<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 CORPORATION]
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
- - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- - --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- - --------------------------------------------------------------------------------
(3) Filing party:
- - --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
LOGO
Notice of
1999 ANNUAL MEETING OF SHAREHOLDERS
and
PROXY STATEMENT
- - --------------------------------------------------------------------------------
Thursday, May 6, 1999
Parkwood IV Conference Center
500 East 96th Street
Indianapolis, Indiana
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
LOGO
INDIANAPOLIS, INDIANA
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1999
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of GREAT
LAKES CHEMICAL CORPORATION (the "Corporation") will be held at Parkwood IV
Conference Center, 500 East 96(th) Street, Indianapolis, Indiana, on Thursday,
May 6, 1999, at 11:00 a.m. (Eastern Standard Time) for the following purposes:
1. To elect two directors to serve until the 2002 Annual Meeting;
2. To consider and act upon a shareholder proposal to request
the Board of Directors to redeem the Corporation's
shareholder rights plan unless the plan receives
shareholder approval; and
3. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed March 8, 1999, 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 1998 are enclosed.
By Order of the Board of Directors,
MARY P. MCCLANAHAN
Secretary
March 31, 1999
IMPORTANT
PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN YOUR PROXY CARD
IN THE ENCLOSED ENVELOPE.
<PAGE> 4
GREAT LAKES CHEMICAL CORPORATION
500 EAST 96TH STREET, INDIANAPOLIS, INDIANA 46240
------------------------
PROXY STATEMENT
MARCH 31, 1999
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1999
------------------------
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 6, 1999, and at
any adjournment thereof.
As of March 8, 1999, the record date of the meeting, 58,384,199 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 a 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. Because Proposal 2 is a request that the Board take steps
to implement the proposal, approval of Proposal 2 may not result in the
requested action being taken, nor is the Board required to initiate such steps
to take that action. If no voting instructions are given, the accompanying proxy
will be voted AGAINST Proposal 2. Under the New York Stock Exchange rules,
brokers who hold street name shares cannot vote in their discretion on Proposal
2. THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 2.
A quorum will exist if the shares present (including broker non-votes)
constitute a majority of the outstanding shares.
PROPOSAL ONE: ELECTION OF DIRECTORS
The Certificate of Incorporation of the Corporation provides that the
number of directors shall be not less than three nor more than eleven, and shall
be divided into three classes of equal size (to the extent possible), with one
class to be elected each year, in rotation, for a term of three years. The Board
is currently comprised of seven members, divided into two classes of two
directors and one class of three directors. Director Evan Bayh resigned from the
Board in January 1999 to assume his seat in the U.S. Senate. Director Robert B.
McDonald, whose term expires at the Annual Meeting in 1999, will not stand for
re-election. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the two nominees, Mark P. Bulriss and Thomas M.
Fulton, for three-year terms to expire at the Annual Meeting in 2002 and until
their successors are duly elected and qualified. Nominees Bulriss and Fulton 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
1
<PAGE> 5
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, 1999.
None of the business organizations, other than Great Lakes Chemical Corporation,
with which the named individuals are employed or associated is a parent,
subsidiary or affiliate of the Corporation.
NOMINEES TO SERVE UNTIL THE 2002 ANNUAL MEETING
MARK P. BULRISS Director since April 1998. (4), (5), (6)
Mr. Bulriss, 47, was named president and chief executive officer of the
Corporation on April 1, 1998. Prior to joining Great Lakes, Mr. Bulriss served
as president of AlliedSignal Polymers, a $2.1 billion business unit of
AlliedSignal Inc. that manufactures polymers and markets nylon, technical
fibers, plastics, films and chemical intermediates. Before being named president
of its polymers unit, Mr. Bulriss served as president of AlliedSignal Inc.'s
electronic materials business. His 24-year career in chemicals and plastics also
includes 16 years with G. E. Plastics, a division of the General Electric
Corporation.
THOMAS M. FULTON Director since 1995. (2), (3), (4)
Mr. Fulton, 65, retired in 1998 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
serves on the boards of Octel Corp., The Advocate South Suburban Hospital and
the Bethel Community Facility, and serves as chairman of the board of the
Chicago Theological Seminary.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES.
DIRECTORS SERVING UNTIL THE 2001 ANNUAL MEETING
LOUIS E. LATAIF Director since 1995. (1), (2)
Mr. Lataif, 60, 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. Mr.
Lataif also serves on the boards of Bank Audi (USA), the Fred Jones Companies,
Inc., Unitrode Corporation, and the Iacocca Foundation.
MACK G. NICHOLS Director since 1998. (1), (2)
Mr. Nichols, 60, retired in 1998 as president and chief operating officer
and a director of Mallinckrodt Inc., a diversified chemical and healthcare
company. He has served as a director of A. P. Green Industries, Inc., the
National Association of Manufacturers, and the Chemical Manufacturers
Association. Mr. Nichols has also served as Chairman of the Metropolitan St.
Louis YMCA, 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.
2
<PAGE> 6
DIRECTORS SERVING UNTIL THE 2000 ANNUAL MEETING
MARTIN M. HALE Director since 1978. (1), (4), (5), (6)
Mr. Hale, 58, 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 Octel Corp. and 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, 72, 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 has served as a director of Illinois
Tool Works Inc., Vulcan Materials Corporation, and Landauer, Inc., and currently
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 in 1990-1992. Previously he served as chairman
of the board of both The Industrial Health Council and the YMCA of Metropolitan
Chicago.
JAY D. PROOPS Director since 1996. (4), (5), (6)
Mr. Proops, 57, 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 director of AMCOL International, and as a trustee
of Daniel Webster College.
- - -------------------------
(1) Audit Committee
(2) Compensation and Incentive Committee
(3) Environmental, Safety and Health Committee
(4) Executive Committee
(5) Finance Committee
(6) Succession Planning Committee
DIRECTORS' COMPENSATION
RETAINER, COMMITTEE AND MEETING FEES
Nonemployee directors receive compensation for their services in the form
of an annual retainer and committee chair and meeting fees. Great Lakes
employees are not paid any fees or compensation for serving on the Board or on
any Board committee.
All nonemployee directors, excluding Mr. McDonald, receive an annual
retainer of $26,000. In order to better align the directors' interests with
those of the Corporation's shareholders, the director retainer was frozen in
1997 for three years. In lieu of increases in the annual retainer in 1998 and
1999, each director was granted 300 shares of restricted stock of the
Corporation in each of the above years, effective at the beginning of each year.
The shares vest over three years with 100 shares vesting on the first, second
and third anniversaries of the grant date, respectively. 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
3
<PAGE> 7
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 $120,000 in recognition of his substantial Board responsibilities.
All 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 voted to replace its then existing cash
Directors' Retirement Plan with a new Non-Employee Directors' Deferred and
Long-Term Compensation Plan (the "Deferred and Long-Term Compensation Plan").
The Board made this decision to align director compensation more closely with
shareholder interests. Each nonemployee director 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 nonemployee
director may elect, at the time he joins the Board or prior to the commencement
of each subsequent calendar year, 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.
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, whichever is greater. 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 election for any new
director 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 1998 the Board met eight times. Each
of the directors attended at least 98% percent of the aggregate of the total
number of Board and committee meetings he was required to attend.
The Audit Committee, which met three times during 1998, 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.
4
<PAGE> 8
The Compensation and Incentive Committee, which met seven times during
1998, makes recommendations to the Board with respect to compensation for the
Corporation's executives and establishes eligibility and award levels under the
Corporation's stock award program.
The Environmental, Safety and Health Committee, which met twice during
1998, reports to the Board on environmental, safety and health matters; reviews
all environmental and safety audits; assesses environmental, safety and health
policies and performance; and monitors significant environmental, safety and
health issues.
The Executive Committee, which met twice during 1998, is empowered to act
for the Board, with certain restrictions, on behalf of the Corporation.
The Finance Committee, which met once during 1998, and includes the chief
financial officer 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 once during 1998, 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 listed in the Summary Compensation Table ("Named
Executives") and currently employed by the Corporation, 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. (7).................... 7,273,616 12.46%
Investment Advisor
100 E. Pratt Street
Baltimore, Maryland 21202
FMR Corp. (8)........................................ 6,587,138 11.28%
82 Devonshire Street
Boston, Massachusetts 02109
State Farm Mutual Automobile Insurance Corporation 5,441,195 9.32%
and Related Entities (9)...........................
One State Farm Plaza
Bloomington, Illinois 61710
Berkshire Hathaway Inc., et al (10).................. 4,000,000 6.85%
1440 Kiewit Plaza
Omaha, Nebraska 68131
Mark P. Bulriss (11)................................. 370,774 *
L. Donald Simpson (12)............................... 70,034 *
Marshall E. Bloom (13)............................... 39,218 *
Richard L. Boehner (14).............................. 26,730 *
Robert L. Hollier (15)............................... 70,835 *
Thomas M. Fulton..................................... 1,600 *
Martin M. Hale (16).................................. 218,948 *
Louis E. Lataif...................................... 2,600 *
Richard H. Leet...................................... 1,600 *
Robert B. McDonald (17).............................. 27,625 *
Mack G. Nichols...................................... 2,600 *
Jay D. Proops (18)................................... 12,600 *
Directors and executive officers as a group.......... 590,537 1.01%
</TABLE>
* Less than 1%
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(1) Information concerning persons known to the Corporation to be beneficial
owners of more than five percent of its Common Stock is based upon the
most recently available reports furnished by 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, is as of March 8, 1999.
(3) Unless otherwise indicated, beneficial ownership is direct, and the person
indicated has sole voting and investment power.
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<PAGE> 10
(4) In addition to the shares listed in the table as beneficially owned, the
following directors have phantom stock units: T. M. Fulton, 3,293; M.M.
Hale, 2,563; L. E. Lataif, 2,747; R. H. Leet, 4,211; M. G. Nichols, 2,630;
and J. D. Proops, 2,477. These numbers represent the original phantom unit
grants to directors, adjusted to reflect the spin-off of Octel Corp. These
stock units do not have any voting rights.
(5) Ownership includes 500 shares of restricted stock granted to each
nonemployee director, except Mr. McDonald, for which investment power has
not yet vested, but for which each director has sole power to direct the
vote.
(6) Ownership of executive officers includes stock options exercisable within
60 days as disclosed in the table on options exercised and value of options
at end of fiscal year on page 11.
(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 is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(8) FMR Corp. reported sole power to dispose of or to direct the disposition of
6,587,138 shares, and sole power to vote or to direct the vote of 291,038
of such shares as follows: Fidelity Management & Research Company reported
6,148,800 shares and Fidelity Management Trust Company reported 438,338
shares. Fidelity Management & Research Company and Fidelity Trust Company
are both wholly owned subsidiaries of FMR Corp.
(9) Each of the following State Farm entities has reported sole voting power
and sole disposition power and disclaims "beneficial ownership" as to all
shares as to which each has no right to receive the proceeds of sale of the
security and disclaims that it is part of a group: State Farm Mutual
Automobile Insurance Company reported 3,934,300 shares; State Farm Life
Insurance Company has 106,000 shares; State Farm Fire and Casualty Company
has 127,500 shares; State Farm Investment Management Corp. has 729,700
shares, and State Farm Insurance Companies Savings and Thrift Plan for U.S.
Employees has 543,500 shares. State Farm Investment Management Corp. also
has 195 shares with shared voting power. State Farm Life Insurance Company
and State Farm Fire and Casualty Company are wholly owned subsidiaries of
State Farm Mutual Automobile Insurance Corporation. State Farm Investment
Management Corporation is a wholly owned subsidiary of State Farm Fire and
Casualty Company. State Farm Life and Accident Assurance Company is a
wholly owned subsidiary of State Farm Life Insurance Company.
(10) The power to vote, direct the vote and dispose of these shares is shared by
Warren E. Buffett, Berkshire Hathaway Inc., OBH Inc., National Indemnity
Company, Geico Corporation and the Government Employee Insurance Company.
Warren E. Buffet may be deemed to control Berkshire Hathaway, Inc.
(11) Includes 25,000 shares of restricted stock for which investment power has
not yet vested, but for which Mr. Bulriss has sole power to direct the
vote, and 274 shares held indirectly by Mr. Bulriss through the
Corporation's 401(k) and Supplemental Savings Plan.
(12) Includes 1,900 shares held indirectly by Mr. Simpson through the
Corporation's 401(k) and Supplemental Savings Plans and 2,000 shares
through spousal ownership.
(13) Includes 427 shares held indirectly by Mr. Bloom through the Corporation's
Supplemental Savings Plan.
(14) Includes 11,456 shares of restricted stock units for which investment power
has not yet vested.
(15) Includes 291 shares held indirectly by Mr. Hollier through the
Corporation's 401(k) and Supplemental Savings Plan.
(16) Includes 190,840 shares held by Mr. Hale as cotrustee and 2,000 shares held
by his wife as trustee for his children. Mr. Hale disclaims beneficial
ownership of these 192,840 shares.
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<PAGE> 11
(17) Includes 10 shares held indirectly by Mr. McDonald in the Corporation's
401(k) Plan and 7,000 shares through spousal ownership.
(18) Includes 10,000 shares held by the Jay and Kay Proops Family Limited
Partnership.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during 1998 to Mark P. Bulriss, president and chief executive officer of
the Corporation, compensation paid during the last three years to Robert B.
McDonald, former president and chief executive officer of the Corporation, and
to each of the Corporation's four other most highly compensated serving
executive officers, as well as to one former executive officer.
SUMMARY COMPENSATION TABLE
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION ALL OTHER
COMPENSATION AWARDS COMPENSATION
----------------------------------------------------------------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#)(1) ($)(2)(12)
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark P. Bulriss (3).................... 1998 482,500 487,500 146,714(4) 2,028,125(5) 700,000 892,762(3)
President and
Chief Executive Officer
Robert B. McDonald..................... 1998 180,769 0 51,551 10,213,830(6)
President and 1997 650,000 508,000 60,000 53,980
Chief Executive Officer 1996 645,192 165,000 35,000 57,160
L. Donald Simpson...................... 1998 320,492 238,000 13,746 26,699
Group Vice President 1997 310,000 227,300 20,000 21,107
1996 303,077 55,000 12,000 20,538
Robert T. Jeffares (7)................. 1998 392,861 131,000(7) 19,061 2,652,542(7)
Executive Vice President and 1997 380,000 213,400 30,000 28,663
Chief Financial Officer 1996 380,000 78,000 20,000 29,856
Marshall E. Bloom...................... 1998 262,904 188,000 8,362 17,200
Vice President 1997 245,000 160,200 9,500 15,600
1996 245,000 42,000 7,500 15,500
Richard R. Boehner (8)................. 1998 198,471 135,006 109,202(9) 499,375(10) 45,824 16,900
Senior Vice President 1997 56,250 50,000 21,241(9) 15,000(11) 0
Robert L. Hollier (12)................. 1998 273,825 46,000 14,319 9,162
Vice President 1997 264,981 33,200 10,000 9,121
1996 264,990 38,000 7,500 8,212
</TABLE>
- - --------------------------------------------------------------------------------
(1) Options to acquire shares of Common Stock.
(2) Includes: 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. Bulriss,
$2,962 and $39,800, respectively; Mr. McDonald $3,229 and $-0-,
respectively; Mr. Simpson, $9,299 and $17,400, respectively; Mr. Jeffares,
$10,542 and $24,000, respectively; Mr. Bloom, $3,200 and $14,000,
respectively; Mr. Boehner, $-0- and $16,900, respectively, and Mr. Hollier,
$3,242 and $-0-, respectively.
(3) In April 1998, Mr. Bulriss replaced Mr. McDonald as president and chief
executive officer. All other compensation includes a signing bonus granted
under the terms of Mr. Bulriss' employment agreement, a description of
which is provided on page 12.
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<PAGE> 12
(4) Includes relocation expenses ($86,957) paid by the Corporation.
(5) Represents the fair market value of restricted stock at the time of the
award. At December 31, 1998, the fair market value of the restricted stock
was $2,000,000, based on the per share closing price of the Common Stock on
the New York Stock Exchange. Mr. Bulriss was awarded 50,000 restricted
shares under the terms of his employment agreement with the Corporation.
The forfeiture restrictions on 25,000 shares lapsed on April 1, 1998, and
the forfeiture restrictions on the remaining 25,000 shares lapse in two
equal installments on April 1, 1999, and April 1, 2000, respectively.
Restricted shares are subject to forfeiture on termination of employment,
except by reason of death, disability, or a change in control of the
Corporation. The shares awarded (less shares withheld to satisfy
withholding tax requirements) may not be sold or transferred until April 1,
2001. Mr. Bulriss has voting power, and receives dividends at the same rate
paid to shareholders, on the restricted shares. Dividends paid on the
shares are subject to the same restrictions as apply to the restricted
shares. Restricted shares owned for at least six months may be transferred
for the purpose of exercising all or any portion of stock option awards
granted to Mr. Bulriss.
(6) Represents benefits paid and accrued under the terms of Mr. McDonald's
severance agreement, as described on page 13.
(7) Mr. Jeffares was granted a leave of absence from August 31, 1998, to
February 29, 1999, when his employment with the Corporation ended. The 1998
bonus was prorated to August 31, 1998. All Other Compensation includes
benefits paid or accrued under Mr. Jeffares severance agreement, as
described on page 14.
(8) Mr. Boehner re-joined the Corporation as Senior Vice President on April 30,
1998. The data for 1997 represents compensation paid to him during that
part of 1997 when Mr. Boehner was an employee of the Corporation.
(9) Includes relocation expenses paid by the Corporation in 1998 ($97,127) and
in 1997 ($21,241).
(10) Represents the fair market value of restricted stock units at the time of
the award. At December 31, 1998, the fair market value of the restricted
stock units was $458,240, based on the per share closing price of the
Common Stock on the New York Stock Exchange. Mr. Boehner was awarded 11,456
restricted stock units by the Compensation and Incentive Committee on
joining the Corporation in May 1998. The units vest in equal installments
on May 6, 2001, and May 6, 2003, subject to Mr. Boehner's continued
employment with the Corporation, and are paid out on the vesting dates in
the form of shares of Common Stock on a 1-for-1 basis. Mr. Boehner does not
receive dividends and has no voting power over these restricted stock
units.
(11) The stock option granted to Mr. Boehner in 1997 did not vest and was
terminated.
(12) As an employee of OSCA, Inc., a wholly owned subsidiary of the Corporation,
Mr. Hollier does not participate in the Great Lakes Chemical Pension Plan.
OSCA employees participate in a defined contribution plan, to which OSCA
contributed $5,920, $6,616, and $5,742 on behalf of Mr. Hollier in 1998,
1997, and 1996, respectively.
STOCK COMPENSATION PLANS
The Corporation has three stock compensation plans which provide for grants
of stock-based awards to key employees and nonemployee directors. Plan
provisions allow grants of incentive and non-qualified stock options, with terms
not to exceed 10 years at an option price which is not less than the market
value of the Corporation's Common Stock on the date of grant, and other
stock-based awards.
9
<PAGE> 13
OPTION GRANTS IN 1998
The following table provides information related to options granted to the
Named Executives during 1998:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
INDIVIDUAL GRANTS STOCK PRICE APPRECIATION
FOR OPTION TERM(3)(4)
-------------------------
- - ------------------------------------------------------------------------------------ -------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED #(1) 1998 ($/SH)(2) DATE 5%($)
- - ------------------------------------------------------------------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark P. Bulriss (5) 700,000 54.0% $42.00 03/31/08 $18,522,000
Robert B. McDonald 51,551 4.0% $40.10 02/06/08 1,302,304
L. Donald Simpson 13,746 1.1% $40.10 02/06/08 347,257
Robert T. Jeffares 19,061 1.5% $40.10 02/06/08 481,527
Marshall L. Bloom 8,362 0.6% $40.10 02/06/08 211,244
Richard L. Boehner 45,824 3.5% $43.59 05/05/08 1,258,425
Robert L. Hollier 14,319 1.1% $40.10 02/06/08 361,733
$1.6
Increase in Market Value to Shareholders (6) billion
<CAPTION>
- - ----------------------------- ----------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM(3)(4)
----------------------------
- - ----------------------------- -----------
NAME 10%($)
- - ----------------------------- ----------------------------
<S> <C> <C>
Mark P. Bulriss (5) $46,746,000
Robert B. McDonald 3,266,766
L. Donald Simpson 878,412
Robert T. Jeffares 1,215,283
Marshall L. Bloom 533,141
Richard L. Boehner 3,176,025
Robert L. Hollier 912,945
$4.2
Increase in Market Value to S billion
</TABLE>
- - --------------------------------------------------------------------------------
(1) Each of the Named Executives, excluding Mr. Bulriss, received a single
stock option grant in 1998 pursuant to the 1993 Employee Stock Compensation
Plan. Each option has a term of 10 years and is exercisable in cumulative
33 percent installments commencing one year from date of grant, with full
vesting occurring on the third anniversary date of the grant or on the
retirement of the employee over 62 years of age under certain
circumstances. For additional information regarding options, see
"Change-in-Control and Severance Agreements." In accordance with the
anti-dilution provisions of the 1993 Employee Stock Compensation Plan, the
above table reflects the number of options shares granted and the
associated option price as adjusted to reflect the spin-off of Octel Corp.
on May 22, 1998.
(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) Pursuant to his employment agreement, Mr. Bulriss was granted a restricted
stock option. The restricted stock option, which has a term of 10 years,
was adjusted to reflect the spin-off of Octel Corp. On April 1, 1998,
200,000 option shares vested, and the remaining 500,000 option shares will
vest in 25% annual installments commencing on April 1, 1999. Full vesting
will occur upon a change in control of the Corporation, death or
disability, termination by the Corporation without cause, or termination of
employment by the Executive with good reason. Stock acquired on exercise of
the option cannot be sold, transferred, or otherwise disposed of until
April 1, 2001.
(6) Calculated by using a Common Stock price of $41.85 and the average number
of shares outstanding for February 1999, assuming five and 10 percent
compounded growth rates. The increase in market value to common
shareholders is shown for comparative purposes only and is not a prediction
of future stock performance.
10
<PAGE> 14
OPTION EXERCISES IN 1998 AND VALUE OF OPTIONS AT DECEMBER 31, 1998
The following table provides information related to options exercised by
the Named Executives during 1998 and the number and value of options held at
year end. The Corporation does not have any stock appreciation rights
outstanding.
OPTION EXERCISES IN 1998 AND VALUE OF OPTIONS AT END OF YEAR
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998(#)(3) DECEMBER 31, 1998($)(3)
ACQUIRED ON VALUE ---------------------------------------------------------
NAME EXERCISE(#)(1) REALIZED($)(1)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark P. Bulriss (4)........... 200,000 500,000
Robert B. McDonald............ 6,100 $206,066 11,456 $291,990
L. Donald Simpson............. 49,332 33,602 22,158 44,317
Robert T. Jeffares............ 16,000 $550,500 141,856 49,609 994,133 66,476
Marshall L. Bloom............. 28,713 18,479 67,817 21,047
Richard L. Boehner............ 45,824
Robert L. Hollier............. 59,090 24,818 65,964 22,155
</TABLE>
- - --------------------------------------------------------------------------------
(1) Options were exercised before the spin-off of Octel Corp. Numbers of shares
listed and values realized do not reflect any adjustment relative to the
Octel Corp. spin-off.
(2) Value based on market price of the Corporation's Common Stock at date of
exercise minus the exercise price multiplied by the number of shares to
which the exercise relates.
(3) Value based on market price of the Corporation's Common Stock at end of
fiscal year minus the exercise price multiplied by the number of shares to
which the option relates. Numbers of shares and values of unexercised
in-the-money options have been adjusted to reflect the spin-off of Octel.
(4) Mr. Bulriss' exercisable options are not in the money.
PENSION PLAN
The Corporation has a noncontributory defined benefit pension plan (the
"Pension Plan") covering substantially all U.S. employees. The Corporation also
has non-qualified Supplemental Retirement Plans (the "SERPs"). These SERPs
provide for substantially the same 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, excluding Mr. Bulriss, are computed
using the average of the highest compensation for 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 under the defined Pension Plan, as augmented by SERPs, to participants
upon normal retirement at age 65. The benefits indicated in the table are not
subject to deduction for Social Security or other offset payments.
<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.................................. $ 46,277 $ 61,702 $ 77,128 $ 92,553 $ 107,979 $ 117,979 $ 127,979
300,000.................................. 71,027 94,702 118,378 142,053 165,729 180,729 195,729
400,000.................................. 95,777 127,702 159,628 191,553 223,479 243,479 263,479
500,000.................................. 120,527 160,702 200,878 241,053 281,229 306,229 331,229
600,000.................................. 145,277 193,702 242,128 290,553 338,979 368,979 398,979
700,000.................................. 170,027 226,702 283,378 340,053 396,729 431,729 466,729
800,000.................................. 194,777 259,702 324,628 389,553 454,479 494,479 534,479
900,000.................................. 219,527 292,702 365,878 439,053 512,229 557,229 602,229
1,000,000................................. 244,277 325,702 407,128 488,553 569,979 619,979 669,979
2,000,000................................. 491,777 655,702 819,628 983,553 1,147,479 1,247,479 1,347,479
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 15
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, Simpson, Jeffares, Bloom, and Boehner as
shown in the Summary Compensation Table. Credited years of service under the
plans as of December 31, 1998, were: Mr. McDonald, 29 years, 3 months; Mr.
Simpson, 7; Mr. Jeffares, 15; Mr. Bloom, 43; and Mr. Boehner, 8 months.
Neither Mr. Hollier nor Mr. Bulriss participates in the Pension Plan. For
Mr. Hollier's retirement arrangements, see Summary Compensation Table, note
(12). Through a joint survivorship annuity provided under the terms of his
employment agreement, Mr. Bulriss would receive estimated annual benefits
payable on normal retirement at age 65 of $719,125.
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 their dates of hire. Effective January 1, 1999,
employees may elect to contribute up to 20 percent of their pay into the Plan,
subject to certain limits prescribed by Section 402(g) of the Internal Revenue
Code. Also effective January 1, 1999, the Corporation makes matching
contributions, in Common Stock of the Corporation, equal to 50% of the first six
percent of salary contributed by the employee. 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 be paid, earned or awarded in the
following year.
EMPLOYMENT AGREEMENT
In connection with his employment by the Corporation, Mr. Bulriss entered
into an employment agreement with the Corporation in April 1998. The agreement
has an initial term of five years, subject to extension if neither party
terminates prior to the end of the initial term. The agreement provides that Mr.
Bulriss will serve as president and chief executive officer and that the
Corporation will use its best efforts to cause him to be elected as a director.
Under the agreement, his base salary is to be at least $650,000 per year and he
is to receive annual incentive awards and bonuses under the Corporation's plans
with a minimum bonus for 1998 of 75% of his base salary and a target bonus of
75% each year thereafter. In connection with entering into the agreement, Mr.
Bulriss was paid a signing bonus of $850,000, and was granted 50,000 shares of
Common Stock and a nonqualified stock option to purchase 700,000 shares of
Common Stock. Both stock awards are subject to certain vesting and transfer
restrictions until April 2001. Under the agreement, he will receive a 100,000
share non-qualified stock option grant in each of the years 1999 through 2001,
all subject to vesting and transfer restrictions. The agreement also provides
for, among other things, certain retirement benefits including immediate vesting
and an additional six years of benefit service, salary continuation and bonus
eligibility during disability, and full vesting of the options and restricted
shares on death or disability. If Mr. Bulriss' employment is terminated by the
Corporation without cause, or by him with "good reason" as such term is defined
in the agreement (which includes material breach by the Corporation, substantial
diminution of his position, duties or authority, the Corporation giving notice
that the automatic term extensions will cease and his resignation during the
fourth month after a change in control of the Corporation), his options and
restricted shares will vest and he will receive a prorated bonus for
12
<PAGE> 16
the year in which termination occurs based on the greater of his target bonus
for that year or his average bonus for the prior three years and a lump sum
equal to three times his then base salary plus the nonprorated amount of such
bonus, as well as other benefits including a gross up of any excise taxes on
payments made in connection with a change in control. The agreement prohibits
Mr. Bulriss from competing with the Corporation for a year after termination of
his employment.
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 entered into
change-in-control agreements with the current Named Executives, except Mr.
Bulriss, 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 Corporation's Common Stock) exceeds the exercise price
thereof, and all restrictions on other stock 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 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 current Named
Executives, except Mr. Bulriss, and certain other 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. If payment becomes due under any eligible
executive's change-in-control agreement, the provisions of the Plan will not
apply.
In connection with the termination of their employment with the
Corporation, Messrs. McDonald and Jeffares entered into agreements with the
Corporation. Mr. McDonald's agreement provided for his resignation as president
and chief executive officer of the Corporation in April 1998 and the payment to
him or on his behalf of, among other things, (i) $700,000 per year until the
earlier of October 31, 2001, his death or when he elects to begin receiving
retirement benefits; (ii) approximately $4.9 million at the time of termination
for cancellation of his rights to bonuses, employee matches under the 401(k)
plan, further premiums under the split dollar life insurance agreement and
certain stock options; and (iii) approximately $4.7 million in November 2001 if
he decides not to receive payments under the SERPs and Pension Plan. He also can
continue to participate in the Corporation's medical and related plans and
receive reimbursement of his club dues. The Corporation relinquished its rights
in his split dollar life insurance policy. He was permitted until March 1, 1999
to exercise 11,456 stock options with an exercise price of $14.512 per share
(number of shares and option price adjusted to reflect Octel Corp. spin-off). In
his agreement, Mr. McDonald
13
<PAGE> 17
released any claims against the Corporation relating to his termination and
agreed not to compete with the Corporation or solicit the employment by others
of its employees until October 31, 2001.
In Mr. Jeffares' agreement, which was signed in August 1998, his employment
termination date was set at February 28, 1999. Under his agreement and a
supplemental agreement, Mr. Jeffares continued to receive his salary and certain
of his benefits through the termination date, and will receive salary
continuation payments from March 1, 1999, through August 27, 2000. Mr. Jeffares
received title to his company car, entitlement to the maximum annual benefit
($109,000) beginning January 1, 2001 under his deferred compensation agreement
for the full 15 year period under such agreement, credit for service through
August 2000 under the SERPs, an extension in the period allowed to exercise his
stock options to February 2002, $24,000 in additional premiums paid by the
Corporation on his split dollar life policy and assignment of such policy to
him, and continued coverage under the Corporation's medical and related plans to
August 31, 2000. Mr. Jeffares released any claims against the Corporation and
agreed not to compete with the Corporation or solicit the employment of its
employees through August 2000.
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,
which is comprised of four independent nonemployee directors, is responsible for
establishing and maintaining an executive compensation program that is designed
to attract and retain performance-oriented key executives who are committed to
the long-term success of the Corporation and to the enhancement of shareholder
value.
The objectives of the Committee are to:
- balance executive compensation with market
requirements for the hiring and retention of qualified
corporate executives; and
- provide competitive incentives for the achievement of
quantifiable financial and strategic corporate goals;
The Committee approves all compensation programs, including eligible
participants, performance objectives, target guidelines and award levels. In
conjunction with the full Board, the Committee reviews corporate and individual
performance, administers and grants awards under all executive compensation
plans, and ensures that compensation levels are externally competitive and
internally equitable. It is also responsible for determining the compensation of
the chief executive officer and other key executives.
As the executive compensation programs of the Corporation cannot address
all possible variables, the Committee takes appropriate action with respect to
compensation issues, which in its judgment is in the best long-term interest of
the Corporation and its shareholders.
14
<PAGE> 18
COMPETITIVE MARKET
The Committee conducts a full review of the Corporation's executive
compensation program each year. This includes a review of 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
specialty chemical companies.
COMPENSATION COMPONENTS
The Corporation's executive compensation program is designed to provide a
strong link between executive compensation and enhancement of shareholder value.
The Committee believes the interests of the shareholders will be best served if
the Corporation's compensation program consists of a combination of cash-based
components and equity ownership. A significant portion of executive compensation
is contingent upon corporate and individual performance. Individual performance
is measured by a comparison of achievement versus pre-determined objectives. The
total compensation program consists of three components: base salary, which
reflects the executive's level of responsibility and individual performance;
incentive compensation awards in the form of cash bonuses, which reflect
corporate, business unit and individual performance; and long-term incentive
compensation in the form of stock awards, which create value for the executive
only if the price of the Corporation's stock appreciates over time. The latter
two components provide at-risk compensation which is linked directly to
financial results and enhancement of shareholder value. The Committee considers
all elements of compensation when determining an individual's total
compensation.
BASE SALARY
Each year the Committee reviews the base salary of the chief executive
officer and, in conjunction with the chief executive officer, the base salaries
of other corporate officers. The Committee makes all final compensation
determinations concerning officers. The full Board makes the final determination
on the salary of the chief executive officer. The key criteria in the base
salary determination for each executive are the level and scope of
responsibility, competitive market factors, and individual and business unit
performance.
BONUS
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.
Participants are eligible to receive annual incentive awards equivalent to
approximately 15% to 75% of base salary based upon the attainment of
preestablished goals, including EVA(1) ("economic value added") goals
established by the Committee for the Corporation as a whole and for each of the
Corporation's major operating subsidiaries and business units, as well as for
meeting individual performance objectives. Under the MICP, the majority of the
participant's award is tied to the attainment of performance objectives for
his/her respective business unit and/or the Corporation. A maximum of 200% of
target may be paid upon achievement of outstanding performance. When
preestablished financial objectives are not achieved annual awards may be
reduced or eliminated. EVA is determined by subtracting from net operating
profit a charge for the capital used to generate that profit. For 1998,
individual, corporate and business unit performance objectives were achieved in
substantial part and corresponding MICP awards were made.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentive compensation is comprised of restricted stock and
restricted stock unit awards and 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.
- - ---------------
1 EVA is a trademark of Stern Stewart & Co.
15
<PAGE> 19
The Corporation's stock option grant guidelines were designed, and have
been revised periodically, with the assistance of external compensation
consultants. Stock options are generally granted annually and cannot be
exercised for at least one year from the date of grant, and vest over three
years. Options expire 10 years from the grant date.
Stock option grant guidelines set forth the criteria for eligibility, award
levels and administration of the program. Stock option awards are based on
corporate and individual performance and the impact which the Committee feels a
particular executive can have on future performance. Additional option grants
may be made to reflect increased responsibility or to reward outstanding
performance.
The Committee may also grant restricted stock and restricted stock units in
conjunction with the hiring of new executives. Such grants were made to four
executives in 1998.
The Committee believes that linking a significant portion of an executive's
current and potential future compensation to the Corporation's success, as
reflected in its stock price, gives the executive a stake similar to that of the
Corporation's shareholders and results in better long-term management of the
Corporation for the benefit of its shareholders.
CHIEF EXECUTIVE COMPENSATION
In April 1998, the Committee screened and interviewed candidates for the
position of president and chief executive officer. Upon completion of this
process, the Committee recommended, and the Board approved, the appointment of
Mark Bulriss as the new president and chief executive officer of the
Corporation. In order to attract and retain Mr. Bulriss and ensure to the
greatest extent possible the continued services of Mr. Bulriss over a period of
time sufficient to permit him to develop and implement important strategic
initiatives, the Committee determined that it was necessary and appropriate to
enter into an employment agreement. This employment agreement was effective on
April 1, 1998.
In establishing the new chief executive officer's compensation as reflected
in the employment agreement, the Committee considered various factors, including
(a) the compensation packages provided to other chief executive officers of
entities in the Corporation's peer group; (b) Mr. Bulriss' abilities, past
performance and compensation history; (c) the scope of the responsibilities Mr.
Bulriss would assume at Great Lakes; (d) the Corporation's internal compensation
levels; and (e) the difficulty of the objectives to be achieved by Mr. Bulriss
in view of the level of change required in the Corporation's business processes,
systems, organization, personnel, development and operations to permit the
Corporation to achieve sustainable long-term financial and strategic
improvement.
Mr. Bulriss' annual salary and bonus awards were established based on the
Committee's review of compensation of other chief executive officers and the
factors cited above. Mr. Bulriss' grant of stock options and the award of
restricted stock reflect the Committee's intent to establish a strong connection
between his compensation and the success of the Corporation by placing a
significant amount of Mr. Bulriss' compensation at risk. These stock awards
strongly align his economic interests with those of the Corporation's
shareholders. The signing bonus provided to Mr. Bulriss was in recognition of
the difficulty of the services to be performed and to cover the long term loss
of the value of stock options granted by his former employer.
POSITION ON DEDUCTIBILITY OF COMPENSATION
The Omnibus Budget Reconciliation Act of 1993 (the "Act") limits the
deductibility of compensation 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 compensation meets certain criteria.
The Committee seeks to qualify officer compensation for deductibility where
feasible, but retains the discretion to pay non-deductible amounts. The
Committee believes that flexibility is an important feature of the Corporation's
compensation programs and one that best serves the interests of the Corporation
and its shareholders by allowing the Committee to recognize and motivate
individual executive officers as circumstances warrant.
16
<PAGE> 20
SUMMARY
With a significant portion of the Corporation's executive compensation
linked directly to individual and corporate performance and price appreciation
of the Corporation's stock over the long term, the Committee believes that the
overall compensation practices adopted for the Corporation will help to ensure
the alignment of the interests of the Corporation's executives and shareholders
and encourage executives to support the long-term success of the Corporation.
The Committee further believes that shareholders will be well served by the
Great Lakes' new management team under the direction of Mr. Bulriss. The new
management team has already initiated numerous difficult and necessary changes
for the Corporation, including the restructuring of the Corporation and the
implementation of a strong infrastructure that better position the Corporation
to pursue aggressive growth strategies, enhance operational excellence and
deliver superior shareholder value in a challenging competitive environment.
This report is submitted by the members of the Compensation and Incentive
Committee, none of whom is an employee or a former employee of the Corporation.
Compensation and Incentive Committee
Thomas M. Fulton, Chairman
Louis E. Lataif
Richard H. Leet
Mack G. Nichols
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<PAGE> 21
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return to shareholders on the
Common Stock of the Corporation for the five year period ending December 31,
1998, to the cumulative total return during the same period on the S&P 500
Composite and S&P Specialty Chemical Indices, as well as a custom composite
index comprised of six specialty chemical companies (the "Peer Group"). The Peer
Group consists of Albemarle Corp. (since January 1, 1995), Crompton & Knowles
Corporation, Cytec Industries, Inc. (since December 31, 1993), Ferro
Corporation, Morton International Inc. and Witco Corporation. These companies
are similar in size and market capitalization to Great Lakes. Additionally, each
of these companies and Great Lakes compete in the same markets. Therefore, the
Corporation believes measurement against the performance of these entities more
accurately reflects the Corporation's achievement of shareholder value. The
graph assumes that $100 was invested on December 31, 1993, and that all
dividends were reinvested in Great Lakes Common Stock.
GREAT LAKES CHEMICAL CORPORATION, S&P EQUITY INDICES AND PEER GROUP
TOTAL RETURN TO SHAREHOLDERS OVER FIVE YEARS
<TABLE>
<CAPTION>
S&P 500 COMPOSITE S&P CHEMICALS GREAT LAKES CHEMICAL
INDEX (SPECIALTY) INDEX CORPORATION PEER GROUP
----------------- ----------------- -------------------- ----------
<S> <C> <C> <C> <C>
'12/31/93 100.00 100.00 100.00 100.00
'12/31/94' 101.32 87.50 76.88 90.34
'12/31/95' 139.40 114.74 97.77 112.16
'12/31/96' 171.40 117.69 64.12 136.87
'12/31/97' 228.59 145.73 62.02 170.27
'12/31/98' 293.91 124.11 64.59 117.08
</TABLE>
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<PAGE> 22
On May 22, 1998, the Corporation completed a spin-off of its wholly-owned
subsidiary, Octel Corp. and distributed to its shareholders the common stock of
Octel Corp. Accordingly, of the five years shown in the above graph, four years
and five months represent the performance of Great Lakes prior to the
distribution and seven months represent performance post-distribution. The graph
accounts for this distribution as though it were a non-taxable cash dividend
reinvested in the Common Stock of the Corporation.
Past results are not necessarily indicative of future performance, and this
chart does not reflect the Corporation's forecast for future share price
performance.
PROPOSAL TWO: SHAREHOLDER PROPOSAL ON THE SHAREHOLDER RIGHTS PLAN
One shareholder has given notice that it will introduce a proposal and
supporting statement (the "Proposal") for action at the Annual Meeting. The name
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:
RESOLVED, that the shareholders of Great Lakes Chemical Corporation ("Great
Lakes Chemical" or the "Company") request the Board of Directors to redeem the
shareholder rights previously issued unless such issuance is approved by the
affirmative vote of shareholders, to be held as soon as may be practicable.
SUPPORTING STATEMENT
In September 1989, Great Lakes Chemical's Board of Directors issued certain
rights (the "rights") pursuant to a "rights agreement." We view these rights as
a type of anti-takeover device, commonly known as a "poison pill," which injures
stockholders by reducing management accountability and adversely affecting
stockholder value.
The Company's Board acted unilaterally, without first seeking a vote by the
shareholders on whether they wished to have such a rights plan in effect for a
ten year period. Earlier this year, the Board voted to extend the poison pill
until 2009, even though the Board was aware that shareholders would soon be
voting on this resolution.
We believe that these rights are designed to discourage or thwart an
unwanted takeover of the Company, and they operated in that manner. Although
management and the Board of Directors should have appropriate tools to ensure
that all stockholders benefit from any proposal to acquire the Company, we do
not believe that the future possibility of a takeover justifies the unilateral
imposition of such a poison pill. At a minimum, we believe that the shareholders
should have the right to vote on the necessity of such a powerful tool, which
could be used to entrench existing management.
The negative effects of poison pills on the trading value of companies'
stock have been the subject of extensive research. A 1986 study (covering 245
companies adopting poison pills between 1983 and July 1986) was prepared by the
Office of the Chief Economist of the U.S. Securities and Exchange Commission on
the effect of poison pills on the wealth of target stockholders. It states that
"empirical tests, taken together, show that poison pills are harmful to target
stockholders, on net." A 1992 study by Professor John Pound of Harvard's
Corporate Research Project and Lilli A. Gordon of the Gordon Group found a
correlation between high corporate performance and the absence of poison pills.
In recent years, various companies have been willing to redeem outstanding
rights. We believe that Great Lakes Chemical should follow suit or at least put
to a vote of the shareholders the question of whether the current rights plan
should remain in force.
WE URGE YOU TO VOTE FOR THIS RESOLUTION!
THE BOARD RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
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<PAGE> 23
Your Board of Directors recommends a vote against this Proposal because (1)
rights plans such as the Corporation's Shareholder Rights Plan (the "Rights
Plan") help maximize shareholder value, (2) the Rights Plan protects
shareholders and the Corporation from unfair and abusive takeover tactics and
(3) under Delaware law the Board has the authority to adopt a rights plan such
as the current Rights Plan. The Board believes that the Corporation's
Shareholder Rights Plan is in the best interests of the Corporation and its
shareholders.
In February 1999, the Board of Directors adopted a new Rights Plan to
protect the Corporation's shareholders against coercive and abusive takeover
tactics and to ensure that each shareholder would be treated fairly in the event
of an unsolicited offer to acquire the Corporation.
The Corporation's Rights Plan does not prevent an offer to acquire the
Corporation at a price and on terms that are fair and in the best interests of
shareholders. Rather, the Rights Plan improves the Board's ability to discharge
its fiduciary duty by protecting shareholders from unfair or inadequate offers
and abusive tactics. The Rights Plan also enhances the Board's ability to get a
higher price if there is to be a sale of the Corporation. The Board's ability to
achieve this objective by negotiating with a potential acquiror on behalf of all
shareholders is significantly greater than the ability of an individual
shareholder to achieve such a result. Without the protections and benefits of a
rights plan, the Board could lose important bargaining power in negotiating a
transaction with a potential acquiror or pursuing potentially superior
alternatives. In responding to an unsolicited acquisition proposal and
negotiating with a potential acquiror, the Board recognizes its obligation to
fulfill its fiduciary duties to shareholders in deciding whether to redeem the
Rights to facilitate a transaction.
The benefits of shareholder rights plans have been validated by a study by
Georgeson & Company Inc., in November 1997. The study found that: (i) premiums
paid to companies with shareholder rights plans were on average eight percentage
points higher than premiums paid to purchase target companies that did not have
shareholder rights plans; (ii) the presence of a shareholder rights plan did not
increase the likelihood that a hostile takeover bid would be defeated or that a
friendly bid would be withdrawn; and (iii) a shareholder rights plan did not
reduce the likelihood that a company would become a takeover target (the
takeover rate was similar for companies with and without shareholder rights
plans). This conclusion has been supported by Patrick McGunn, director of
corporate programs for Institutional Shareholder Services, who was recently
quoted as saying that "companies with poison pills tend to get higher premiums
paid on average than companies that don't have pills." (Wall Street Journal,
January 29, 1999). By comparison, the 1986 study relied upon by the proponent in
support of the Proposal is over 13 years old.
Over 1,900 publicly traded companies have adopted rights plans. Your Board
believes that the Rights Plan serves the best interests of the Corporation and
its shareholders. For the reasons discussed above, the Board strongly believes
that the Corporation should retain this important tool for the protection of
shareholders. The Board urges you to vote against the 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.
Based on a review of forms filed and information provided by officers and
directors, Great Lakes believes that all Section 16(a) reporting requirements
were fully met, except for a late report by Mr. Hollier of two sales of stock in
February totaling 6,815 shares.
20
<PAGE> 24
INFORMATION RESPECTING THE CORPORATION'S INDEPENDENT
PUBLIC ACCOUNTANTS
The principal independent public accountant of the Corporation, selected by
the Board for 1999, is 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 questions.
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
The Corporation anticipates holding its 2000 Annual Meeting of Shareholders
on Thursday, May 4, 2000.
Notice of any matter intended to be presented by a shareholder for action
at next year's Annual Meeting must be addressed to the secretary of the
Corporation at its office in West Lafayette, and must comply with the advance
notice procedures and information requirements set forth in the Bylaws of the
Corporation. Notice of such matter must be received not later than January 6,
2000, nor before December 7, 1999.
However, in order to be considered for inclusion in the Corporation's proxy
statement and form of proxy for the 2000 Annual Meeting under the regulations of
the Securities and Exchange Commission, shareholder proposals must be received
no later than December 1, 1999, by the secretary of the Corporation at its
office in West Lafayette, Indiana.
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. Morrow & Co., Inc. has been
engaged to assist in the solicitation of proxies. The Corporation will pay that
firm $5,000 for its services and reimburse its out-of-pocket expenses.
Solicitations may also be solicited 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 31, 1999
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD
21
<PAGE> 25
PROXY GREAT LAKES CHEMICAL CORPORATION PROXY
1999 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS 1999
The undersigned hereby appoints MARK P. BULRISS, MARK E. TOMKINS, 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 6, 1999, 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 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> 26
GREAT LAKES CHEMICAL CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
<TABLE>
<CAPTION>
[ ]
<S> <C> <C> <C>
1999 THE BOARD RECOMMENDS A VOTE FOR ITEM 1. THE BOARD RECOMMENDS A VOTE AGAINST ITEM 2
FOR Withhold Except
ALL All 2. Shareholder proposal concerning the For AGAINST Abstain
P 1. Election of Director Nominees [ ] [ ] [ ] Shareholder Rights Plan [ ] [ ] [ ]
R Mark P. Bulriss and Thomas M. Fulton
O 3. In their discretion, the Proxies are authorize to vote
X Nominee Exception upon any other matter which may properly come before
Y ---------------------- the meeting.
Please check here to discontinue the annual
report mailing for this account [ ]
1999
-------------------------------------------------------
Signature Date
1999
-------------------------------------------------------
Signature Date
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS PROXY Please sign exactly as your name appears. Joint owners should
PROMPTLY USING THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF each sign personally. Where applicable, indicate your official
MAILED IN THE UNITED STATES. position or representation capacity.
- - -----------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
</TABLE>
