as "Awards."
3. The number of shares of Common Stock that will be reserved for issuance
under the 1998 Plan is 2,250,000 shares of Common Stock of the Corporation. Any
shares authorized under the 1998 Plan, that are not issued either because Awards
are forfeited or terminated pursuant to the 1998 Plan, shall immediately become
available for Awards.
4. Only executive officers (including those who are also directors), other
key employees and nonemployee directors (as defined in the 1998 Plan) of the
Corporation or any of its subsidiaries may be granted Awards. Currently 18
executive officers, 540 other key employees and seven nonemployee directors will
be eligible to be granted awards. The Committee, in its sole discretion,
determines the person or persons to whom Awards are to be granted and the number
of shares to be covered by each such Award.
5. The 1998 Plan will remain in effect for 10 years from the effective date
thereof.
6. The Board has complete power and authority to amend, modify or terminate
the 1998 Plan, except that the Board cannot increase the number of shares
available for Awards under the 1998 Plan unless it is permitted by Paragraph 11
(Anti-Dilution Provision) of the 1998 Plan or approved by the Corporation's
shareholders. No termination or amendment may, without the consent of the
individual to whom any Award shall have been granted under the 1998 Plan,
adversely affect the right of such individual under such Award.
Although the 1998 Plan generally provides the Board with full authority to
amend the 1998 Plan (other than to increase the total number of shares available
for grant to awardees under the 1998 Plan), in order for the Corporation to meet
the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended, regarding the deductibility of executive compensation, stockholder
approval is required for certain amendments.
7. Except as determined by the Board or the Committee, options granted
under the 1998 Plan will be exercisable only during an optionee's employment by
or service with the Corporation and up to three months after the termination of
an optionee's employment or service for any other reason, except that in the
Board's (or, if such authority is delegated by the Board, the Committee's or the
chief executive officer's) discretion an option may be exercisable for a period
of up to three years after the retirement or death, or for up to 10 years after
mandatory retirement under the Executive Mandatory Retirement Policy. An option
may be exercised after the termination of an optionee's employment or service
only to the extent that (i) the optionee was entitled to do so on the date of
termination, and
17
<PAGE> 21
(ii) the option would not otherwise have expired had the optionee continued to
be employed by or in the service of the Corporation. The Board (or, if such
authority is delegated by the Board, the Committee) may, in its discretion
determine that an authorized leave of absence or disability shall be deemed to
satisfy the 1998 Plan's employment requirements.
8. The number, kind and grant price of shares subject to outstanding Awards
and the number and kind of shares available for subsequent Awards, will be
appropriately adjusted to reflect any stock dividend, stock split, combination
or exchange of shares, merger or consolidation or any other similar change in
capitalization.
9. Except as may be determined by the Board or the Committee, no Award will
be transferable otherwise than by will or the laws of descent and distribution,
and no Award granted may be exercised by any person other than the person to
whom the Award was initially granted during the lifetime of such initial
awardee.
10. As of the date of this Proxy Statement, the Committee has not approved
any Awards under the 1998 Plan. Neither the number nor types of future 1998 Plan
Awards to be received by or allocated to particular participants is presently
determinable, and it is not possible to determine the Awards that would have
been made under the 1998 Plan in 1997 had the 1998 Plan then been in effect.
However, in 1997 Awards covering 517,860 shares were granted to executive
officers and key employees under the 1993 Plan. In addition, 300 shares of
restricted stock were granted to each of the nonemployee directors on January 1,
1998.
11. The maximum number of shares that may be awarded to any employee in any
year shall not exceed 150,000, subject to adjustment as provided in Paragraph 11
of the 1998 Plan.
STOCK OPTIONS
1. The option price in each instance will not be less than 100 percent of
the market value of the Common Stock at the time the option is granted. The
option price will generally be the closing price of the Corporation's stock the
preceding trading day on the New York Stock Exchange and will remain constant
during the life of such option (subject to adjustment in the event of a
recapitalization or a similar change), regardless of the changes in the market
value of the Common Stock.
2. Upon exercise, the option purchase price is to be paid in full in cash,
by exchanging Common Stock already owned by the optionee for at least six months
prior to the date of exercise, by delivery of a broker exercise notice, by a
combination of such methods, or by such other method as the Committee may
determine.
3. During the 60-day period from and after a change in control of the
Corporation (as defined in the 1998 Plan) all optionees will have the right to
surrender all or part of their outstanding options, unless determined otherwise
by the Committee at the time of grant, to the Corporation and receive a cash
payment equal to the amount by which the fair market value of these shares on
the exercise date exceeds their option price. Optionees will be required to give
written notice to the Corporation (within this 60-day period) to elect to
exercise this right to surrender options and receive a cash payment.
4. Whenever a non-qualified option is exercised, the Corporation may
require as a condition of delivery that the optionee remit an amount sufficient
to satisfy all related federal, state and local withholding tax requirements.
OTHER STOCK-BASED AWARDS
1. The Committee may grant other stock-based Awards either alone or in
addition to other Awards under the 1998 Plan.
2. The Committee may place such restrictions on such Awards as the
Committee determines to be necessary.
18
<PAGE> 22
3. The maximum number of shares with respect to which other stock-based
awards may be granted shall not exceed 450,000, subject to adjustment as
provided in Paragraph 11 of the 1998 Plan.
CHANGE IN CONTROL
Upon a change in control of the Corporation (as defined in the 1998 Plan),
all options will immediately vest and become exercisable and all restrictions on
other Awards will immediately lapse.
FEDERAL TAX CONSEQUENCES
a. Incentive Stock Option: A participant will not realize taxable income,
and the Corporation will not be entitled to a deduction at the time of the grant
or exercise of such option. If the participant makes no disposition of shares
acquired pursuant to an incentive stock option within two years from the date of
grant of such option, or within one year of the transfer of the shares to such
participant, any gain or loss realized on a subsequent disposition of such
shares will be treated as a long-term capital gain or loss. Under such
circumstances, the Corporation will not be entitled to any deduction for federal
income tax purposes. If the foregoing holding period requirements are not
satisfied, the participant will generally realize ordinary income at the time of
disposition in an amount equal to the lesser of (i) the excess of the fair
market value of the shares on the date of exercise over the option price or (ii)
the excess of the amount realized upon disposition of the shares, if any, over
the option price, and the Corporation will be entitled to a corresponding
deduction for federal income tax purposes.
b. Non-Qualified Stock Option: A participant will not realize taxable
income at the time of the grant of an option which does not qualify as an
incentive stock option. Upon exercise, of such non-qualified stock option,
however, the participant will realize ordinary income in an amount measured by
the excess, if any, of the fair market value of the shares on the date of
exercise over the option price, and the Corporation will be entitled to a
corresponding deduction for federal income tax purposes. Upon a subsequent
disposition of such shares, the participant will realize short-term or long-term
capital gain or loss with the basis for computing such gain or loss equal to the
option price plus the amount of ordinary income realized upon exercise.
c. Restricted Stock Grant: A participant awarded restricted stock will not
recognize taxable income at the time of the Award unless he or she elects
otherwise. At the time the restrictions on the restricted stock lapse, the
participant will recognize ordinary income and the Corporation will be entitled
to a corresponding deduction equal to the excess of the fair market value of the
Common Stock on the date the restrictions lapse over the amount, if any, paid
for such stock. Dividends, if any, paid to the participant on restricted stock
will be taxable to the participant as ordinary income and deductible by the
Corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL TWO.
PROPOSAL THREE: SHAREHOLDER PROPOSAL ON THE CLASSIFIED BOARD
One shareholder has given notice that it will introduce a proposal and
supporting statements (the "Proposal") for action at the Annual Meeting. The
names and address of the shareholder submitting the Proposal, as well as the
number of shares held by such shareholder, will be furnished by the Corporation,
either orally or in writing as requested, promptly upon receipt of any oral or
written request. The Proposal as submitted reads as follows:
BE IT RESOLVED, that the shareholders of Great Lakes Chemical Corporation
request that the Board of Directors take the necessary steps to declassify the
Board and establish annual elections of directors, whereby directors would be
elected annually and not by classes. This policy would take effect immediately,
and be applicable to the re-election of any incumbent director whose term, under
the current classified system, subsequently expires.
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SUPPORTING STATEMENT
We believe that the ability to elect directors is the single most important
use of the shareholder franchise. Accordingly, directors should be accountable
to shareholders on an annual basis. The election of directors by classes, for
three-year terms, in our opinion, minimizes accountability and precludes the
full exercise of the rights of shareholders to approve or disapprove annually
the performance of a director or directors.
In addition, since only one-third of the Board of Directors is elected
annually, we believe that classified boards could frustrate, to the detriment of
long-term shareholder interest, the efforts of a bidder to acquire control or a
challenger to engage successfully in a proxy contest.
We urge your support for the proposal which requests the Board of Directors
to take the necessary steps to repeal the classified board and establish that
all directors be elected annually.
THE BOARD RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
Your Board of Directors believes that a declassification of the Board and
the establishment of annual elections for all directors would negatively affect
the continuity and stability of the Corporation's governance, have a negative
impact on its long-term policies, and would not be in the best interests of the
Corporation or its shareholders.
The Corporation's Certificate of Incorporation, approved by shareholders,
divides the Board of Directors into three classes with directors elected to
staggered three-year terms. Approximately one-third of the directors stand for
election each year and therefore the entire Board could be replaced in the
course of three annual meetings, all held within approximately two years. Thus,
at all times, a majority of directors will have prior experience as Directors of
the Corporation. This is important for ensuring that our Board has intimate
knowledge of the Corporation's business. The Board believes that such a Board is
most able to maximize long-term shareholder value, particularly through the
development and execution of long-term strategic plans, a process that often
takes years. Moreover, the Board believes that a Board with an historical
perspective of the Corporation is better positioned to make the fundamental
decisions that are best for the Corporation and its shareholders. The annual
election of one-third of the Board also helps to prevent abrupt changes in
corporate policies that might result if the entire Board were elected each year.
Such changes could hinder the Corporation in achieving its long-term strategic
goals, and thus might deprive the shareholders of the opportunity to realize the
maximum value of their investment.
In the statement in support of its proposal, the proponent suggests that
staggered terms lessen the Directors' accountability to shareholders. Your Board
strongly disagrees. Shareholders have the power to propose and elect alternate
nominees for the class of director to be elected each year, and thus may
influence the Board's composition. This provides an effective balance between
accountability and the need for stability and experience on the Board.
In addition, the Board believes that staggered terms protect the interests
of all shareholders in a variety of situations, especially in addressing
proposals or actions by anyone with short-term interests that may, in the long
run, not be in the best interests of the Corporation and its shareholders. The
Board further believes that the staggered system of electing Directors affords
the Corporation valuable protection against an unsolicited or unfriendly
proposal that is deemed not in the best interest of shareholders. Staggered
terms would also encourage possible corporate raiders to initiate such action
through arm's-length negotiations with the Board. This additional time and
leverage would enable your Board to review any takeover proposal, consider
alternatives, and negotiate a more favorable result that maximizes shareholder
value. In the event the Board is radically changed, which could occur with an
annual election of the entire board, the new board may be unable or unwilling to
protect the interests of shareholders.
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Under Delaware corporate law, members of the Board must perform their
duties in good faith, with due care, acting in the best interest of the
Corporation and its shareholders. The current classified structure does not
alter the Board's legal duties.
The Board observes that numerous well-respected U.S. corporations have
staggered boards. It also believes that there is little evidence or research to
indicate that stock performance is directly influenced by whether or not a board
is elected annually or for three-year terms.
Your Board believes that the classified Board of Directors is appropriate
for a corporation like Great Lakes in that it facilitates continuity and
stability of leadership and policy, assuring responsible, knowledgeable
representation of the long-term interests of Great Lakes shareholders.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST
THIS PROPOSAL.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's directors and officers, and persons who own more than 10
percent of a registered class of the Corporation's equity securities, to file
initial reports of ownership and reports of changes in ownership of the
Corporation's equity securities with the Securities and Exchange Commission (the
"SEC") and the New York Stock Exchange. Such persons are required by SEC
regulations to furnish the Corporation with copies of all Section 16(a) forms
they file.
During 1997 nine Section 16(a) reports were filed late. Initial reports of
ownership by Richard Boehner, vice president Corporate Development hired on June
2, 1997, and Mark Esselman, vice president Human Resources hired on September
11, 1997, were filed on June 19, 1997, and September 25, 1997, respectively.
Reports covering various stock transactions occurring between January and
September were reported late by Robert Hollier, vice president. Messrs. Kerrison
and McDonald inadvertently failed to report stock option grants received in
February 1997 on their year-end reports. Otto Furuta, vice president,
inadvertently failed to include on his year-end report 128 shares of the
Corporation's Common Stock owned indirectly by his son, which had been reported
on his earlier SEC filings. Year-end reports filed by Directors Fulton, Proops
and Leet, either did not include beneficial ownership which had been reported
earlier, or had inaccurately reported grants of phantom stock made on January 1,
1997.
INFORMATION RESPECTING THE CORPORATION'S
INDEPENDENT PUBLIC ACCOUNTANTS
The principal independent public accountants of the Corporation, selected
by the Board for 1997, are Ernst & Young LLP, Indianapolis, Indiana.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting and will have the opportunity to make a statement if they should desire
to do so. They are also expected to be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
The Corporation anticipates holding its 1999 Annual Meeting of Shareholders
on Thursday, May 6, 1999.
Under the regulations of the Securities and Exchange Commission, any
shareholder desiring to make a proposal to be acted upon at the 1999 Annual
Meeting of Shareholders must present such proposal to the secretary of the
Corporation at its principal office in West Lafayette, Indiana, not later than
November 30, 1998, in order for the proposal to be considered for inclusion in
the Corporation's proxy statement.
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Shareholder proposals or director nominations not included in a proxy
statement for an annual meeting must comply with the advance notice procedures
and information requirements set forth in the Bylaws of the Corporation in order
to be properly brought before that Annual Meeting of Shareholders.
OTHER MATTERS
As of the date of this proxy statement, management is not aware of any
matters to be presented at the meeting other than the matters specifically
stated in the Notice of Meeting and discussed in the proxy statement. If any
other matter or matters are properly brought before the meeting, the persons
named in the enclosed proxy have discretionary authority to vote the proxy on
each such matter in accordance with their judgment.
The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers or other persons holding stock in their names or in the
names of their nominees for their expenses in sending proxy material to the
beneficial owners will be borne by the Corporation. Solicitations may be made by
officers and regular employees of the Corporation, without additional
compensation, by use of the mails, telephone, facsimile or personal calls.
By order of the Board of Directors,
MARY P. MCCLANAHAN
Secretary
March 30, 1998
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD
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EXHIBIT A
GREAT LAKES CHEMICAL CORPORATION
1998 STOCK COMPENSATION PLAN
1. SHARES SUBJECT TO PLAN. 2,250,000 shares of common stock, par value
$1.00 per share ("Common Stock") of Great Lakes Chemical Corporation (the
"Corporation") shall be reserved for Awards granted under this Plan (the "1998
Plan"). If any Award granted under this 1998 Plan shall terminate or expire
without being fully exercised for any reason prior to the end of the period
under which Awards may be granted, the shares of Common Stock to which such
termination or expiration relates shall again become available for Awards
thereafter granted.
2. EFFECTIVE DATE AND DURATION. This 1998 Plan shall become effective on
May 7, 1998, upon its approval by the holders of a majority of the Common Stock
of the Corporation present and voting (in person or by proxy) at the 1998 Annual
Meeting of Shareholders, and shall continue in effect for a period of ten (10)
years from the date of such shareholder approval. Upon expiration of such
ten-year period, no further Awards shall be granted (although unexercised Awards
theretofore granted shall continue in effect).
3. AWARDS. The Board may grant Options, including Incentive Stock Options
meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and Non-Qualified Options, and other stock-based awards,
collectively referred to as "Awards."
4. ADMINISTRATION OF THE 1998 PLAN. The Board of Directors of the
Corporation (the "Board"), which may act through its Compensation and Incentive
Committee (the "Committee"), shall administer this 1998 Plan. It may in its sole
discretion determine the person or persons to whom Awards are to be granted and
the number of shares to be covered by each such Award, all within the
limitations set forth in this 1998 Plan. It may interpret the provisions of this
1998 Plan and decide all questions of fact arising out of its application, and
all such interpretations and determinations shall be conclusive and binding upon
the individual employees and directors involved and all persons claiming under
them.
5. PERSONS ELIGIBLE FOR AWARDS. Individuals who are (a) executive officers,
(b) other key employees (including those who are also directors) or (c)
non-employee directors, in each case of the Corporation or any of its
subsidiaries, may be granted Awards. For this purpose, the term "subsidiary"
shall mean any corporation in which the Corporation owns stock having 50 percent
or more of the total combined voting power of all classes of such corporation's
stock. A person is a key employee by virtue of meeting all of the following
standards: (i) such person is employed by the Corporation or its subsidiaries,
(ii) such person has managerial, supervisory, professional, scientific,
engineering or similar responsibilities and (iii) such person is not covered by
any collective bargaining agreement binding on the Corporation or its
subsidiaries.
6. TERMS AND CONDITIONS OF OPTIONS. Options granted may be either Incentive
Stock Options as defined in Section 422 of the Code, (hereinafter referred to as
"ISOs") or options which are not within the 422 definition (hereinafter referred
to as "Non-Qualified Options") (ISOs and Non-Qualified Options are referred to
collectively as "Options").
(a) INCENTIVE STOCK OPTIONS. The terms of each ISO granted shall
include those terms which are required by Section 422 of the Code, and
other such terms, not inconsistent therewith as the Board may determine.
(b) NON-QUALIFIED OPTIONS. Subject to the minimum option price
specified in paragraph (c), the terms of each Non-Qualified Option granted,
which may be different in each case, shall be determined by the Board.
(c) MINIMUM OPTION PRICE. The option price payable for the shares of
Common Stock subject to each Option granted shall not be less than the fair
market value of the Corporation's Common Stock at the time of the grant of
that Option. The fair market value of the Corporation's Common Stock at the
time of the grant of an Option shall be deemed to be equal to the closing
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price on the preceding trading day on the New York Stock Exchange;
provided, however, that during the 60-day period from and after a change in
control of the Corporation, "fair market value" shall mean, other than in
the case of shares of Common Stock subject to ISOs, the higher of (X) the
highest closing price of the Common Stock on the New York Stock Exchange
during the 60-day period prior to the change in control of the Corporation
and (Y) if the change in control of the Corporation is the result of a
transaction or series of transactions described in paragraphs (a), (b) or
(c) of Section 13(A)(v) hereof, the highest price for shares of Common
Stock paid in such transaction or series of transactions, which in the case
of such paragraph (a) shall be the highest price for shares of Common Stock
as reflected in a Schedule 13D filed under the Exchange Act (as defined in
Section 13(A)(v)(a) hereof) by the person having made the acquisition.
(d) MAXIMUM NUMBER OF SHARES. Subject to the provisions of Paragraph
11 hereof, the maximum number of shares that may be awarded to any
participant in any year hereunder shall not exceed 150,000.
7. TERMS AND CONDITIONS OF OTHER STOCK-BASED AWARDS. The Committee may
grant other stock-based Awards either alone or in addition to other Awards under
the 1998 Plan. The Committee will place such restrictions on such awards as the
Committee determines to be necessary; provided however, that restricted stock
awarded to any participant who is also a participant in the Corporation's
Management Incentive Compensation Plan may not vest solely based upon the
continued employment of the participant for a specified period of time. Subject
to the provisions of Paragraphs 1 and 11 hereof, the maximum number of shares
with respect to which awards may be granted under this Paragraph 7 shall not
exceed 450,000.
8. TRANSFER LIMITATIONS. Except as may be determined by the Board or the
Committee, no Award granted shall be transferable otherwise than by will or the
laws of descent and distribution, and no Award granted may be exercised by any
person other than the person to whom the Award shall initially have been granted
during the lifetime of such initial Awardee.
9. EXERCISE OF AWARDS. Awards shall be exercised by written notice to the
Corporation, which written notice must be accompanied by payment in full of the
option price. Options may be exercised in one or more installments. Payment of
the option price may be made as specified in each Award Agreement (as discussed
below), (a) in cash, (b) by exchanging Common Stock of the Corporation already
owned by the optionee for at least six months prior to the date of exercise, (c)
by delivery of a combination of cash and Common Stock, (d) through the delivery
of a notice that the optionee has placed a market sell order with a broker with
respect to shares of Common Stock then issuable to the optionee upon exercise of
the Option, and that the broker has been directed to pay a sufficient portion of
the net proceeds of the sale to the Corporation in satisfaction of the aggregate
exercise price of the Option or the exercised portion thereof or (e) by such
other method as the Committee may determine. The exchanged shares, plus cash, if
any, must be equal to the aggregate option price of the shares acquired upon
exercise of the Option. The value to be used for any exchanged shares shall be
the closing market price of the Corporation's Common Stock on the preceding
trading day on the New York Stock Exchange. Notwithstanding the foregoing,
during the 60-day period from and after a change in control of the Corporation,
all optionees, with respect to any or all of their respective Options, shall,
unless the Committee shall determine otherwise at the time of grant, have the
right, in lieu of the payment of the full Option price of the shares of Common
Stock being purchased under the Options and by giving written notice to the
Corporation in form satisfactory to the Committee, to elect (within such 60-day
period) to surrender all or part of the Options to the Corporation and to
receive in cash an amount equal to the amount by which the fair market value of
shares of Common Stock on the date of exercise exceeds the option price per
share of Common Stock under the Options multiplied by the number of shares of
Common Stock granted under the Options as to which the right granted by this
sentence shall have been exercised.
(a) MANDATORY WITHHOLDING TAXES. Whenever a Non-Qualified Option is
exercised, the Corporation may require as a condition of delivery that the
optionee remit an amount sufficient to
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satisfy all federal, state and local withholding tax requirements related
thereto. The optionee may elect to pay the tax by remitting (1) cash, (2)
shares of Common Stock already owned by the optionee for at least six
months, (3) withholding a portion of the shares otherwise deliverable to
the optionee upon the exercise, or (4) by any combination of the above. The
value to be used for any shares delivered or withheld shall be the closing
market price on the preceding trading day on the New York Stock Exchange.
(b) DISQUALIFYING DISPOSITIONS OF ISO SHARES. An optionee shall be
required to notify the Corporation of any disposition of shares issued
pursuant to the exercise of an ISO under the circumstances described in
Section 421(b) of the Code (relating to certain disqualifying
dispositions), within ten days of such disposition.
10. AWARD AGREEMENT. No person shall have any rights with respect to an
Award unless and until the Corporation and the person to whom such Award shall
have been granted shall have executed and delivered an Award Agreement
containing provisions setting forth terms of the Awards.
11. ANTI-DILUTION PROVISION. If, prior to the complete exercise of any
Award, there shall be declared and paid a stock dividend upon the shares of
Common Stock of the Corporation or if the shares shall be split up, converted,
reclassified, changed into, or exchanged for, a different number or kind of
securities of the Corporation, the Award, to the extent that it has not been
exercised, shall entitle the holder upon the future exercise of such Award to
such number and kind of securities or other property subject to the terms of the
Award to which the holder would be entitled had such holder actually owned the
shares subject to the unexercised portion of the Award at the time of the
occurrence of such stock dividend, split-up, conversion, exchange,
reclassification or exchange; and the aggregate purchase price upon the future
exercise of the Award shall be the same as if originally optioned or awarded
shares were being purchased thereunder; or the Committee shall make such other
adjustment to such Award as it deems appropriate. If any such event should
occur, the number of shares with respect to which Awards remain to be issued, or
with respect to which Awards may be reissued, shall be similarly adjusted.
In the event the outstanding shares of Common Stock shall be changed into
or exchanged for any other class or series of capital stock or cash, securities
or other property pursuant to a recapitalization, reclassification, merger,
consolidation, combination or similar transaction (other than a transaction
described in the previous paragraph), then each Award shall thereafter become
exercisable for the number and/or kind of capital stock, and/or the amount of
cash, securities or other property so distributed, into which the shares subject
to the Award would have been changed or exchanged had the Award been exercised
in full prior to such transaction, provided that, if the kind or amount of
capital stock or cash, securities or other property received in such transaction
is not the same for each outstanding share, then the kind or amount of capital
stock or cash, securities or other property for which the Award shall thereafter
become exercisable shall be the kind and amount so receivable per share by a
plurality of the shares; or the Committee shall make such other adjustment to
such Award as it deems appropriate. If any such event should occur, the number
of shares with respect to which Awards remain to be issued or with respect to
which Awards may be reissued, shall be similarly adjusted.
12. AWARDS GRANTED UNDER OPTION PLANS. Options granted under the 1984 and
1993 Plans shall be governed by the provisions of the respective Plan as
amended. Awards granted under this 1998 Plan shall be governed by the provisions
of this 1998 Plan.
13. ADDITIONAL PROVISIONS.
A. VESTING, TERMINATION OF EMPLOYMENT OR SERVICE.
(i) Upon a change in control of the Corporation (as defined below),
all Options shall immediately vest and become exercisable and all
restrictions on other Awards shall immediately lapse.
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(ii) The following provisions shall be applicable in the event of an
Awardee's termination of employment or service, except as may be otherwise
determined by the Board or the Committee. An Award shall be exercisable
only during the Awardee's employment by or service with the Corporation and
for up to three months after the termination of such employment or service
for any reason (including but not limited to any such termination of
employment or service which occurs following a change in control of the
Corporation), except that in the Board's (or, if such authority is
delegated by the Board, the Committee's or the Chief Executive Officer's)
discretion, an Award may be exercisable for a period of up to three years
after retirement or death, or for up to ten years after mandatory
retirement under the Executive Mandatory Retirement Policy.
(iii) Except as otherwise determined by the Board or the Committee, an
Award may be exercised after the termination of an Awardee's employment or
service with the Corporation only to the extent that (a) the Awardee was
entitled to do so on the date of termination (after giving effect to
Section 13(A)(i) above), and (b) the Award would not have expired prior to
the date of such exercise had the Awardee continued to be employed by (or
to be in the service of) the Corporation.
(iv) The Board (or if such authority is delegated by the Board, the
Committee or the Chief Executive Officer) may in its discretion determine
that an authorized leave of absence or disability shall be deemed to
satisfy this 1998 Plan's employment or service requirements.
(v) For purposes of this 1998 Plan, a "change in control of the
Corporation" shall be deemed to have occurred if the conditions set forth
in any one of the following paragraphs shall have been satisfied:
(a) any "person" (as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
other than (i) the Corporation, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation,
(iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the shareholders of the Corporation in substantially the
same proportions as their ownership of shares of the Corporation (any
such person is hereinafter referred to as a "Person"), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing
more than 20% of the combined voting power of the Corporation's then
outstanding securities (not including in the securities beneficially
owned by such Person any securities acquired directly from the
Corporation);
(b) there is consummated a merger or consolidation of the
Corporation with or into any other corporation, other than a merger or
consolidation which would result in the holders of the voting securities
of the Corporation outstanding immediately prior thereto holding
securities which represent, in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit
plan of the Corporation, immediately after such merger or consolidation,
more than 70% of the combined voting power of the voting securities of
either the Corporation or the other entity which survives such merger or
consolidation or the parent of the entity which survives such merger or
consolidation;
(c) the shareholders of the Corporation approve any plan or
proposal for the liquidation or dissolution of the Corporation or an
agreement for the sale or disposition by the Corporation of all or
substantially all the Corporation's assets; or
(d) during any period of two consecutive years (not including any
period prior to the date of this 1998 Plan), individuals who at the
beginning of such period constitute the Board and any new director
(other than a director designated by a Person who has entered into an
agreement with the Corporation to effect a transaction described in
clause (a), (b) or (c) of this paragraph) whose election by the Board or
nomination for election by the Corporation's shareholders was approved
by a vote of at least two-thirds ( 2/3) of the directors then still in
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office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease
for any reason to constitute a majority thereof.
For purposes of this 1998 Plan, where a change in control of the
Corporation results from a series of related transactions, the change in
control of the Corporation shall be deemed to have occurred on the date of
the consummation of the first such transaction. For purposes of clause (a)
of this subsection, the shareholders of another corporation (other than the
Corporation or a corporation described in subclause (iv) of clause (a) of
this subsection) shall be deemed to constitute a Person. Further, the sale,
transfer, or other disposition of a subsidiary of the Corporation shall not
constitute a change in control of the Corporation giving rise to payments
or benefits under this 1998 Plan.
Notwithstanding any other provision hereof, a "change in control of
the Corporation" shall not be deemed to have occurred by virtue of the
Corporation entering into any agreement with respect to, the public
announcement of, the approval by the Corporation's shareholders or
directors of, or the consummation of, any transaction or series of
integrated transactions (including any merger or other business combination
transaction) entered into in connection with, or expressly conditioned upon
the occurrence of, a spin-off (such transaction or series of integrated
transactions, the "Spin-Off Transaction") immediately following which the
recordholders of the Common Stock of the Corporation immediately prior to
the Spin-Off Transaction continue to have substantially the same
proportionate ownership in the spun-off entity as they had in the
Corporation immediately prior to the Spin-Off Transaction; provided that
such Spin-Off Transaction (including any related merger of other business
combination transaction) has been approved by a vote of a majority of the
Corporation's Continuing Directors (as defined below) then in office. For
purposes of this 1998 Plan, a "Continuing Director" shall mean any member
of the Board of the Corporation who is a member of the Board as of the date
of this 1998 Plan and any person who subsequently becomes a member of the
Board, if such person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing Directors.
B. LISTINGS, REGISTRATION AND COMPLIANCE WITH LAWS AND REGULATIONS.
(i) Each Award shall be subject to the requirement that if at any time
the Board shall determine, in its discretion, that the listing,
registration, or qualification of the shares subject to the Award upon any
securities exchange or under any state or federal securities or other law
or regulation, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition to or in connection with the
granting of such Award or the issue or purchase of shares thereunder, no
such Award may be exercised or paid in Common Stock in whole or in part
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board and the Awardee will supply the Corporation with such certificates,
representations and information as the Corporation shall request and shall
otherwise cooperate with the Corporation in obtaining such listing,
registration, qualification, consent or approval. In the case of executive
officers and other persons subject to Section 16(b) of the Securities
Exchange Act of 1934, the Board may at any time impose any limitations upon
the exercise of an Award which, in the Board's discretion, are necessary or
desirable in order to comply with Section 16(b) and the rules and
regulations thereunder. Prior to the occurrence of a change in control of
the Corporation, if the Corporation, as part of an offering of securities
or otherwise, finds it desirable because of federal or state regulatory
requirements to reduce the period during which any Award may be exercised,
the Board may, in its discretion and without the Awardee's consent, so
reduce such period on not less than 15 days written notice to the Awardee.
(ii) Notwithstanding the terms of this paragraph, no Awardee shall
have the right to require the Corporation to register, list or qualify said
Award or any of the stock underlying such Option.
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C. AMENDMENT OF THE 1998 PLAN. Except as provided in the following sentence
and as required by law, the Corporation's Board shall have complete power
and authority to amend this 1998 Plan at any time and no approval by the
Corporation's shareholders or by any other person, committee or other
entity of any kind shall be required to make any such amendment effective.
The Board shall not, however, increase the maximum number of shares
available for Awards granted unless such increase shall either be approved
by the Corporation's shareholders or shall be permitted by Paragraph 11. No
termination or amendment may, without consent of the individual to whom any
Award shall have been granted under the 1998 Plan, adversely affect the
rights of such individual under such Award.
D. CAPTIONS. The captions (i.e., all boldfaced words) are for convenience
only, do not constitute a part of this 1998 Plan, and shall not be deemed
to limit, characterize or affect in any way any provisions of this 1998
Plan, and all provisions shall be construed as if no captions had been
used.
E. SEVERABILITY. Whenever possible, each provision in this 1998 Plan and in
every Award at any time granted under this 1998 Plan shall be interpreted
in such manner as to be effective and valid under applicable law, but if
any provision of this 1998 Plan or any Award at any time granted under this
1998 Plan shall be held to be prohibited by or invalid under applicable
law, then (i) such provision shall be deemed amended to accomplish the
objectives of the provision as originally written to the fullest extent
permitted by law, and (ii) all other provisions and every Award at any time
granted under this 1998 Plan shall remain in full force and effect.
F. NO STRICT CONSTRUCTION. No rule of strict construction shall be applied
against the Corporation, the Board, or any other person in the
interpretation of any of the terms of this 1998 Plan, any Award granted
under this 1998 Plan or any rule or procedure established by the Board or
the Committee.
G. APPLICABLE LAW. Every Award at any time granted under this 1998 Plan
shall be deemed to be a contract made under the laws of the State of
Indiana. For all purposes, both this 1998 Plan and every Award granted
under this 1998 Plan shall be construed in accordance with and governed by
the laws of the State of Indiana.
A-6
<PAGE> 32
PROXY GREAT LAKES CHEMICAL CORPORATION PROXY
1998 This Proxy is solicited on behalf of The Board of Directors 1998
The undersigned hereby appoints ROBERT B. MCDONALD, ROBERT T. JEFFARES, AND
MARY P. MCCLANAHAN, and each of them with full power of substitution, as the
proxies of the undersigned, to attend the Annual Meeting of Shareholders to be
held on Thursday, May 7, 1998, at 11:00 a.m. and any adjournment thereof, and to
vote the stock the undersigned would be entitled to vote, if present, on the
items listed on the reverse side of this proxy card.
THIS PROXY WILL BE VOTED AS SPECIFIED; OR IF NO CHOICE IS SPECIFIED, IT WILL BE
VOTED FOR THE ELECTION OF DIRECTOR NOMINEES AND APPROVAL OF THE 1998 EMPLOYEE
STOCK COMPENSATION PLAN, AND AGAINST THE SHAREHOLDER PROPOSAL.
ELIMINATE DUPLICATE MAILINGS
SEC rules require the Corporation to mail an annual report to every
shareholder even if there are multiple shareholders in the same household. If
you are a shareholder of record and have the same address as other shareholders
of record, you may authorize the Corporation to discontinue mailings of multiple
annual reports. To do so, mark the box (see over) on each proxy card for which
you do not wish to receive an annual report. Applicable law requires the
Company to send separate proxy statements and proxy cards for all of your
accounts.
[ ] Mark here for address change
------------------------------------
New Address
------------------------------------
------------------------------------ (PLEASE SIGN ON THE REVERSE SIDE)
- - --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
<PAGE> 33
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
GREAT LAKES CHEMICAL CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
----------------------------------------------------------------------------
| THE BOARD RECOMMENDS A VOTE FOR ITEMS 1 AND 2. | THE BOARD RECOMMEDS A VOTE AGAINST ITEM 3.
1998 ----------------------------------------------------------------------------
<S> | <C> <C> | <C>
| | 3. Shareholder proposal concerning the
P | 1. Election of Director Nominees: FOR Withhold Except | classified board. For AGAINST Abstain
R | Louis E. Lataif and Mack G. Nichols. ALL All | -------
O | --- | / / / / / /
X | Nominee Exception _______________________ / / / / / / | 4. In their discretion, the Proxies are authorized
Y | | to vote upon any other matter which may
| 2. Approval of 1998 Stock Compensation Plan. FOR Against Abstain | properly come before the meeting.
| --- |
| / / / / / / |
| | Please check here to discontinue the annual
---------------------------------------------------------------------------- report mailing for this account. / /
1998
---------------------------------------------
Signature Date
1998
---------------------------------------------
Signature Date
Please sign exactly as your name appears.
Joint owners should each sign personally. Where
applicable, indicate your official position or
representation capacity.
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- - ------------------------------------------------------------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
</TABLE>
