<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14A-11(c) or Rule 14a-12
GREAT LAKES CHEMICAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C>
[LOGO] Great Lakes Chemical Corporation
</TABLE>
NOTICE OF
2000 ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
----------------------------------------------------------------------
Thursday, May 4, 2000
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>
<TABLE>
<S> <C>
[LOGO] Great Lakes Chemical Corporation
</TABLE>
INDIANAPOLIS, INDIANA
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 4, 2000
------------------------
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 4, 2000, at 11:00 a.m. (Eastern Standard Time) for the following purposes:
1. To elect two directors to serve until the 2003 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;
3. To consider and act upon a shareholder proposal to request the
Board of Directors to eliminate the classification of the Board of
Directors and to require that all Directors stand for election
annually; 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 6, 2000, 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 1999 are enclosed.
By Order of the Board of Directors,
JEFFREY M. LIPSHAW
Secretary
March 27, 2000
IMPORTANT
PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN YOUR PROXY CARD
IN THE ENCLOSED ENVELOPE.
<PAGE>
GREAT LAKES CHEMICAL CORPORATION
500 EAST 96(TH) STREET, INDIANAPOLIS, INDIANA 46240
------------------------
PROXY STATEMENT
MARCH 27, 2000
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 2000
------------------------
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 4, 2000, and at
any adjournment thereof.
As of March 6, 2000, the record date of the meeting, 54,404,652 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 Proposals 2 and 3 request that the Board take steps to
implement the proposals, approval of Proposals 2 and 3 may not result in the
requested actions being taken, nor is the Board required to initiate steps to
take such actions. If no voting instructions are given, the accompanying proxy
will be voted AGAINST Proposals 2 and 3. Under the New York Stock Exchange
rules, brokers who hold street name shares cannot vote in their discretion on
Proposals 2 and 3. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST
PROPOSALS 2 AND 3.
A quorum will exist if the shares present (including broker nonvotes)
constitute a majority of the outstanding shares.
PROPOSAL ONE: ELECTION OF DIRECTORS
The Certificate of Incorporation of the Corporation provides that the number
of directors shall be not less than three nor more than eleven, and shall be
divided into three classes of equal size (to the extent possible), with one
class to be elected each year, in rotation, for a term of three years. The Board
is currently comprised of nine members, divided into three classes of three
directors. Director Richard H. Leet, whose term expires at the Annual Meeting in
2000, will not stand for re-election under the Directors Mandatory Retirement
Policy. Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the two nominees, Martin M. Hale and Jay D. Proops, for
three-year terms to expire at the Annual Meeting in 2003 and until their
successors are duly elected and qualified. Nominees Hale and
1
<PAGE>
Proops are currently serving as directors and have consented to serve for the
new term. Although the nominees are not expected to decline or be unable to
serve as directors, in each such event, the persons named in the enclosed proxy
will vote for another candidate nominated by the Board, and discretionary
authority to do so is included in the proxy.
Information in the biographies that follow is current as of March 1, 2000.
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 2003 ANNUAL MEETING
MARTIN M. HALE Director since 1978. (1), (4), (5), (6)
Mr. Hale, 59, currently serves as nonexecutive chairman of the Board, but
will step down from this position on May 4, 2000. Mr. Hale was, until
December 31, 1999, 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.
JAY D. PROOPS Director since 1996. (1), (4), (5), (6)
Mr. Proops, 58, 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 and AMCOL International, and as a trustee of Daniel
Webster College.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES.
DIRECTORS SERVING UNTIL THE 2002 ANNUAL MEETING
MARK P. BULRISS Director since 1998. (3), (4), (5), (6)
Mr. Bulriss, 48, was named president and chief executive officer of the
Corporation on April 1, 1998. He will become chairman on May 4, 2000. Prior to
joining the Corporation, 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. Mr. Bulriss currently
serves as a director of the Chemical Manufacturers Association.
THOMAS M. FULTON Director since 1995. (2), (3), (4)
Mr. Fulton, 66, 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.
2
<PAGE>
JOHN C. LECHLEITER Director since November 1999.
Mr. Lechleiter, 46, is senior vice president, Pharmaceutical Products at Eli
Lilly and Company. During his career with Eli Lilly, he has held various
positions of increasing responsibility that include: director, pharmaceutical
product development in England; executive director, pharmaceutical product
development for Lilly Research Laboratories; and vice president, development and
regulatory affairs. A member of the American Chemical Society, Mr. Lechleiter
also serves on the International Policy Board of the Centre for Medicines
Research and as a director of the Indiana Business Modernization and Technology
Board. In addition, he serves on the Resource Development Committee of United
Way of America and as a trustee of the Children's Museum of Indianapolis and the
Brebeuf Jesuit Preparatory School.
DIRECTORS SERVING UNTIL THE 2001 ANNUAL MEETING
JAMES W. CROWNOVER Director since January 2000.
Mr. Crownover, 56, is the nonexecutive chairman and a director of
Xpedior, Inc., an e-business professional services start-up firm. In 1998, he
retired as a director of the global management-consulting firm of McKinsey &
Company and as head of its North American Energy Practice. During his 30 year
career with McKinsey, he served as managing director and head of Southwest
Practice and of the Houston office. Mr. Crownover currently serves as a director
of Altra Energy Technologies and Unocal Corp. He serves as a member of the
advisory council of the Stanford Graduate School of Business and as a director
of the Rice Graduate School of Management.
LOUIS E. LATAIF Director since 1995. (1), (2)
Mr. Lataif, 61, 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), Unitrode Corporation
and the Iacocca Foundation.
MACK G. NICHOLS Director since 1998. (1), (2), (3)
Mr. Nichols, 61, retired in 1998 as president, chief operating officer and
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.
- ------------------------
(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. The Corporation's
employees are not paid any fees or compensation for serving on the Board or on
any Board committee.
3
<PAGE>
All nonemployee directors 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 for three years beginning in
1998. 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 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 annual retainer of $120,000 paid to the nonexecutive chairman of
the Board will be discontinued effective May 4, 2000, when Mr. Bulriss assumes
the position of executive chairman. 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 and are 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 for directors with a 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. 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 OPTION GRANTS
Each nonemployee director received a single 2,000 share stock option grant
in 1999 pursuant to the 1998 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 an employee over 62 years of age under
certain
4
<PAGE>
circumstances. For additional information regarding options, see
"Change-in-Control and Severance Agreements." 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.
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 1999 the Board met four times. Each of the
directors attended 100 percent of the aggregate of the total number of Board and
committee meetings he was required to attend.
The Audit Committee composed of four independent directors and chaired by
Mr. Lataif, met three times during 1999. The Audit Committee provides assistance
to the Board in fulfilling its oversight responsibilities relating to the
accounting and reporting practices of the Corporation, the quality and integrity
of the Corporation's financial reports, and its internal control and compliance
programs. This committee also reviews the work of both independent and internal
auditors, and ensures that there is open communication between the auditors and
the management of the Corporation. The Audit Committee makes recommendations to
the Board concerning the selection of the Corporation's independent accountants.
The Compensation and Incentive Committee, chaired by Mr. Fulton, met four
times during 1999. This committee 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 is currently chaired
by Dr. Leet and met once during 1999, 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 once during 1999, is empowered to act for
the Board, with certain restrictions, on behalf of the Corporation. Mr. Hale
chairs the Executive Committee.
The Finance Committee, which is chaired by Mr. Proops and includes the chief
financial officer in addition to Board members, met four times during 1999 to
review the financial affairs of the Corporation and present recommendations for
action to the Board.
The Succession Planning Committee monitors and evaluates the Corporation's
management resources, structure, succession planning, executive development and
selection processes. This Committee did not meet during 1999. The Committee also
recommends board membership criteria to the Board 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
secretary of the Corporation.
5
<PAGE>
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 5 percent
of its Common Stock, the directors of the Corporation, the executive officers of
the Corporation listed in the Summary Compensation Table (the "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) OUTSTANDING
- ---------------------------------------------------------- ------------------------- ------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
T. Rowe Price Associates Inc.............................. 7,602,511 13.97%
Investment Advisor (6)
100 E. Pratt Street
Baltimore, Maryland 21202
Berkshire Hathaway Inc., et al (7)........................ 6,403,000 11.77%
1440 Kiewit Plaza
Omaha, Nebraska 68131
State Farm Mutual Automobile Insurance Company 4,992,468 9.18%
and Related Entities (8)................................
One State Farm Plaza
Bloomington, Illinois 61710
FMR Corp. (9)............................................. 4,596,986 8.45%
82 Devonshire Street
Boston, Massachusetts 02109
Brandes Investment Partners, L.P. (10).................... 3,138,470 5.77%
12750 High Bluff Drive
San Diego, CA 92130
Mark P. Bulriss (11)...................................... 528,310 *
L. Donald Simpson (12).................................... 70,767 *
Louis M. Maresca (13)..................................... 20,252 *
Marshall E. Bloom (14).................................... 50,920 *
Larry J. Bloom (15)....................................... 26,825 *
C. Hugh Morton (16)....................................... 18,852 *
James W. Crownover (17)................................... 100 *
Thomas M. Fulton (18)..................................... 2,266 *
Martin M. Hale (19)....................................... 220,340 *
Louis E. Lataif (20)...................................... 3,266 *
John C. Lechleiter (21)................................... 1,650 *
Richard H. Leet (22)...................................... 2,266 *
Mack G. Nichols (23)...................................... 3,266 *
Jay D. Proops (24)........................................ 43,266 *
Directors and executive officers as a group............... 1,211,102 2.23%
</TABLE>
* Less than 1%
- --------------------------------------------------------------------------------
6
<PAGE>
(1) Information concerning persons known to the Corporation to be beneficial
owners of more than 5 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 6, 2000.
(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: J. W. Crownover, 2,652; T. M.
Fulton, 3,293; M. M. Hale, 2,563; L. E. Lataif, 2,747; J. C. Lechleiter,
1,947; R. H. Leet, 4,211; M. G. Nichols, 2,630; and J. D. Proops, 2,477.
These stock units do not have any voting rights. The phantom units listed
for Messrs. Fulton, Hale, Lataif, Leet, Nichols and Proops represent their
original phantom unit grants, adjusted to reflect the spin-off of Octel
Corp.
(5) Ownership of directors and 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 12.
(6) 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.
(7) 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 Government Employees Insurance Company.
Warren E. Buffet may be deemed to control Berkshire Hathaway, Inc.
(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 Company reported 3,484,800 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 968 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 Corp. 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 Fire Life Insurance Company.
(9) FMR Corp. reported sole power to dispose of or to direct the disposition of
4,596,986 shares, and sole power to vote or to direct the vote of 78,686 of
such shares. Fidelity Management & Research Company reported 4,323,500
shares and Fidelity Management Trust Company reported 273,486 shares.
Fidelity Management & Research Company and Fidelity Trust Company are both
wholly owned subsidiaries of FMR Corp.
(10) The power to vote, direct the vote and dispose of these shares is shared by
Charles H. Brandes; Brandes Investment Partners, L.P.; Brandes Investment
Partners, Inc.; Brandes Holdings, L.P.; Glenn R. Carlson; and Jeffrey A.
Busby. Charles H. Brandes, Glenn R. Carlson and Jeffrey R. Busby may be
deemed to control Brandes Investment Partners, L.P.
7
<PAGE>
(11) Includes 12,500 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 1,977 shares held indirectly by Mr. Bulriss through the Corporation's
401(k) and Supplemental Savings Plans.
(12) Includes 2,633 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 3,586 shares held indirectly by Mr. Maresca through the
Corporation's 401(k) and Supplemental Savings Plans.
(14) Includes 716 shares held indirectly by Mr. Marshall E. Bloom through the
Corporation's 401(k) and Supplemental Savings Plans.
(15) Includes 834 shares held indirectly by Mr. Larry J. Bloom through the
Corporation's 401(k) and Supplemental Savings Plans.
(16) Includes 519 shares held indirectly by Mr. Morton through the Corporation's
401(k) and Supplemental Savings Plans.
(17) Ownership includes 100 shares of restricted stock for which investment
power has not yet vested, but for which Mr. Crownover has sole power to
direct the vote.
(18) Ownership includes 300 shares of restricted stock for which investment
power has not yet vested, but for which Mr. Fulton has sole power to direct
the vote.
(19) Includes 190,840 shares held by Mr. Hale as co-trustee and 2,000 shares
held by his wife as trustee for his children. Mr. Hale disclaims beneficial
ownership of these 192,840 shares. Ownership also includes 300 shares of
restricted stock for which investment power has not yet vested, but for
which Mr. Hale has sole power to direct the vote.
(20) Ownership includes 300 shares of restricted stock for which investment
power has not yet vested, but for which Mr. Lataif has sole power to direct
the vote.
(21) Ownership includes 100 shares of restricted stock for which investment
power has not yet vested, but for which Mr. Lechleiter has sole power to
direct the vote.
(22) Ownership includes 300 shares of restricted stock for which investment
power has not yet vested, but for which Dr. Leet has sole power to direct
the vote.
(23) Ownership includes 300 shares of restricted stock for which investment
power has not yet vested, but for which Mr. Nichols has sole power to direct
the vote.
(24) Includes 20,000 shares held by the Jay and Kay Proops Family Limited
Partnership, and ownership of 300 shares of restricted stock for which
investment power has not yet vested, but for which Mr. Proops has sole power
to direct the vote.
8
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during 1999 to Mark P. Bulriss, chairman-elect, president and chief
executive officer of the Corporation, and to each of the Corporation's five
other most highly compensated serving executive officers (the "Named
Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
AWARDS
ANNUAL ------------------------------
COMPENSATION RESTRICTED SECURITIES ALL OTHER
---------------- OTHER ANNUAL STOCK UNDERLYING COMPENSATION
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS -----------
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)(2) (#)(3) ($)(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark P. Bulriss......................... 1999 671,923 450,000 56,421 (5) 2,028,125 (6) 100,000 44,600 (7)
Chairman-elect, President and 1998 482,500 487,500 146,714 (5) 700,000 892,762
Chief Executive Officer
L. Donald Simpson....................... 1999 322,400 194,000 14,000 37,622
Executive Vice President 1998 320,492 238,000 13,746 26,699
1997 310,000 227,300 20,000 21,107
Louis M. Maresca........................ 1999 289,627 218,000 82,601 (8) 745,000 (9) 20,000 20,500
Executive Vice President 1998 115,101 89,000 202,500 (10) 30,000 15,700
Marshall E. Bloom (1)................... 1999 263,454 202,000 15,000 18,800
Executive Vice President 1998 262,904 188,000 8,362 17,200
1997 245,000 160,200 9,500 15,600
Larry J. Bloom (1)...................... 1999 256,923 185,000 558,750 (11) 6,000 20,700
Executive Vice President 1998 254,180 173,000 6,300 2,857
1997 234,300 144,200 4,582 1,600
C. Hugh Morton.......................... 1999 316,769 117,000 59,291 (12) 745,000 (13) 25,000 21,800
Executive Vice President 1998 137,115 86,000 1,365,000 (14) 30,000 17,000
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Marshall Bloom effectively transferred policy-making responsibility for
BioLab, Inc. to Mr. Larry Bloom before the end of 1999 in anticipation of
Mr. Marshall Bloom's stepping down as chief executive officer of
BioLab, Inc. on January 1, 2000. Mr. Larry Bloom was elected executive vice
president of Great Lakes Chemical Corporation and chairman and chief
executive officer of BioLab, Inc., effective January 1, 2000.
(2) Restricted stock units are subject to forfeiture on termination of
employment, except by reason of death, disability or a change in control of
the Corporation.
(3) Options to acquire shares of Common Stock.
(4) 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, $4,800
and $39,800, respectively; Mr. Simpson $20,222 and $17,400, respectively;
Mr. Maresca, $4,800 and $15,700, respectively; Mr. Marshall Bloom, $4,800
and $14,000, respectively; Mr. Larry Bloom, $4,800 and $15,900,
respectively; and Mr. Morton, $4,800 and $17,000, respectively.
(5) Other Annual Compensation includes personal use of the company plane
($42,084) in 1999 and relocation expenses ($86,957) paid by the Corporation
in 1998.
9
<PAGE>
(6) Represents the fair market value of restricted stock at the time of the
award. At December 31, 1999, the fair market value of the restricted stock,
net of 7,500 shares used to satisfy tax withholdings on the vesting of
37,500 shares, was $1,622,969, 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 lapsed on 25,000 shares on
April 1, 1998 and on 12,500 shares on April 1, 1999. The forfeiture
restrictions on the remaining 12,500 shares lapse on April 1, 2000.
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.
(7) All other compensation includes a signing bonus granted under the terms of
his employment agreement, a description of which is provided on page 14.
(8) Includes relocation expense ($81,226) paid by the Corporation in 1998.
(9) Represents the fair market value of restricted stock units at the time of
the award. At December 31, 1999, the fair market value of the restricted
stock units was $763,750, based on the per share closing price of the Common
Stock on the New York Stock Exchange. The Compensation and Incentive
Committee awarded Mr. Maresca 20,000 restricted stock units on December 6,
1999. Subject to Mr. Maresca's continued employment with the Corporation,
these units vest 4,000 units on December 6, 2002; 6,000 units on
December 6, 2006; and the remaining 10,000 units vest on February 14, 2016.
The units will be paid out on the vesting dates in the form of shares of
Common Stock on a 1-for-1 basis. Mr. Maresca does not receive dividends and
has no voting power over these restricted stock units.
(10) Represents the fair market value of 5,000 restricted stock units awarded to
Mr. Maresca on joining the Corporation on August 3, 1998. At December 31,
1999, the fair market value of the restricted stock was $190,938, based on
the per share closing price of the Common Stock on the New York Stock
Exchange. These units vest in equal installments on August 3, 2001 and
August 3, 2003 and will be paid out on the vesting dates in the form of
shares of Common Stock on a 1-for-1 basis. Mr. Maresca does not receive
dividends and has no voting power over these restricted stock units.
Restricted stock units are subject to forfeiture on termination of
employment, except by reason of death, disability or a change in control of
the Corporation.
(11) Represents the fair market value of restricted stock units at the time of
the award. At December 31, 1999, the fair market value of the restricted
stock units was $572,813, based on the per share closing price of the Common
Stock on the New York Stock Exchange. The Compensation and Incentive
Committee awarded Mr. Larry Bloom 15,000 restricted stock units on
December 6, 1999. Subject to Mr. Bloom's continued employment with the
Corporation, the units vest 3,000 units on December 6, 2002; 4,500 units on
December 6, 2006; and the remaining 7,500 units vest on March 25, 2013. The
units will be paid out on the vesting dates in the form of shares of Common
Stock on a 1-for-1 basis. Mr. Bloom does not receive dividends and has no
voting power over these restricted stock units.
(12) Includes relocation expense ($55,764) paid by the Corporation in 1998.
(13) Represents the fair market value of restricted stock units at the time of
the award. At December 31, 1999, the fair market value of the restricted
stock units was $763,750, based on the per share closing price of the Common
Stock on the New York Stock Exchange. The Compensation and Incentive
Committee awarded Mr. Morton 20,000 restricted stock units on December 6,
1999. Subject to
10
<PAGE>
Mr. Morton's continued employment with the Corporation, the units vest 4,000
units on December 6, 2002; 6,000 units on December 6, 2006; and the
remaining 10,000 units vest on April 6, 2017. The units will be paid out on
the vesting dates in the form of shares of Common Stock on a 1-for-1 basis.
Mr. Morton does not receive dividends and has no voting power over these
restricted stock units.
(14) Represents the fair market value of 35,000 restricted stock units awarded
to Mr. Morton on July 20, 1998, on joining the Corporation. At December 31,
1999, the fair market value of the restricted stock was $1,336,563, based on
the per share closing price of the Common Stock on the New York Stock
Exchange Subject to Mr. Morton's continued employment with the Corporation,
the units 5,000 units on July 20, 2001; 5,000 units on July 20, 2002; 5,000
units on July 20, 2003; 10,000 units on July 20, 2008; and the remaining
10,000 units on the earlier of July 20, 2010 or upon Mr. Morton's retirement
under the Corporation's executive retirement policy. These units will be
paid out on the vesting dates in the form of shares of Common Stock on a
1-for-1 basis. Mr. Morton does not receive dividends and has no voting power
over these restricted stock units.
STOCK COMPENSATION PLANS
The Corporation has three stock compensation plans that provide for grants
of stock-based awards to key employees and nonemployee directors. Plan
provisions allow grants of incentive and nonqualified stock options, with terms
not to exceed 10 years at an option price which is not less than the market
value of the Corporation's Common Stock on the date of grant, as well as other
stock-based awards.
OPTION GRANTS IN 1999
The following table provides information related to options granted to the
Named Executives during 1999:
<TABLE>
<CAPTION>
OPTION GRANTS IN 1999
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
INDIVIDUAL STOCK PRICE
GRANTS APPRECIATION
- --------------------------------------------------------------------------------------------------- FOR OPTION TERM (3)(4)
NUMBER OF ---------------------------
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS EXERCISE
SARS GRANTED TO OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME # (1) 1999 ($/SH)(2) DATE 5%($) 10%($)
- --------------------------------------------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark P. Bulriss............................ 100,000 14.0% $ 35.75 02/14/09 $ 2,252,250 $ 5,684,250
L. Donald Simpson.......................... 14,000 2.0% $ 35.75 02/14/09 315,315 795,795
Louis M. Maresca........................... 20,000 2.8% $ 35.75 02/14/09 450,450 1,136,850
Marshall L. Bloom.......................... 15,000 2.1% $ 35.75 02/14/09 337,838 852,638
Larry J. Bloom............................. 6,000 0.8% $ 35.75 02/14/09 135,135 341,055
C. Hugh Morton............................. 25,000 3.5% $ 35.75 02/14/09 563,063 1,421,063
Increase in Market Value to Shareholders (5) $1.2 billion $3.1 billion
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each of the Named Executives received a single stock option grant in 1999
pursuant to the 1998 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 an employee over
62 years of age under certain circumstances. For additional information
regarding options, see "Change-in-Control and Severance Agreements."
11
<PAGE>
(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 a zero dollar
gain for the optionee.
(5) Calculated by using a Common Stock price of $35.75 and the average number of
shares outstanding for February 1999, assuming 5 and 10 percent compounded
growth rates. The increase in market value to common shareholders is shown
for comparative purposes only and is not a prediction of future stock
performance.
OPTION EXERCISES IN 1999 AND VALUE OF OPTIONS AT DECEMBER 31, 1999
The following table provides information related to options exercised by the
Named Executives during 1999 and the number and value of options held at
year-end. The Corporation does not have any stock appreciation rights
outstanding.
OPTION EXERCISES IN 1999 AND VALUE OF OPTIONS AT END OF YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
SHARES 1999 (#)(2) DECEMBER 31, 1999 ($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark P. Bulriss (3).................. 325,000 375,000 $243,750
L. Donald Simpson.................... 49,332 33,602 16,634 424,440
Louis M. Maresca (3)................. 10,000 40,000 48,750
Marshall L.Bloom..................... 37,991 24,201 56,887 40,511
Larry J. Bloom....................... 20,365 11,726 3,326 16,287
C. Hugh Morton (3)................... 10,000 45,000 60,937
- ---------------------------------------------------------------------------------------------------------------------------------
</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) 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.
(3) The exercisable options of Mr. Bulriss, Mr. Maresca and Mr. Morton are not
in the money.
12
<PAGE>
PENSION PLAN
The Corporation has a noncontributory defined benefit pension plan ("Pension
Plan") covering substantially all U.S. employees. The Corporation also has
nonqualified Supplemental Retirement Plans ("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. 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..................................... $ 46,078 $ 61,437 $ 76,796 $ 92,156 $ 107,515 $ 117,515 $ 127,515
300,000..................................... $ 70,828 $ 94,437 $118,046 $141,656 $ 165,265 $ 180,265 $ 195,265
400,000..................................... $ 95,578 $127,437 $159,296 $191,156 $ 223,015 $ 243,015 $ 263,015
500,000..................................... $120,328 $160,437 $200,546 $240,656 $ 280,765 $ 305,765 $ 330,765
600,000..................................... $145,078 $193,437 $241,796 $290,156 $ 338,515 $ 368,515 $ 398,515
700,000..................................... $169,828 $226,437 $283,046 $339,656 $ 396,265 $ 431,265 $ 466,265
800,000..................................... $194,578 $259,437 $324,296 $389,156 $ 454,015 $ 494,015 $ 534,015
900,000..................................... $219,328 $292,437 $365,546 $438,656 $ 511,765 $ 556,765 $ 601,765
1,000,000.................................... $244,078 $325,437 $406,796 $488,156 $ 569,515 $ 619,515 $ 669,515
2,000,000.................................... $491,578 $655,437 $819,296 $983,156 $1,147,015 $1,247,015 $1,347,015
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Annual compensation covered by the Pension Plan is defined as gross pay,
which is essentially identical to the total salary and bonus compensation
reported for Named Executives, Mr. Simpson, Mr. Maresca, Mr. M. Bloom, Mr. L.
Bloom and Mr. Morton, as shown in the Summary Compensation Table. Mr. Bulriss
does not participate in the Pension Plan. 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 $728,771.
Credited years of service under the plans as of December 31, 1999, were
Mr. Simpson, 8 years; Mr. Maresca, 1 year and 4 months; Mr. M. Bloom, 44 years;
Mr. L. Bloom, 31 years; Mr. Morton, 1 year and 5 months.
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. 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. The
Corporation makes matching contributions, in Common Stock of the Corporation,
equal to 50 percent of the first 6 percent of salary contributed by the
employee. Employees determine how their salary deferrals 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 nonqualified 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.
13
<PAGE>
EXECUTIVE DEFERRED COMPENSATION PLAN
The Corporation maintains the Great Lakes Chemical Deferred Compensation
Plan, an unfunded, nonqualified, 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 that will be paid, earned or awarded in the following year.
EMPLOYMENT AGREEMENTS
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 percent of his base salary and a target
bonus of 75 percent 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 nonqualified stock option grant in each of the years 1999
through 2001, all subject to certain 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 terms are 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 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.
In connection with their transitions to retirement, Messrs. Simpson and
Marshall Bloom entered into employment agreements with the Corporation.
Mr. Simpson's agreement provided for his stepping down as executive vice
president on January 31, 2000, at which time he assumed the position of
executive director, special projects, reporting to Mr. Bulriss. Mr. Simpson will
receive (i) his base salary of $322,400 per year until the earlier of
December 31, 2000 or his retirement from the Corporation, and (ii) a prorated
bonus under the 2000 incentive compensation plan based on total project hours
completed during 2000. Effective with his retirement, the Corporation will
transfer title to Mr. Simpson of his company car, as well as ownership of the
Corporation's personal computer currently assigned to him. In addition, the
Corporation will reimburse Mr. Simpson (to a maximum of $15,000) for expenses
associated with the sale of his home and/or the storage/movement of his
household goods, provided such a move occurs before December 31, 2001.
Mr. Simpson has agreed that he will not, without the consent of the president
and chief executive officer of the Corporation, directly or indirectly, compete
with the business of the Corporation for one year following Mr. Simpson's
retirement from the Corporation.
Mr. Marshall Bloom's agreement provided for his stepping down as executive
vice president of Great Lakes Chemical Corporation and as chairman and chief
executive officer of BioLab, Inc. on January 1, 2000. He assumed the title of
chairman emeritus of BioLab, Inc. and will remain an employee of
14
<PAGE>
BioLab, Inc. until February 26, 2003, the planned effective date of his
retirement. Until December 31, 2000, Mr. Bloom will undertake special projects
assigned by Mr. Bulriss and will continue to receive his base salary of
$264,800. From January 1, 2001 through his planned retirement date of
February 26, 2003, Mr. Bloom will receive $280,000 paid in equal monthly
increments. If at any time prior to the effective date of his retirement
Mr. Bloom should become ineligible to participate in the Corporation's
retirement, health and welfare plans, the Corporation will reimburse Mr. Bloom
the costs incurred in replacing such coverage and will otherwise compensate him
to the same extent as if he had remained eligible to fully participate in all
such plans through and until the effective date of his retirement. Mr. Bloom has
agreed that he will not, without the prior written consent of the Corporation
and BioLab, Inc., directly or indirectly, compete with the business of the
Corporation or BioLab, Inc. for three years following his retirement from the
Corporation.
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 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. The Corporation may terminate
these change-in-control agreements 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
12 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 Severance Payments will not apply.
15
<PAGE>
SPLIT-DOLLAR LIFE INSURANCE
A split-dollar life insurance arrangement ("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
4 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. It
also 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.
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.
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.
16
<PAGE>
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 predetermined 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 that 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 with the exception of the chief executive
officer, whose compensation is recommended to the full Board for final approval.
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
An Incentive Compensation Plan ("ICP") 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 7.5 percent to
75 percent of base salary based upon each executive's level of responsibility,
the attainment of pre-established goals, including EVA-Registered Trademark-(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 ICP, 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 percent of target may be paid upon achievement of
outstanding performance. When pre-established 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 1999, individual, corporate and business unit performance
objectives were achieved in part and corresponding ICP awards were made.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentive compensation is comprised of annual grants of stock
options, restricted stock and restricted stock unit awards, 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.
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
- ------------------------
(1) EVA is a registered trademark of Stern Stewart & Co.
17
<PAGE>
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
that 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.
Restricted stock and restricted stock unit awards may also be granted in
conjunction with the hiring of new executives, executive retention or for
exemplary performance. Grants of restricted stock units were made to six
executives in 1999.
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
Mr. Bulriss was appointed as the Corporation's president and chief executive
officer in April 1998. 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 authorized an employment agreement.
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 the Corporation; (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 within the Corporation's
business processes, systems, organization, personnel, development and
operations.
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 100,000 stock options in 1999, as
prescribed by his employment agreement, reflects 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. Mr. Bulriss was also granted a $450,000 bonus for
1999 in recognition of the numerous difficult and necessary initiatives,
including the restructuring of the Corporation and the creation of a strong
infrastructure, he implemented throughout the Corporation during the year to
better focus its assets and position the Corporation for sustainable long-term
financial and strategic improvement.
POSITION ON DEDUCTIBILITY OF COMPENSATION
The Omnibus Budget Reconciliation Act of 1993 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.
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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.
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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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,
1999, 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 seven specialty chemical companies (the "Peer Group"). The
Peer Group consists of Albemarle Corp., CK Witco Corporation, Cytec
Industries, Inc., Ferro Corporation, W. R. Grace & Co., Hercules Incorporated
and Sigma-Aldrich, Inc. These companies are similar in size and market
capitalization to the Corporation. Additionally, each of these companies and the
Corporation compete in the same markets. The graph assumes that $100 was
invested on December 31, 1994, and that all dividends were reinvested in the
Corporation's Common Stock.
GREAT LAKES CHEMICAL CORPORATION VS. S&P EQUITY INDICES AND PEER GROUP
TOTAL RETURN TO SHAREHOLDERS OVER FIVE YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE OF $100 INVESTMENT MADE DECEMBER 31, 1994
<S> <C> <C>
S&P 500 Composite Index S&P Chemicals (Specialty) Index
12/31/94 $100 $100
12/31/95 137.58 131.43
12/31/96 169.17 134.81
12/31/97 225.60 166.93
12/31/98 290.08 142.17
12/31/99 351.12 157.37
**Year-end Total Return to Shareholders with dividends
reinvested and no purchase commissions.
<CAPTION>
VALUE OF $100 INVESTMENT MADE DECEMBER 31, 1994
<S> <C> <C>
Great Lakes Chemical Corporation (GLK) Peer Group
12/31/94 $100 $100
12/31/95 127.17 144.76
12/31/96 83.40 163.34
12/31/97 80.66 216.38
12/31/98 84.01 158.03
12/31/99 80.86 149.58
**Year-end Total Return to Shareholders with dividends
reinvested and no purchase commissions.
</TABLE>
<TABLE>
<CAPTION>
VALUE OF $100 INVESTMENT MADE DECEMBER 31, 1994**
---------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 Composite Index.................... $100 137.58 169.17 225.60 290.08 351.12
S&P Chemicals (Specialty) Index............ $100 131.43 134.81 166.93 142.17 157.37
Great Lakes Chemical Corporation........... $100 127.17 83.40 80.66 84.01 80.86
Peer Group................................. $100 144.76 163.34 216.38 158.03 149.58
** Year-end Total Return to Shareholders with dividends reinvested and no purchase commissions.
</TABLE>
On May 22, 1998, the Corporation completed a spin-off if its wholly-owned
subsidiary, Octel Corp. and distributed to its shareholders the common stock of
Octel Corp. Accordingly, of the five years shown
20
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in the above graph, three years and five months represent the performance of
Great Lakes prior to the distribution and one year 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 for action at the Annual Meeting. The name and address of
the shareholder submitting this 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. This
proposal as submitted reads as follows:
RESOLVED: That the shareholders of Great Lakes Chemical Corp. ("Great Lakes
Chemical" or the "Company") request the Board of Directors to redeem any
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 the Board of Directors issued certain shareholder rights
(the "rights") pursuant to a "rights agreement" of the sort commonly known as a
"poison pill." Those rights were set to expire in September 1999.
In our view, such a "poison pill" rights agreement can operate as an
anti-takeover device, which can injure shareholders by reducing management
accountability and adversely affecting shareholder value. Although management
and the Board of Directors should have appropriate tools to ensure that all
shareholders benefit from any proposal to acquire the Company, we do not believe
that the future possibility of a takeover justifies the unilateral imposition of
a poison pill. At a minimum, we believe that the shareholders should have the
right to vote on the necessity of adopting such a powerful anti-takeover weapon.
For these reasons, we submitted this resolution for a vote by the Company's
shareholders at the May 1999 annual meeting; a date that gave the Board enough
time to consider the shareholder views before the rights expired in
September 1999. The Board of Directors voted to include this resolution in the
proxy materials for that 1999 meeting, but then voted--before shareholders could
have any say on the matter--to extend the Company's rights agreement until
September 2009.
Despite the Board's decision not to wait and learn what shareholders thought
of such an extension, 63% of the votes cast at the 1999 annual
meeting--representing a majority of the total outstanding shares--were voted in
favor of this resolution.
We are troubled by the Board's decisions to act unilaterally before the
shareholders could be heard and then to maintain this "poison pill" in effect
when the shareholders have voted against such action.
We are also troubled by this unwillingness to listen to shareholders,
particularly in light of the Company's poor performance in recent years. The
Council of Institutional Investors recently placed Great Lakes Chemical on its
"Focus List" of companies that had underperformed both the S&P 500 index and its
industry group over the one-, three- and five-year periods ending June 30, 1999.
21
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In recent years, various companies have been willing to redeem outstanding
rights or at least allow shareholders to have a meaningful vote on whether a
rights plan should remain in force. We believe that Great Lakes Chemical should
do so as well.
WE URGE YOU TO VOTE FOR THIS RESOLUTION!
THE BOARD RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
The Board of Directors believes that this shareholder proposal is not in the
best interest of the Corporation and its shareholders and therefore unanimously
recommends a vote "AGAINST" this proposal.
This unanimous recommendation does not come thoughtlessly, or as the result
of a knee-jerk view that the Corporation should have as many corporate
anti-takeover defenses as possible, or a desire to entrench the current Board or
management at the expense of the shareholders. The Board recognizes and takes
seriously that a majority of the shares held have previously voted in favor of a
non-binding proposal to have the Board redeem the shareholder rights and
terminate the plan.
At this time, however, the Board believes its legal obligation to manage the
business and affairs of the Corporation in the interest of the shareholders
requires the difficult decision to continue the shareholder rights plan, despite
a majority vote of the shares to the contrary. The Board has previously cited
data indicating that shareholder rights plans on the whole work to increase
shareholder value in the face of an unsolicited offer to acquire a company. But
the Board does not base its current position solely on that evidence, and has
discussed the issue at every meeting since last year's vote.
The Board's paramount duty is to protect the interests of all shareholders.
That duty transcends the individual interests of the current management or the
individual interests of the directors themselves. The Board must continue to
assess the performance of the management team, and determine whether that team
is best positioned to maximize value to the shareholders of the Corporation. The
Board unanimously believes, based on its review of the Corporation's operations
and plans (both for calendar year 2000 and for the next five years), that the
management team it has assembled over the past two years will create significant
value for the shareholders.
Nevertheless, that Board strongly believes that if a would-be acquiror,
solicited or unsolicited, makes an offer to buy the Corporation, it is the
Board's duty to weigh (a) whether the price and terms of such offer would let
the shareholders presently realize something approaching the full potential of
the Corporation, against (b) other possible offers or the value the Board
believes management could create through the continued operation of the
Corporation as an independent entity.
The Board believes that the efforts of the present management team have not
yet been reflected in the price of the stock--i.e., that the stock is presently
undervalued. (Consistent with that belief, the Board has authorized and the
Corporation has undertaken the repurchase of Corporation shares.) Under the
present circumstances, the Board believes it should retain the ability to weigh
any offer to acquire the Corporation against the value it expects to be created
by the present management team. Unsolicited offers to acquire other companies
have demonstrated that operation of the securities laws and regulations may not
give the Board the time necessary to make that assessment. If the offer were for
cash, the Board would be required to assess the fairness of the price, terms and
conditions. It would need to determine the adequacy of the financing and the
likelihood of a closing. If the offer were for stock, in addition to overall
fairness, the Board would need to assess the value of the stock being offered as
currency. And in each case, the Board would need to assess how the offer stacked
up against the present value of the Corporation as an independent entity. The
shareholder rights plan enhances the Board's ability to protect the
shareholders' interests while making those judgments.
A shareholder rights plan is not a shield to protect the interests of
nonperforming management at the expense of the shareholders. At every meeting at
which it has discussed the matter since last year's vote,
22
<PAGE>
the Board (the members of which, other than the chief executive officer, are all
independent) has made it clear to management that performance is paramount. The
rights plan is a tool, and exists only to further the Board's exercise of its
fiduciary obligations to the shareholders.
Finally, even if the Board were to decide at some future time that
circumstances warranted the redemption of the shareholder rights and the
termination of the present plan, it would be a dereliction of the Board's
fiduciary obligation to commit that it would not readopt a plan if faced with an
unfair or coercive offer. For example, one company decided to redeem its
shareholder rights plan (in response to its shareholders proxy vote on a rights
plan redemption proposal), but nevertheless opposed a shareholder proposal that
would have restricted its Board's future ability to adopt such a plan, if
necessary to protect the interests of the shareholders.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
AGAINST THIS PROPOSAL.
PROPOSAL THREE: SHAREHOLDER PROPOSAL ON THE CLASSIFIED BOARD
One shareholder has given notice that it will introduce a proposal and
supporting statement for action at the Annual Meeting. The name and address of
the shareholder submitting this 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. This
proposal as submitted reads as follows:
RESOLVED: that the shareholders of Great Lakes Chemical Corp. ("Company")
hereby urge the Board of Directors to take the necessary steps to eliminate the
classification of the Board of Directors of the Company and to require that all
Directors stand for election annually. The Board declassification shall be
completed in a manner that does not affect the unexpired terms of Directors
previously elected.
We believe the election of directors is the most powerful way Great Lakes
shareholders influence the strategic direction of our Company. Currently the
Board of Great Lakes Chemical is divided into three classes, one with three
members and two with two. Each class serves staggered three-year terms. Because
of this structure shareholders may only vote on roughly one third of the
Directors each year. The staggered term structure of Great Lakes' Board is not
in the best interests of shareholders because it reduces accountability and is
an unnecessary anti-takeover device.
Shareholders should have the opportunity to vote on the performance of the
entire Board of Directors each year. We feel that such annual accountability
serves to keep Directors closely focused on the performance of top executives
and on increasing shareholder value. Annual election of all Directors give
shareholders the power to either completely replace their Board, or replace a
majority of Directors, if a situation arises which warrants such drastic action.
We do not believe destaggering the Board of Great Lakes will be destabilizing to
our Company or impact the continuity of Director service. Our Directors, as well
as the directors of the overwhelming majority of other public companies, are
routinely elected with over 95% shareholder approval.
We are particularly concerned about the Great Lakes Board's insensitivity to
shareholder opinion regarding the Company's anti-takeover defenses. In 1998 a
majority shareholder vote to declassify the Board was ignored. Last year
shareholders overwhelmingly supported a resolution to eliminate the Company's
poison pill rights plan. Currently the poison pill remains in force. We do not
believe that this Board should be allowed to ignore two majority votes by
shareholders and at the same time enjoy the protection of a three-year term
structure that serves both as an entrenchment device and as an additional tool
to oppose takeovers without shareholder input.
There are indications from studies that classified boards and other
anti-takeover devices have an adverse impact on shareholder value. A 1991 study
by Lilli Gordon of the Gordon Group and John Pound
23
<PAGE>
of Harvard University found that companies with restrictive corporate governance
structures, including those with classified boards, are "significantly less
likely to exhibit outstanding long-term performance relative to their industry
peers."
A growing number of shareholders appear to agree with our concerns. Last
year a majority of shareholders supported proposals asking their boards to
repeal classified board structures at a total of 23 companies, including Merck,
Bristol-Meyers Squibb, United HealthCare and Kimberley Clark.
FOR A GREATER VOICE IN THE GOVERNANCE OF GREAT LAKES CHEMICAL AND ANNUAL
ELECTIONS FOR ALL DIRECTORS WE URGE SHAREHOLDERS TO VOTE YES ON THIS PROPOSAL.
THE BOARD OF DIRECTORS BELIEVES THAT THIS SHAREHOLDER PROPOSAL IS NOT IN THE
BEST INTEREST OF THE CORPORATION AND ITS SHAREHOLDERS AND THEREFORE UNANIMOUSLY
RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
The Corporation's current system of electing directors by classes was
approved by 71 percent of the shares voted in May 1988. Under this method, as
provided in the Corporation's Certificate of Incorporation, approximately
one-third of the directors is elected annually by the shareholders. This system
is a common practice that has been approved by the shareholders of many major
corporations.
The Board is aware that a similar nonbinding shareholder proposal to
eliminate the classified board was submitted in 1998. Although the proposal
received 54 percent of the votes cast, it received the votes of only 49 percent
of the shares present and 44.15 percent of all shares. The Board has again
reviewed the issues raised in the proposal and continues to believe that the
classified Board is in the best interest of the Corporation and the
shareholders.
Because two-thirds of the directors at any time have terms extending beyond
the then present year, the classification enhances the Board's ability to
develop and execute long-term strategies and measure long-term performance. It
ensures that two-thirds of the Board will always have historical perspective. It
enhances continuity and stability within the Corporation.
The classified board also has the effect of encouraging persons who would
seek to acquire control of the Corporation by proxy contest to initiate such
efforts through negotiation with the Board. With the classified Board, two
meetings of the shareholders would generally be required to replace a majority
of the Board. By reducing the threat of an abrupt change in the composition of
the Board, classification of the directors provides the Board with time and
opportunity to exercise its fiduciary duties in responding to any acquisition
proposal. The Board's considerations in the face of such a proposal, and the
alternatives, would be the same as those described in the response to the
proposal on the shareholder rights plan.
The classified board proposal suggests that the directors are somehow less
accountable to the shareholders, less focused on the performance of top
executives, and less likely to increase shareholder value because of the
classified board. The Board vehemently disagrees. Every director takes seriously
his fiduciary obligations to the shareholders. No director feels any less
accountable to the shareholders as a result of the term of office. As stated in
the response to the proposal on the rights plan, the Board has made it clear to
management that its performance in increasing shareholder value is paramount.
That message would not be any clearer if the entire Board were elected every
year. Indeed, the directors in a classified board are more likely to have
experience with and knowledge of the Corporation, and are more likely to be able
to judge management's commitments and performance on a year over year basis.
A classified board is not a permanent board. The shareholders vote on a
third of the directors each year. If the shareholders are dissatisfied with the
incumbents' discharge of their duties, they always have the right to propose
other nominees. Indeed, the shareholders have renewed and revitalized the
Board--with the exception of the outgoing chairman, all Board members are new
since 1994.
24
<PAGE>
Finally, adoption of this proposal would not eliminate the classified Board.
It is only a recommendation to the Board. Because the classified board is part
of the Corporation's Certificate of Incorporation, under Delaware law, an
amendment would require the approval of the Board and the affirmative vote of a
majority of the outstanding shares.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS 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.
Based on a review of forms filed and information provided by officers and
directors, the Corporation believes that all Section 16(a) reporting
requirements were fully met.
25
<PAGE>
INFORMATION RESPECTING THE CORPORATION'S INDEPENDENT
PUBLIC ACCOUNTANTS
The principal independent public accountant of the Corporation, selected by
the Board for 2000, 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 2001 ANNUAL MEETING
The Corporation anticipates holding its 2001 Annual Meeting of Shareholders
on Thursday, May 3, 2001.
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 Indianapolis, Indiana, 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 4,
2001, nor before December 5, 2000.
However, in order to be considered for inclusion in the Corporation's proxy
statement and form of proxy for the 2001 Annual Meeting under the regulations of
the Securities and Exchange Commission, shareholder proposals must be received
no later than November 27, 2000, by the secretary of the Corporation at its
office in Indianapolis, 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 mail, telephone, facsimile or
personal calls.
By order of the Board of Directors,
JEFFREY M. LIPSHAW
Secretary
March 27, 2000
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD
26
<PAGE>
PROXY GREAT LAKES CHEMICAL CORPORATION PROXY
2000 This Proxy is solicited on behalf of The Board of Directors 2000
The undersigned hereby appoints MARK P. BULRISS, MARK E. TOMKINS AND JEFFREY M.
LIPSHAW, 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 4, 2000, 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 PROPOSALS.
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)
<PAGE>
- --------------------------------------------------------------------------------
GREAT LAKES CHEMICAL CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------
THE BOARD RECOMMENDS A VOTE FOR ITEM 1. THE BOARD RECOMMENDS A VOTE AGAINST ITEMS 2 AND 3.
- --------------------------------------------------------------------- -------------
2000 FOR Withhold Except
P All All
R
O 1. Election of Director Nominees: / / / / / /
X Martin M. Hale and Jay D. Proops
Y
Nominee Exception
--------------
- ---------------------------------------------------------------------
For AGAINST Abstain
2. Shareholder proposal concerning / / / / / /
the Shareholder Rights Plan.
3. Shareholder proposal concerning / / / / / /
the classified board.
4. In their discretion, the Proxies are authorized to
vote upon any other matter which may properly come
before the meeting.
Please check here to discontinue the annual
report mailing for this account. / /
2000
----------------------------------------------------
Signature Date
2000
----------------------------------------------------
Signature Date
Please sign exactly as your name appears. Joint
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS PROXY owners should each sign personally. Where
PROMPTLY USING THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN applicable, indicate your official position or
THE UNITED STATES. representation capacity.
</TABLE>
