-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VD5heQDVZd7HbKYM3oW79HZPDoVVpLewfWSdkpz51m1EMpR2h5SFeFDkeibj3zKX mXH+xZVcsXBRJTQAGRGJLA== 0000950137-98-001311.txt : 19980403 0000950137-98-001311.hdr.sgml : 19980403 ACCESSION NUMBER: 0000950137-98-001311 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREAT LAKES CHEMICAL CORP CENTRAL INDEX KEY: 0000043362 STANDARD INDUSTRIAL CLASSIFICATION: 2890 IRS NUMBER: 951765035 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06450 FILM NUMBER: 98579554 BUSINESS ADDRESS: STREET 1: ONE GREEAT LAKES BLVD CITY: WEST LAFAYETTE STATE: IN ZIP: 47906 BUSINESS PHONE: 3174976219 FORMER COMPANY: FORMER CONFORMED NAME: MCCLANAHAN OIL CO DATE OF NAME CHANGE: 19700925 FORMER COMPANY: FORMER CONFORMED NAME: GREAT LAKES OIL & CHEMICAL CO DATE OF NAME CHANGE: 19700925 10-K 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 Commission file number 1-6450 GREAT LAKES CHEMICAL CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 95-1765035 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) ONE GREAT LAKES BOULEVARD P. O. BOX 2200 WEST LAFAYETTE, INDIANA 47996 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 765-497-6100 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common stock, $1.00 par value New York Stock Exchange Pacific Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of March 9, 1998, the aggregate market value of the voting stock held by non-affiliates of the registrant was $2,807,722,770. As of March 9, 1998, 59,032,279 shares of the registrant's stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the 1997 Annual Report to Stockholders are incorporated by reference into Parts I, II and IV. Portions of the annual proxy statement expected to be filed on March 30, 1998 are incorporated by reference into Part III. 2 PART I Item 1. BUSINESS GENERAL Great Lakes Chemical Corporation is a Delaware corporation incorporated in 1933, having its principal executive offices in West Lafayette, Indiana. The Company's operations consist of one dominant industry-segment chemicals and allied products. Within this segment the Company focuses on performance chemicals, water treatment chemicals, and specialized services and manufacturing. In 1997, the Company took a number of actions that will enable it to focus on its core specialty chemicals operations. These include the announced spin off of the petroleum additives business (Octel), and the decision to exit the furfural and derivatives, Eastern European trading (Chemol) and environmental services businesses. These businesses are reported as discontinued operations. Unless otherwise indicated, the information herein refers to the continuing business of the Company. The Business Profile on page 6 and the Review of Operations on pages 8 through 17 of the 1997 Annual Report to Stockholders are incorporated herein by reference. The term "Great Lakes" as used herein means Great Lakes Chemical Corporation and its Subsidiaries unless the context indicates otherwise. Net sales by Business Unit are set forth in the following table (dollars in millions):
Years - ended December 31 1997 1996 1995 ------ ------ ------ Flame Retardants $ 309 $ 294 $ 300 Intermediates and Fine Chemicals 211 196 197 Polymer Stabilizers 245 242 224 Specialized Services and Manufacturing 194 190 152 Water Treatment 352 430 419 ------ ------ ------ Total Net Sales $1,311 $1,352 $1,292 ------ ------ ------
PRODUCTS AND SERVICES The following is a list of the principal products and services provided by Great Lakes:
FLAME RETARDANTS Products & Services Principal Markets Facilities Major Raw Materials - - ------------------- ----------------- ---------- ------------------- Brominated, intumescent Computer and Business Equipment, El Dorado, AR Bromine and antimony based flame Consumer Electronics, Textiles, Newport, TN Bisphenol A retardants Urethanes and Construction Laredo, TX Diphenyl Oxide Materials Reynosa, Mexico Antimony Aycliffe, U.K.
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POLYMER STABILIZERS Products & Services Principal Markets Facilities Major Raw Materials - - ------------------- ----------------- ---------- ------------------- Antioxidants, UV absorbers Computer and Business Equipment, Newport, TN Alkylated Phenols, and Light Stabilizers Consumer Appliances, Packaging, Catenoy, France Methyl Acrylate, Textiles, Building and Persan, France Phosphorus Trichloride Construction, Transportation Waldkraiburg, Germany Pedrengo, Italy Ravenna, Italy Pyongtaek, Korea INTERMEDIATES AND FINE CHEMICALS Bromine, Bromine derivatives Pharmaceutical Industry, ElDorado, AR Bromine and Bromine-based specialty Agrochemical Industry, Marysville, AR Chlorine chemicals, and Methyl Bromide Electronics, Soil Crop and Newport, TN Structural Pest Control, Konstanz, Germany Photographic Papers and Films Amlwch, U.K. and Rubber Compounds Halebank, U.K. WATER TREATMENT CHEMICALS RECREATIONAL Water sanitizers - Pool and Spa Dealers and Conyers, GA BCDMH, BioGuard(R),OMNI(R), Distributors, Mass Market Decatur, GA Chlorinated Guardex(R) Pool Time(R), Retailers, Builders Lake Charles, LA Isocyanurates, Calcium AquaChem(R), Vantage(R), Adrian, MI Hypochlorite, Cyanuric AquaBrom(R), Bayrol(R), Victoria, Australia Acid Hydrotech(R), Ontario, Canada Algicides, oxidizers, pH Mundolsheim, France balancers, mineral balancers Munich, Germany and specialty chemicals Barbera Del Valles, Spain Kyalami, South Africa Glouchester, U.K. INDUSTRIAL BromiCide(R) and Industrial Cooling Water Adrian, MI Sodium Bromide LiquiBrom(TM) Specialty Treatment, Industrial and ElDorado, AR Bromine Biocides, Biocide dispensing Municipal Wastewater Treat- equipment ment, Pulp and Paper and Food Processing
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SPECIALIZED SERVICES AND MANUFACTURING OIL FIELD SERVICES Completion products and Worldwide Oil and Gas Lafayette, LA Calcium Bromide services, including Industry New Orleans, LA Sodium Bromide reservoir analysis, Houston, TX Zinc Bromide solids-free fluids, sand Milan, Italy control, filtration, Villahermosa, Mexico downhole tools, stimulation Stravanger, Norway and marine well services Aberdeen, U.K. Anaco, Venezuela TOXICOLOGICAL SERVICES All phases of nonclinical Pharmaceutical, Chemical, Ashland, OH toxicological testing and Veterinary, Medical, Agri- bioanalytical services, cultural, Food and Consumer Design of specialized Products Industries toxicological, metabolic and analytical chemistry programs FLUORINE CHEMISTRY Fire extinguishing agent Data Processing ElDorado, AR Fluorine FM-200(R), Organo-fluorine Telecommunications compounds, Fluorinated Military intermediates
BUSINESS RISKS Great Lakes Chemical Corporation is including the following cautionary statement in this Annual Report of Form 10-K to make applicable and take advantage of the new "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 with respect to any forward-looking statement made by, or on behalf of, the Company. The factors identified in this cautionary statement are important factors (but do not necessarily constitute all important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company. Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, the Company cautions that, while it believes such assumptions or basis to be reasonable and makes them in good faith, assumed facts or bases almost always vary from actual results, and the differences between assumed facts or basis and actual results can be material, depending upon the circumstances. Where, in any forward-looking statement, the Company, or its management, expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. Taking into account the foregoing, certain factors, including but not limited to, those listed below may cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company. Economic factors over which the Company has no control, including changes in inflation, tax rates, interest rates and foreign currency exchange rates. 5 Competitive factors such as pricing pressures on key products and the cost and availability of key raw materials. Governmental factors including laws and regulations and judicial decisions related to the production or use of key products such as bromine and bromine derivatives. The difficulties and uncertainties inherent in new product development. New product candidates that appear promising in development may fail to reach the market because of safety concerns, inability to obtain necessary regulatory approvals, difficulty or excessive costs to manufacture, or infringements of the patents or intellectual property rights of others. Legal factors, including unanticipated litigation of product liability claims, antitrust litigation; environmental matters, and patent disputes with competitors which could preclude commercialization of products or negatively affect the profitability of existing products. Inability to obtain existing levels of product liability insurance or denial of insurance coverage following a major product liability claim. Changes in tax laws, including future changes in tax laws related to the remittance of foreign earnings or investments in foreign countries with favorable tax rates. Changes in accounting standards promulgated by the Financial Accounting Standards Board, the Securities and Exchange Commission, and the American Institute of Certified Public Accountants which are adverse to the Company. Internal factors such as changes in business strategies and the impact of cost control efforts and business combinations. Loss of brine leases or inability to produce bromide ion in required quantities due to depletion of resources or other causes beyond the Company's control. 1997 DEVELOPMENTS The Business Profile on page 6 and the Review of Operations on pages 8 through 17 of the 1997 Annual Report to Stockholders are incorporated herein by reference. Raw Materials The sources of essential raw materials for bromine are the brine from company-owned wells in Arkansas and sea water extraction plants in Europe. The Arkansas properties are located atop the Smackover lime deposits, which constitute a vast underground sea of bromine-rich brine. The area between ElDorado and Magnolia, Arkansas, (located about 35 miles west of ElDorado) provides the best known geological location for bromine production and both major domestic bromine manufacturers are located there. Based on projected production rates, the Company's brine reserves are estimated to be adequate for the foreseeable future. Other materials used in the chemical processes are obtained from outside suppliers through purchase contracts. Supplies of these materials are believed to be adequate for the Company's future operations. 6 International Operations Great Lakes has a substantial presence in foreign markets. The Company's investment in foreign countries is principally in Western Europe and represents $482 million or 31 percent of total assets, excluding discontinued operations. Sales to customers in foreign countries (primarily Europe and the Far East) amount to 46, 46 and 45 percent of total sales for the years ended December 31, 1997, 1996, and 1995, respectively. Approximately 35, 36 and 34 percent of these foreign sales, respectively for the three years shown, are attributable to products exported from the U.S., with the balance of the Company's international sales primarily being products manufactured and sold by the Company's European subsidiaries and branches. The profitability on foreign sales (including U.S. exports and foreign manufactured products) approximates those for domestic operations. The geographic segment data contained in the note "Industry Segments and Foreign Operations" of Notes to Consolidated Financial Statements on page 36 of the 1997 Annual Report to Stockholders is incorporated herein by reference. Customers and Distribution During the last three years, no single customer accounted for more than 10 percent of Great Lakes' total consolidated sales. The Company has no material contracts or subcontracts with government agencies. A major portion of the Company's sales are sold to industrial or commercial users for use in the production of other products. Some products, such as recreational water treatment chemicals and supplies, are sold to a large number of retail pool stores, mass merchandisers and distributors. Some export sales are marketed through distributors and brokers. The Company's business does not normally reflect any material backlog of orders at year-end. Competition Great Lakes is in competition with businesses producing the same or similar products as well as businesses producing products intended for similar use. There is one other major bromine producer in the United States which competes with the Company in varying degrees, depending on the product involved, with respect to the sale of bromine and bromine derivatives. There is also one major overseas manufacturer of bromine and brominated products which competes with the Company in the United States and elsewhere. There are several small producers in the U.S. and overseas which are competitors in several individual products. In addition, there are numerous manufacturers of alternatives that compete with the Company. In the polymer stabilizers area, the Company competes with a significantly larger supplier across this entire product line and with a number of smaller companies in individual product areas. The Company competes with several manufacturers and distributors of swimming pool and spa chemicals and equipment. Principal methods of competition are price, product quality and purity, technical services and ability to deliver promptly. The Company is able to move quickly in providing new products to meet identified market demands, and believes its production costs are among the lowest in the world. These factors, combined with high technical skills, allow the Company to compete effectively. Seasonality and Working Capital The products which the Company sells to the agricultural and swimming pool markets, exhibit some seasonality; however, the quarterly effect on overall Company sales and profits is not material. Seasonality results in the need to build inventories for rapid delivery at certain times of the year. The pool product season is strongest during the first six months, requiring a build-up of inventory at the beginning of 7 the year. Except for certain arrangements with distributors and dealers of swimming pool and spa products, customers are not permitted to return unsold material at the end of a season. Extended credit terms are granted only in cases where the Company chooses to do so to meet competition. The effect of the above items on working capital requirements is not material. Research and Development and Patents Research and development expenditures are included in the note "Research and Development Expense" of the Notes to Consolidated Financial Statements on page 35 of the 1997 Annual Report to Stockholders and is incorporated herein by reference. The Company holds no patents, licenses, franchises or concessions which are essential to its operations. Environmental and Toxic Substances Control The Company recognizes its responsibility for the sound environmental management of its businesses and operations. In addressing this responsibility, the Company's domestic chemical manufacturing operations subscribe to the comprehensive environmental stewardship program developed by the Chemical Manufacturers Association known as Responsible Care. The Company is in material compliance with all environmental laws and regulations to which it is subject. Employees The Company has approximately 5,100 employees. Item 2. PROPERTIES Great Lakes has plants at 11 locations in 7 states and 16 plants in 9 foreign countries. Most principal plants are owned. Listed under Item 1 above in a table captioned Products and Services are the principal locations at which products are manufactured, distributed or marketed. The Company leases warehouses, distribution centers and space for offices throughout the world. All of the Company's facilities are in good repair, suitable for the Company's businesses, and have sufficient space to meet present marketing demands at an efficient operating level. Item 3. LEGAL PROCEEDINGS There are no material pending legal proceedings involving the Company, its subsidiaries or any of its properties. Furthermore, no director, officer or affiliate of the Company, or any associate of any director or officer is involved, or has a material interest in, any proceeding which would have a material adverse effect on the Company. Item 103 of Regulation S-K requires disclosure of administrative or judicial proceedings arising under any federal, state or local provisions dealing with protection of the environment, if the monetary sanctions might exceed $100,000. There are currently no such proceedings. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the quarter ended December 31, 1997. 8 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS As of March 9, 1998, there were approximately 3,700 registered holders of Great Lakes Common Stock. Additional information is contained in the 1997 Annual Report to Stockholders, under the captions "Stock Price Data" and "Cash Dividends Paid" on page 37 all of which are incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA This information is contained in the 1997 Annual Report to Stockholders, under the caption "Financial Review" on page 19 and is incorporated herein by reference. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 20 through 24 of the 1997 Annual Report to Stockholders, is incorporated herein by reference. Item 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK This information is included in the "Market Risks" section of "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 23 and 24 of the 1997 Annual Report to Stockholders and is incorporated herein by reference. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements together with the report thereon of Ernst & Young LLP dated February 3, 1998, appearing on pages 25 through 36 and the "Quarterly Results of Operations" on page 37 of the 1997 Annual Report to Stockholders, are incorporated herein by reference. Item 9. DISAGREEMENT OF ACCOUNTING AND FINANCIAL DISCLOSURE No change of auditors or disagreements on accounting methods have occurred which would require disclosure hereunder. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Executive Officers
Officer Name and Age Office Since - - ------------ ------ ----- Robert B. McDonald, 61(1) Chief Executive Officer and President. Mr. McDonald joined 1981 the Company in 1970. He received the B.E. in Chemical Engineering from Yale University and the M.S. in the same field from the University of Washington.
9 Robert T. Jeffares, 62 Executive Vice President and Chief Financial Officer. Mr. 1983 Jeffares joined the Company in 1983. He received the B.S. in Accounting from the University of Alabama. L. Donald Simpson, 62 Executive Vice President. He joined the Company in 1992. 1992 He is a graduate of Rose Hulman Institute of Technology with the B.S. in Chemical Engineering. Marshall E. Bloom, 60 Vice President, Water Treatment. Mr. Bloom is a graduate 1994 of the University of Georgia receiving his B.B.A. He joined Bio-Lab in 1955 and Great Lakes in 1990. David R. Bouchard, 54 Vice President, Bromine and Bromine Derivatives. He joined 1990 the Company in 1982. He received the B.S. in Chemical Engineering from the University of Michigan and the M.S. in Industrial Administration from Purdue University. Stephen D. Clark, 52 Vice President, Corporate R&D. He joined the Company in 1995 1995. He holds the B.S. in Chemistry from Seattle University and the Ph.D. in Organic Chemistry from the Massachusetts Institute of Technology. Mark Esselman, 41 Vice President, Human Resources. Mr. Esselman came to 1997 Great Lakes from U.S. Robotics in 1997 with nearly 20 years of human resources experience. He received his B.S. and M.S. degrees from the University of Wisconsin. Richard R. Ferguson, 46 Vice President, Treasurer and Assistant Secretary. He 1991 joined the Company in 1977. He graduated from Ball State University with the B.S. in Accounting. Otto K. Furuta, 54 Vice President, Purchasing and Logistics. He joined the 1996 Company in 1980. He earned the B.S. degree in Chemistry from the University of California, Berkeley, and the Ph.D. in Organic Fluorine Chemistry from the University of Colorado. Robert L. Hollier, 55 Vice President, and President of OSCA, Inc. He joined the 1991 Company in 1982. He graduated from the University of Southwestern Louisiana with the B.S. in Business Administration. John V. Lacci, 46 Vice President, General Counsel. He has been with the 1994 Company for 11 years. He received his B.A. from Georgetown University and the J.D. from Georgetown University School of Law. J. Larry Robertson, 49 Vice President, LINX. He joined the Company in 1974. He 1994 graduated from the University of Arkansas with the B.S. in Chemical Engineering.
10 John B. Talpas, 54 Vice President, Manufacturing. He joined the Company in 1988 1988 and is a graduate of Carnegie-Mellon Institute with the B.S. in Chemical Engineering. Robert J. Smith, 51 Vice President, Controller. He joined the Company in 1993 1993 and received the B.A. in Economics from Fairfield University. David C. Sanders, 54 Associate Vice President, New Product Development. He 1990 joined the Company in 1972. He received the B.S. in Chemistry from Butler University and the Ph.D. in Organic Chemistry from Ohio State University. Mary P. McClanahan, 54 Corporate Secretary. She joined the Company in 1978 and 1994 was educated in England. Stephen E. Brewer, 49 Assistant Treasurer He joined the Company in 1991. He 1994 received the B.S. in Chemical Engineering from Purdue University and the M.B.A. from Northwestern University
(1) On March 23, 1998, Mr. McDonald announced his intention to retire effective April 6, 1998. Mark Bulriss has been appointed to succeed Mr. McDonald. Mr. Bulriss joins Great Lakes from AlliedSignal, Inc. where he was president of the Polymers Division since 1996. He joined AlliedSignal in 1993 as president of the Laminates business unit, moving to president of the Electronic Materials Division in 1995. Prior to AlliedSignal, Mr. Bulriss spent 16 years with GE Plastics. Information with respect to directors of the Company is contained under the heading "Proposal One: Election of Directors" in the Great Lakes' Proxy Statement relating to the 1998 Annual Meeting of Stockholders expected to be filed on March 30, 1998, which is incorporated herein by reference. Item 11. EXECUTIVE COMPENSATION The information under the heading "Executive Compensation and Other Information" in the 1998 Proxy Statement is incorporated by reference in this report. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information under the heading "Security Ownership of Certain Beneficial Owners and Management" in the 1998 Proxy Statement is incorporated by reference in this report. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information under the heading "Compensation Committee Interlocks and Insider Participation" in the 1998 Proxy Statement is incorporated by reference in this report. 11 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) Financial Statements The following Consolidated Financial Statements of Great Lakes Chemical Corporation and Subsidiaries and related notes thereto, together with the report thereon of Ernst & Young LLP dated, February 3, 1998, appearing on pages 25 through 36 of the 1997 Annual Report to Stockholders, are incorporated by reference in Item 8: Consolidated Balance Sheets - December 31, 1997 and 1996 Consolidated Statements of Income and Retained Earnings - Years ended December 31, 1997, 1996 and 1995 Consolidated Statements of Cash Flows - Years ended December 31, 1997, 1996 and 1995 Notes to Consolidated Financial Statements (a)(2) Financial Statement Schedules The following additional information is filed as part of this report and should be read in conjunction with the 1997 financial statements. Schedule II - Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore, have been omitted. (a)(3) Exhibits:
Exhibit No. Description ----------- ----------- (3)(i) Articles of Incorporation (3)(ii) By-Laws (4) Shareholders Rights Plan amended and restated December 7, 1995 (filed on Form 8K (No. I-06450), and incorporated herein by reference) (10)(i) Supplemental Retirement Plan (10)(ii) Deferred Compensation Plan (10)(iii) Supplemental Savings Plan (10)(iv) Severance Agreements (10)(v) Deferred Compensation Plan Supplement for one executive (10)(vi) Non Employee Directors' Deferred and Long Term Compensation Plan (10)(vii) Split-Dollar Life Insurance (10)(viii) Change in Control Agreements (10)(ix) Directors Retirement Plan (10)(x) 1993 Employee Stock Compensation Plan (10)(xi) 1984 Employee Stock Option Plan (13) 1997 Annual Report to Stockholders (21) Subsidiaries - Incorporated herein by reference is the list of subsidiaries appearing on the inside of the back cover of the 1997 Annual Report to Stockholders
12 (23) Consent of Independent Auditors (27.1) Financial Data Schedules December 31, 1997, and March 31, 1997, June 30, 1997 and September 30, 1997 Restated (27.2) Financial Data Schedules March 31, 1996, June 30, 1996, September 30, 1996 and December 31, 1996 Restated (27.3) Financial Data Schedule December 31, 1995 Restated
Exhibit No. 23 is included herewith. All other exhibits except exhibit No. 4 are included herewith as part of the electronic filing. (b) Reports on Form 8-K The Company filed a Form 8-K on December 31, 1997 in connection with the restructuring of the Company's operations. (c) Exhibits The response to this section of Item 14 is submitted as a separate section of this report. (d) Financial Statement Schedules The response to this section of Item 14 is submitted as a separate section of this report. 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GREAT LAKES CHEMICAL CORPORATION (Registrant) Date February 17, 1998 /s/ Robert B. McDonald ------------------------------- ---------------------- Robert B. McDonald, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Date February 17, 1998 /s/ Robert T. Jeffares ------------------------------- ---------------------- Robert T. Jeffares, Executive Vice President and Chief Financial Officer Date February 17, 1998 /s/ Robert J. Smith ------------------------------- ------------------- Robert J. Smith, Vice President - Controller (Principal Accounting Officer) Date February 17, 1998 /s/ Evan Bayh ------------------------------- ------------- Evan Bayh, Director Date February 17, 1998 /s/ William H. Congleton ------------------------------- ------------------------ William H. Congleton, Director Date February 17, 1998 /s/ John S. Day ------------------------------- --------------- John S. Day, Director Date February 17, 1998 s/ Thomas M. Fulton ------------------------------- ------------------- Thomas M. Fulton, Director Date February 17, 1998 /s/ Martin M. Hale ------------------------------- ------------------ Martin M. Hale, Director Date February 17, 1998 /s/ Louis E. Lataif ------------------------------- ------------------- Louis E. Lataif, Director Date February 17, 1998 /s/ Richard H. Leet ------------------------------- ------------------- Richard H. Leet, Director Date February 17, 1998 /s/ Robert B. McDonald ------------------------------- ---------------------- Robert B. McDonald, Director Date February 17, 1998 /s/ Jay D. Proops ------------------------------- ----------------- Jay D. Proops, Director
14 SCHEDULE II GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 1997
Balance at Additions Balance Beginning Charges to Costs Charged to at End Description of Period and Expenses Other Accounts Deductions of Period - - ----------- --------- ------------ -------------- ---------- --------- 1997: Reserve deducted from asset: Allowance for doubtful accounts receivable $ 7,321,000 $ (352,000) $-0- $ 1,166,000(A) $ 5,803,000 ------------ ------------ ------------ ------------ ------------ Accumulated amortization of goodwill $ 10,712,000 $ 2,645,000 $-0- $ 712,000(B) $ 12,645,000 ------------ ------------ ------------ ------------ ------------ 1996: Reserve deducted from asset: Allowance for doubtful accounts receivable $ 5,998,000 $ 1,931,000 $-0- $ 608,000(A) $ 7,321,000 ------------ ------------ ------------ ------------ ------------ Accumulated amortization of goodwill $ 8,166,000 $ 2,805,000 $-0- $ 259,000(B) $ 10,712,000 ------------ ------------ ------------ ------------ ------------ 1995: Reserve deducted from asset: Allowance for doubtful accounts receivable $ 6,305,000 $ 648,000 $-0- $ 955,000(A) $ 5,998,000 ------------ ------------ ------------ ------------ ------------ Accumulated amortization of goodwill $ 5,416,000 $ 2,750,000 $-0- $ -0- $ 8,166,000 ------------ ------------ ------------ ------------ ------------
(A) Uncollectible accounts receivable written off, net of recoveries and foreign currency translation. (B) Foreign currency translation. EX-3.(I) 2 ARTICLES OF INCORPORATION 1 Exhibit No. (3)(i) STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATION FILED 11:00 AM 10/25/1993 932985163 - 741228 RESTATED CERTIFICATE OF INCORPORATION OF GREAT LAKES CHEMICAL CORPORATION (formerly Great Lakes Delaware, Inc., incorporated on January 26, 1970) This Certificate as duly adopted in accordance with the provisions of Section 245 of the Delaware General Corporation Law and only restates and integrates and does not further amend the provisions of the Corporation's Certificate of Incorporation as theretofore amended or supplemented, and there is no discrepancy between those provisions and the provisions of the Restated Certificate of Incorporation. - - -------------------------------------------------------------------------------- FIRST. The name of the Corporation is Great Lakes Chemical Corporation. SECOND. The address of its registered office in the State of Delaware is 229 South State Street in the City of Dover, County of Kent. The name of its registered agent at such address is United States Corporation Company. THIRD. The nature of the business to be conducted or promoted and the purposes of the Corporation are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. The total number of shares of capital stock which the Corporation shall have authority to issue is two hundred million shares (200,000,000) of Common Stock with a par value of $1.00 per share. No holder of stock of any class, now or hereafter authorized, shall have any preemptive right to subscribe for or purchase, or have offered to him for subscription or purchase, stock of any class, securities convertible into stock of any class, or warrants or other evidences of optional rights to purchase stock of any class, whether issued for cash or other consideration. FIFTH. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: 2 (a) To make, alter or repeal the By-laws of the Corporation; and (b) To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation. SIXTH. (a) The number of directors shall be not less than 3 nor more than 11. The exact number of directors shall be such as from time to time shall be fixed by, and in a manner set forth in, the By-laws of the Corporation. No decrease in the number of directors shall shorten the term of any incumbent director. (b) The directors shall be classified with respect to the time for which they shall hold office by dividing them into three classes, each consisting, as nearly as may be possible, of one-third of the whole number of the Board of Directors. At each annual meeting of the stockholders, the successors to the directors whose terms shall expire that year shall be elected to hold office for the term of three years, so that the term of office of one class of the directors shall expire in each year. In any event, each director of the Corporation shall hold office until his successor is duly elected and qualified, subject, however, to prior death, resignation, retirement, or removal from office. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. Any vacancy in the Board of Directors or newly created directorship resulting from any increase in the number of directors may be filled by a majority of the directors then in office, excluding any directors who shall theretofore have resigned effective as of a future date, although less than a quorum. (c) No director shall be removed from the Board of Directors by action of the stockholders of the Corporation during his appointed term other than for cause. (d) Advance notice of stockholder nominations for the election of directors shall be given in the manner provided by the By-laws. SEVENTH. Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of 3 trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders, of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors, or class of creditors, and/or of the stockholders or class of stockholders, of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation. EIGHTH. The books of the Corporation may be kept (except as may be otherwise required by law) outside the State of Delaware at such place or places as may be designated from time-to-time by the Board of Directors or in the By-laws of the Corporation. Election of directors need not be by written ballot unless the By-laws of the Corporation shall so provide. NINTH. The Corporation shall indemnify the directors and the officers to the fullest extent permitted by the Delaware General Corporation law. Directors of the Corporation, to the fullest extent permitted by the Delaware General Corporation law, shall not be liable to the Corporation of its stockholders for monetary damages for breach of their fiduciary duty as a director. TENTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute and all rights conferred upon stockholders herein are granted subject to this reservation. ELEVENTH. None of the following transactions may be effectuated unless a meeting of stockholders of the Corporation is held to act thereon and the votes of the stockholders of its voting securities representing at least two-thirds of the votes entitled to be cast are cast in favor thereof: (a) An acquisition by the Corporation of stock of an Interested Party; (b) A sale, lease or exchange of all or the major portion of the assets of the Corporation or an Interested Party to the other; (c) A merger or consolidation to which the Corporation and an Interested Party are parties; or 4 (d) An amendment or repeal of this Article. As used in this Article, "Interested Party" means any person, firm or corporation, or any group thereof acting in concert, which owns of record or beneficially, directly or indirectly, more than 10% of any class of the stock of the Corporation. TWELFTH. Notwithstanding any provision of Delaware Law, or any other provision of this Certificate of Incorporation, any action required or permitted to be taken by the stockholders of the Corporation, whether voting as a class of otherwise, must be taken at a duly called annual or special meeting of the stockholders of the Corporation and may not be taken by consent in writing of such stockholders. No amendment to this Certificate of Incorporation shall amend, alter, change or repeal any of the provisions of this Article Twelfth unless such amendment, in addition to receiving any stockholder vote or consent required by the laws of the State of Delaware in effect at the time, shall receive the affirmative vote or consent of the holders of 80% of the outstanding shares of stock of the Corporation entitled to vote in elections of directors, considered separately for purposes of this Article Twelfth. EX-3.(II) 3 BY-LAWS 1 Exhibit No. (3)(ii) BY-LAWS OF GREAT LAKES CHEMICAL CORPORATION ADOPTED BY ACTION OF THE BOARD OF DIRECTORS (ADOPTED MARCH 14, 1975, AS AMENDED THROUGH FEBRUARY 16, 1998) ARTICLE I STOCKHOLDERS SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders of the Corporation shall be held at the registered office of the Corporation in the State of Delaware or at such other place within or without the State of Delaware, as may be determined by the Board of Directors and as may be stated in the notice of the meeting. The annual meeting shall be held on such date and at such time as shall be designated from time to time by the Board of Directors. The business to be transacted at such meeting shall be the election of directors and such other business as shall properly be brought before the meeting. No business may be transacted at an annual meeting of stockholders, other than business that is (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or 2 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 1 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 1. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than one hundred twenty (120) days nor more than one hundred fifty (150) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close 2 3 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or public announcement of the date of the annual meeting was made, whichever first occurs. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. To be in proper written form, a stockholder's notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such stockholder, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. 3 4 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 1; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 1 shall be deemed to preclude discussion by any stockholder of any such business. If the Chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. The term "public announcement" shall mean an announcement in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may be called by the Board of Directors, by the Chairman, or by the President. At any time, upon the written request of any person or persons entitled to call a special 4 5 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 meeting, it shall be the duty of the Secretary to send out notices of such meeting, to be held within or without the State of Delaware and at such time, but not less than fifteen days nor more than thirty days after receipt of the request, as may be fixed by the Board of Directors. If the Board of Directors shall fail to fix a time or place, the meeting shall be held at the registered office of the Corporation in the State of Delaware at such time as shall be fixed by the Secretary within the above limits. SECTION 3. NOTICE OF MEETINGS AND ADJOURNED MEETINGS. (a) A written or printed notice of each meeting or stockholders shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written or printed notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meetings. If mailed, notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. No publication of the notice of meetings shall be required. An affidavit of the Secretary or an Assistant Secretary or of the Transfer Agent of the Corporation that the notice has been given 5 6 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 shall, in the absence of fraud, be prima facie evidence of the facts stated therein. Any previously scheduled meeting of the stockholders may be postponed, and (unless the Certificate of Incorporation provides otherwise) any special meeting of the stockholders may be canceled, by resolution of the Board of Directors upon public notice given prior to the date previously scheduled for such meeting of stockholders. (b) Whether or not a quorum is present, any annual, regular or special meeting of the stockholders may be adjourned to another date by the Chairman of the meeting or by a majority vote by the shares represented at such meeting. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 6 7 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 (c) Whenever a notice of a meeting is required to be given to stockholders, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting, either in person or by proxy, shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of a meeting, to the transaction of any business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. SECTION 4. QUORUM. Except as otherwise provided by law, a quorum at all meetings of stockholders shall consist of the holders of record of a majority of the shares entitled to vote thereat. SECTION 5. CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by the Chairman, or if he is not present, by the President, or if he is not present, by a Vice President or other person chosen at the meeting. The Secretary or an Assistant Secretary of the Corporation, or in their absence, a person chosen at the meeting, shall act as Secretary of the meeting. 7 8 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 SECTION 6. INSPECTORS OF ELECTION. Whenever any stockholder present at a meeting of the stockholders shall request the appointment of inspectors, the Chairman of the meeting shall appoint inspectors who need not be stockholders. If the right of any person to vote at such meeting shall be challenged, the inspectors of election shall determine such right. The inspectors shall receive and count the votes either upon an election or for the decision of any question, and shall determine the result. Their certificate of any vote shall, in the absence of fraud, be prima facie evidence of the facts stated therein. SECTION 7. VOTING. All elections of directors shall be by written ballot. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Restated Certificate of Incorporation of the Corporation. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 7 and on the record date for the determination of 8 9 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 7. In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than one hundred and twenty (120) days nor more than one hundred fifty (150) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or public announcement (as defined in Section 1) of the date of the annual meeting was made, whichever first occurs. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. 9 10 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 To be in proper written form, a stockholder's notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to nominate the persons named in its notice and (v) any other 10 11 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 7. If the Chairman of the annual meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. At every meeting of the stockholders, each stockholder entitled to vote at such meeting shall have, as to each matter submitted to a vote, one vote for each share of stock having voting rights registered in his name on the stock books of the Corporation. 11 12 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 At all meetings of stockholders, a stockholder may vote by proxy appointed by a written instrument signed by the stockholder or his duly authorized attorney in fact and delivered to the Secretary of the meeting, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provided for a longer period. A quorum being present, directors shall be elected by a plurality of the votes of the shares present and in person or represented by proxy at the meeting and entitled to vote. In all matters, other than the election of directors, the affirmative vote of the majority of shares present or in person or represented by proxy at the meeting and entitled to vote on the subject matter, a quorum being present, shall be the act of the shareholders. SECTION 8. LIST OF STOCKHOLDERS. The Secretary or other officer of the Corporation having charge of the stock ledger shall prepare and make or cause to be prepared and made, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said election, arranged in alphabetical order, and showing the address of each such stockholder and the number 12 13 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder or his proxy who may be present. Upon the willful neglect or refusal of the directors then in office to produce or cause to be produced such a list at any meeting for the election of directors, they shall be ineligible to any office at such meeting. The original or duplicate stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section, or to vote in person or by proxy at such meeting. SECTION 9. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment 13 14 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. (b) If no record date is fixed: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of the stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholder for any other purpose shall be at the close of business on the date on which the Board of Directors adopts 14 15 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 the resolution relating thereto. (c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE II DIRECTORS SECTION 1. NUMBER, QUALIFICATIONS, CLASSES, TERMS AND QUORUM. The business and affairs of the Corporation shall be managed under the direction of a Board of Directors which shall consist of ten members, none of whom need be stockholders. The directors shall be classified with respect to the time for which they shall hold office by dividing them into three classes. The first class shall consist of four directors whose term of office shall expire in 1998 and in every third year thereafter. The second class shall consist of three directors whose terms of office shall expire in 1999 and in every third year thereafter. The third class shall consist of three directors whose terms of office shall expire in 2000 and in every third year 15 16 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 thereafter. At each annual meeting of the stockholders of the Corporation, or any adjournment thereof, the successors to the directors whose terms shall expire in that year shall be elected to hold office for a term of three years. In any event, each director shall hold office until his successor is duly elected and qualified or until his earlier resignation or removal. Any director may resign at any time upon written notice to the Corporation. A majority of the total number of directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. The Board of Directors may elect a Chairman of the Board of Directors who shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board of Directors shall have such other powers and perform such other duties as are delegated to him by the Board of Directors or as are incidental to his office. SECTION 2. VACANCIES. Any vacancy and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. 16 17 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 SECTION 3. MEETINGS. The Board of Directors shall meet each year immediately after the annual meeting of the shareholders, at the place where the annual meeting of the shareholders is held, for the purpose of electing officers and for the conduct of any other business that may be brought before the meetings. Such meeting shall be held without notice. If such meeting is not held as herein provided, the election of officers may be had at any subsequent meeting of the Board of Directors. Regular meetings of the Board of Directors may be held at such time and place within or without the State of Delaware, as the Board of Directors may from time to time designate. Special meetings of the Board of Directors may be held upon the call of the Chairman of the Board, or two or more members of the Board of Directors, at any place, within or without the State of Delaware, upon not less than 48 hours notice, specifying the time, place and general purposes of the meeting, given to each director either personally, or by telephone, telegram, or by mail. At any meeting at which all of the directors are present, notice of the time, place and purposes thereof shall be deemed waived. Notice of any meeting may be waived in writing, either before, during, or after any meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or 17 18 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 members of a committee of the directors, need be specified in any written waiver of notice. A majority of the directors present at any meeting, whether or not a quorum is present, may adjourn the meeting and no notice of such adjourned meeting need be given. SECTION 4. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise the authority of the Board of Directors in the management of the business and affairs of the Corporation, and may 18 19 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution or amending the By-Laws of the Corporation; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or authorize the issuance of stock. An Executive Committee shall be formed, comprising at least three directors, which shall have the authority and power to act on behalf of the Board of Directors, except as restricted above, with the additional authority to declare dividends on behalf of the Corporation. SECTION 5. ACTION BY CONSENT WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings 19 20 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 are filed with the minutes of proceedings of the Board or committee. SECTION 6. MEETINGS BY CONFERENCE TELEPHONE. Members of the Board of Directors or of any committee designated by the Board may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. ARTICLE III OFFICERS SECTION 1. OFFICERS. The officers shall consist of a Chief Executive Officer, a President, one or more Vice Presidents and/or Senior or Executive Vice Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, and one or more Assistant Treasurers. Such officers shall be elected by the Board of Directors and each officer shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Any number of offices may be held by the same person, 20 21 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 but no officer shall execute, act or verify any instrument in more than one capacity. The Corporation may have such other officers and agents as the Board of Directors may determine, who shall be elected or appointed by the Board of Directors and hold office for such terms as are prescribed by the Board of Directors. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, shall be filled by the Board of Directors. The Board of Directors may remove any officer with or without cause. SECTION 2. CHIEF EXECUTIVE OFFICER. Subject to the authority of the Board of Directors, the Chief Executive Officer shall administer the affairs of the Corporation and shall have such other powers and perform such other duties as are delegated to him by the Board of Directors, or by an authorized committee thereof, or are incidental to his office. During the time when the office of the Chairman of the Board is vacant, the Chief Executive Officer shall perform the duties of that office. SECTION 3. PRESIDENT. Subject to the authority of the Board of Directors, the President shall, during the absence or disability of the Chief Executive Officer, administer the affairs of the Corporation and shall have such other powers 21 22 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 and perform such other duties as are incidental to his office or are delegated to him by the Board of Directors, or an authorized committee thereof, or by the Chief Executive Officer. SECTION 4. VICE PRESIDENTS. Subject to the authority of the Board of Directors, the Vice Presidents, in the order designated by the Board of Directors, shall exercise the functions of the Chief Executive Officer and President during the absence or disability of the Chief Executive Officer and the President. Each Vice President shall have such other duties as are assigned to him from time to time by the Board of Directors or the Chief Executive Officer. SECTION 5. OTHER OFFICERS. The Secretary and the Treasurer shall perform such duties as are incidental to their offices, or are properly required of them by the Board of Directors or the Chief Executive Officer. The Assistant Secretaries shall, in the absence of the Secretary, perform the duties and exercise the powers of the Secretary, and shall perform such other duties as may be assigned by the Board of Directors or the Chief Executive Officer. Other subordinate officers elected or appointed by the Board of Directors shall exercise such powers and perform such duties as may be delegated to them. 22 23 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 SECTION 6. DELEGATION OF AUTHORITY. In the case of the absence or incapacity of any officer, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors or, in the absence of any action by the Board of Directors, the Chief Executive Officer may delegate any or all of the duties or powers of such officer to any other officer or to any other director or to any other person. ARTICLE IV CERTIFICATES OF STOCK SECTION 1. FORM. Every holder of stock in the Corporation shall be entitled to have a certificate signed by the Chairman of the Board of Directors, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation certifying the number of shares owned by him in such Corporation. If such certificate is countersigned (1) by a Transfer Agent other than the Corporation or its employee, or, (2) by a Registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, Transfer Agent or Registrar who has signed or 23 24 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 whose facsimile signature has been placed upon a certificate who has ceased to be such officer, Transfer Agent or Registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, Transfer Agent or Registrar at the date of issue. SECTION 2. TRANSFERS. Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation by the registered owner thereof, or his duly authorized attorney, with a Transfer Clerk or Transfer Agent appointed as specified in these By-Laws, and on surrender of the certificate or certificates for such shares of stock properly endorsed and with all taxes thereon paid. The person in whose name the shares of stock stand on the books of the Corporation shall be deemed by the Corporation to be the holder thereof for all purposes. SECTION 3. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint one or more Transfer Agents or Transfer Clerks and one or more Registrars, and may require all certificates for shares of stock to bear the signature or signatures of any of them. SECTION 4. LOSS OR DESTRUCTION. In case of loss or destruction of a certificate for shares, another certificate may be issued in lieu thereof in such manner 24 25 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 and upon such terms as the Board of Directors shall authorize, either by general resolution or by special resolution in each particular case. ARTICLE V FISCAL YEAR SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall begin on the first day of January of each year and shall end on the 31st day of December following. ARTICLE VI SEAL SECTION 1. CORPORATION SEAL. The Board of Directors shall provide a suitable corporate seal for use by the Corporation. ARTICLE VII INDEMNIFICATION 25 26 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 SECTION 1. INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in or called as a witness in any action, suit or proceeding, whether civil, criminal, administrative or investigative, and any appeal therefrom (hereinafter, collectively a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is, was or had agreed to become a director of the Corporation or is, was or had agreed to become an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the Corporation to the fullest extent permitted under the General Corporation Law of the State of Delaware (the "DGCL"), as the same now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than the DGCL permitted the Corporation to provide prior to such amendment), against all expenses, liabilities and losses (including attorneys' fees, judgments, fines, excise taxes or penalties pursuant to the Employee Retirement Income Security Act of 1974, 26 27 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 as amended, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, that except as explicitly provided herein, prior to a Change in Control of the Corporation, as defined herein, a person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person against the Corporation or any director, officer, employee or agent of the Corporation shall not be entitled thereto unless the Corporation has joined in or consented to such proceeding (or part thereof). For purposes of this Article, a "Change in Control of the Corporation" shall be deemed to have occurred if the conditions set forth in any one of the following clauses shall have been satisfied: (a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (as in effect as of December 7, 1995 (the "Exchange Act")) other than (i) the Corporation, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of shares of the Corporation (any such person is hereinafter referred to as a "Person"), is or becomes the "beneficial owner" (as defined in Rule 27 28 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing more than 50% of the combined voting power of the Corporation's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation); (b) there is consummated a merger or consolidation of the Corporation with or into any other corporation, other than a merger or consolidation which would result in the holders of the voting securities of the Corporation outstanding immediately prior thereto holding securities which represent, in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, immediately after such merger or consolidation, more than 70% of the combined voting power of the voting securities of either the Corporation or the other entity which survives such merger or consolidation or the parent of the entity which survives such merger or consolidation; (c) the stockholders of the Corporation approve any plan or proposal for the liquidation or dissolution of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets; or (d) during any period of two consecutive years (not including any period prior to December 7, 1995), individuals who at the beginning of such 28 29 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 period constitute the Board of Directors and any new director (other than a director designated by a Person who has entered into an agreement with the Corporation to effect a transaction described in clause (a), (b) or (c) of this paragraph) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof. For purposes of this Article VII, where a Change in Control of the Corporation results from a series of related transactions, the Change in Control of the Corporation shall be deemed to have occurred on the date of the consummation of the first such transaction. For purposes of clause (a) of this paragraph, the stockholders of another corporation (other than the Corporation or a corporation described in clause (iv)), in the aggregate, shall be deemed to constitute a Person. Prior to a Change in Control of the Corporation, any indemnification under Section 1 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she 29 30 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 has met the applicable standard of conduct set forth in the DGCL. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel (who may be the regular counsel of the Corporation) in a written opinion or (3) by the stockholders. Following a Change in Control of the Corporation, any indemnification under this Section 1 (unless ordered by a court) shall be paid by the Corporation unless within 60 days of such request for indemnification a determination is made, in a written opinion, by special independent counsel selected by the person requesting indemnification and approved by the Corporation (which approval shall not be unreasonably withheld), which counsel has not otherwise performed services (other than in connection with similar matters) within the five years preceding its engagement to render such opinion for such person or for the Corporation or any affiliates (as such term is defined in Rule 405 under the Securities Act of 1933, as amended) of the Corporation (whether or not they were affiliates when services were so performed) ("Independent Counsel"), that indemnification of such person is not 30 31 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 proper under the circumstances because such person has not met the necessary standard of conduct under the DGCL. Unless such person has theretofore selected Independent Counsel pursuant to this Section 1 and such Independent Counsel has been approved by the Corporation, legal counsel approved by a resolution or resolutions of the Board of Directors prior to a Change in Control of the Corporation shall be deemed to have been approved by the Corporation as required. Such Independent Counsel shall determine as promptly as practicable whether and to what extent such person would be permitted to be indemnified under applicable law and shall render its written opinion to the Corporation and such person to such effect. The Corporation agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such Independent Counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Article or its engagement pursuant hereto. In making a determination under this Section 1, the Independent Counsel referred to above shall determine that indemnification is permissible unless clearly precluded by this Article VII or the applicable provisions of the DGCL. 31 32 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 SECTION 2. PAYMENT OF EXPENSES IN ADVANCE. Expenses, including attorneys' fees, incurred by a person referred to in Section 1 of this Article in defending a proceeding shall be paid by the Corporation in advance of the final disposition of such proceeding, including any appeal therefrom, upon receipt of an undertaking (the "Undertaking") by or on behalf of such person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation. SECTION 3. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 1 hereof is not paid in full by the Corporation within 60 days after a written claim has been received by the Corporation or if expenses pursuant to Section 2 hereof have not been advanced within 10 days after a written request for such advancement, accompanied by the Undertaking, has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim or the advancement of expenses. (If the claimant is successful, in whole or in part, in such suit or any other suit to enforce a right for expenses or indemnification against the Corporation or any other party under any other agreement, such claimant shall also be entitled to be paid the 32 33 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 reasonable expense of prosecuting such claim.) It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required Undertaking has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed. After a Change in Control of the Corporation, the burden of proving such defense shall be on the Corporation, and any determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant had not met the applicable standard of conduct required under the DGCL shall not be a defense to the action nor create a presumption that claimant had not met such applicable standard of conduct. SECTION 4. INDEMNITY NOT EXCLUSIVE. The indemnification and advancement of expenses provided by, or granted pursuant to, the other sections of this Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while 33 34 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 holding such office. The Board of Directors shall have the authority, by resolution, to provide for such other indemnification of directors, officers, employees or agents as it shall deem appropriate. SECTION 5. INSURANCE INDEMNIFICATION. The Corporation shall have power to purchase and maintain insurance to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise, against any expenses, liabilities or losses, whether or not the Corporation would have the power to indemnify such person against such expenses, liabilities or losses under the provisions of this Article VII or the DGCL. SECTION 6. CONTINUATION OF INDEMNIFICATION; ENFORCEABILITY. The provisions of this Article shall be applicable to all proceedings commenced after its adoption, whether such arise out of events, acts, omissions or circumstances which occurred or existed prior or subsequent to such adoption, and shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. This Article shall be deemed to grant each person who, at any time that this Article is in effect, serves or agrees to serve in any 34 35 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 capacity which entitles him to indemnification hereunder rights against the Corporation to enforce the provisions of this Article, and any repeal or other modification of this Article or any repeal or modification of the DGCL or any other applicable law shall not limit any rights of indemnification then existing or arising out of events, acts, omissions or circumstances occurring or existing prior to such repeal or modification, including, without limitation, the right to indemnification for proceedings commenced after such repeal or modification to enforce this Article with regard to acts, omissions, events or circumstances occurring or existing prior to such repeal or modification. SECTION 7. SEVERABILITY. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director and officer of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. 35 36 GREAT LAKES CHEMICAL CORPORATION BY-LAWS FEBRUARY 16, 1998 ARTICLE VIII AMENDMENTS SECTION 1. AMENDMENTS. The Board of Directors shall have the power to make, alter or repeal the By-Laws of the Corporation at the annual or any regular meeting of the Board of Directors or by unanimous written consent without a meeting, or at any special meeting called for such purposes. 36 EX-10.(I) 4 SUPPLEMENTAL RETIREMENT PLAN 1 Exhibit No. (10)(i) GREAT LAKES CHEMICAL CORPORATION SUPPLEMENTAL RETIREMENT PLAN (RESTATED EFFECTIVE JANUARY 1, 1993) 3/30/93 2 GREAT LAKES CHEMICAL CORPORATION SUPPLEMENTAL RETIREMENT PLAN (RESTATED EFFECTIVE JANUARY 1, 1993) Table of Contents
ARTICLE I ESTABLISHMENT 1 1.1 Establishment and Purpose 1 1.2 Applicability 1 ARTICLE II PARTICIPATION 2 2.1 Eligibility and Participation 2 2.2 Duration 2 ARTICLE III BENEFIT; PAYMENT 3 3.1 Accrued Benefit 3 3.2 Time and Method of Payment 3 ARTICLE IV FUNDING 4 4.1 Funding 4 ARTICLE V AMENDMENT, ADMINISTRATION 5 5.1 Amendment and Termination 5 5.2 Administration 5 5.3 Deduction of Taxes from Amounts Payable 5 5.4 Indemnification 5 5.5 Expenses 5 ARTICLE VI MISCELLANEOUS 6 6.1 Interests not Transferable 6 6.2 Contract of Employment 6 6.3 Headings 6 6.4 Invalidity 6 6.5 Law Governing 6 APPENDIX A
3 GREAT LAKES CHEMICAL CORPORATION SUPPLEMENTAL RETIREMENT PLAN (RESTATED EFFECTIVE JANUARY 1, 1993) ARTICLE I ESTABLISHMENT 1.1 Establishment and Purpose. Great Lakes Chemical Corporation (the "Company") hereby restates the Great Lakes Chemical Corporation Supplemental Retirement Plan (the "Plan"), effective January 1, 1993 (the "Restatement Date"). The Plan was ESTABLISHED EFFECTIVE JANUARY 1, 1983 (the "Effective Date"). The purpose of the Plan is to provide each Participant in the Plan with the benefits the Participant would have received under the Retirement Plan for Certain Employees of Great Lakes Chemical Corporation, as amended, ("Pension Plan") except for the limitations on compensation and benefits imposed by Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as amended, ("Code") or any successor thereto. Any entity which, with the approval of the Board of Directors of the Company, adopts the Plan and the Company shall be referred to hereinafter as "Employer." The Plan is intended to benefit a select group of management or highly compensated employees of the Employer. 1.2 Applicability. The provisions of the Plan shall apply only to a person who terminates employment with an Employer on or after the Effective Date and shall not apply to any person not in the active employment of an Employer on or after the Effective Date. Page 1 4 ARTICLE II PARTICIPATION 2.1 Eligibility and Participation. Each person, who is both a participant in the Pension Plan and whose accrued benefit under the Pension Plan is reduced by the limitation on compensation imposed by Section 401(a)(17) of the Code or by the limitations on benefits imposed by Section 415 of the Code and has been named by the Board of Directors of the Company as an eligible employee by having his or her name set forth in Appendix A to the Plan, shall become a Participant in the Plan; provided that no person shall be or become a Participant hereunder prior to January 1, 1983. (Each person who becomes a Participant shall be referred to hereinafter as a "Participant.") The Board of Directors shall in its sole and absolute discretion determine those persons eligible to participate and shall take appropriate action to have Appendix A appropriately revised as necessary. 2.2 Duration. Any person who became a Participant shall continue to be a Participant as long as he is entitled to benefits hereunder. Page 2 5 ARTICLE III BENEFIT; PAYMENT 3.1 Accrued Benefit. (a) If at any time any benefit otherwise payable under the provisions of the Pension Plan in respect of a Participant, including any benefit payable with RESPECT THE PARTICIPANT'S SPOUSE OR other beneficiary entitled thereto, shall be REDUCED BY REASON OF THE LIMITATIONS on maximum benefits under Section 415 of the Code, and/or the limitation on the amount of compensation of a PARTICIPANT that may be considered under Section 401(a)( 17) of the Code, the Participant or his spouse or other beneficiary shall be entitled to receive a retirement benefit, subject to the terms and conditions of the Plan, equal to the excess, if any, of - - (1) the amount of the benefit under the Pension Plan, calculated without regard to the limitations imposed by Sections 401(a)(17) and 415 of the Code and without regard to the restriction that limits the years of service that may be recognized to 35 years; over (2) the amount of the benefit under the Pension Plan as limited by Sections 401(a)(17) and 415 of the Code and with regard to the restriction that limits the years of service that may be recognized to 35 years. (The benefit determined under this Section 3.1 shall be referred to hereinafter as the "Accrued Benefit.") (b) The Accrued Benefit under the Plan shall be paid only if, and under the condition that, the benefit under the Pension Plan described in subsection 3.1(a)(2) be and is paid to the Participant, his surviving spouse, or other beneficiary; and the forfeiture, for any cause, including death, of the benefit under the Pension Plan as described in subsection 3.1(a)(2) above shall cause the forfeiture of the Accrued Benefit under the Plan. 3.2 Time and Method of Payment. The Accrued Benefit shall commence to be paid with, and continue to be paid as long as, benefit payments to such Participant or his spouse or beneficiary entitled thereto under the Pension Plan, and shall be paid in the same form and manner as benefits under the Pension Plan; provided, however, the Employer may convert the benefits payable under the Plan into any actuarial equivalent form of payment as determined by the Employer with the advice of an actuary. Page 3 6 ARTICLE IV FUNDING 4.1 Funding. All benefits under this Plan shall be paid directly from the general funds of the Employer, and no special or separate fund shall be established and no other segregation of assets shall be made to assure payment. No Participant, spouse, or beneficiary shall have any right, title or interest whatever in or to any investments which Employer may make to aid the Employer in meeting its obligation hereunder. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between an Employer and any Participant, spouse, or beneficiary of a Participant. To the extent that any person acquires a right to receive payments from the Employer hereunder, such rights shall be no greater than the right of an unsecured creditor of the Employer. Page 4 7 ARTICLE V AMENDMENT, ADMINISTRATION 5.1 Amendment and Termination. The Company intends the Plan to be permanent, but reserves the right at any time to modify, amend, or terminate the Plan, provided that the Company shall not cancel, reduce, or otherwise adversely affect the amount of benefits of any Participant accrued as of the date of any such modification, amendment, or termination, without the consent of the Participant. 5.2 Administration. The Plan shall be administered by the Board of Directors of the Company, which shall be authorized to interpret the Plan, to adopt rules and practices concerning the administration of the Plan, to resolve questions concerning the eligibility for the amount of the Accrued Benefit, and to delegate all or any portion of its authority hereunder to a committee of the Board of Directors or to designated officers or employees of any Employer. 5.3 Deduction of Taxes from Amounts Payable. The Employer may deduct from the amount to be distributed such amount as the Employer, in its sole discretion, deems proper for the payment of income, employment, death, succession, inheritance, or other taxes with respect to benefits under the Plan. 5.4 Indemnification. Each Employer shall indemnify and hold harmless each employee, officer, or director of an Employer to whom is delegated duties, responsibilities, and authority with respect to the Plan against all claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed upon him (including but not limited to reasonable attorney fees) which arise as a result of his actions or failure to act in connection with the operation and administration of the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty, or expense is not paid for by liability insurance purchased or paid for by an Employer. Notwithstanding the foregoing, an Employer shall not indemnify any person for any such amount incurred through any settlement or compromise of any action unless the Employer consents in writing to such settlement or compromise. 5.5 Expenses. The expenses of administering the Plan shall be paid by the Employers. Page 5 8 ARTICLE VI MISCELLANEOUS 6.1 Interests not Transferable. Benefits payable under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or FORMER SPOUSE, OR for any other relative of a Participant prior to actually being received by the person entitled to the benefit under the terms OF THE PLAN, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to benefits payable hereunder SHALL be void. The EMPLOYER SHALL NOT in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any person entitled to benefits hereunder. If any person shall attempt to, or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his benefits under this Plan, or if by any reason of his bankruptcy or other event happening at any time, such benefit would devolve upon any other person or would not be enjoyed by the person entitled thereto under the Plan, the Board of Directors of the Company, in its discretion, may terminate the interest in any such benefits of the person entitled thereof under the Plan and hold or apply them to or for the benefit of such person entitled thereto under the Plan or his spouse, children, or other dependents, or any of them, in such manner as the Board of Directors of the Company may deem proper. 6.2 Contract of Employment. Nothing contained herein shall be construed to constitute a contract of employment between a Participant and an Employer. 6.3 Headings. The headings of Articles and Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control. 6.4 Invalidity. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof and the Plan shall be construed and enforced as if such provisions, to the extent invalid or unenforceable, had not been included. 6.5 Law Governing. The Plan shall be construed and enforced according to the laws of Indiana other than its laws respecting choice of law. Page 6 9 IN WITNESS, WHEREOF , the Company has executed this restated Plan this day of , 1993. GREAT LAKES CHEMICAL CORPORATION By: ____________________________ ATTEST: ______________________________ Page 7 10 GREAT LAKES CHEMICAL CORPORATION Supplemental Retirement Plan APPENDIX A Eligible Employees The Employees listed below compose a select group of management or highly compensated Employees of the Employer who have been named by the Board of Directors as an Eligible Employee for purposes of the Plan. Name of Employee Date of Board Action Emerson Kampen 03-09-93 11 Great Lakes Chemical Corporation Supplemental Retirement Plan Appendix A Eligible Employees The Employees listed below compose a select group of management or highly compensated Employees of the Employer who have been named by the Board of Directors as an Eligible Employee for purposes of the Plan. NAME OF EMPLOYEE DATE OF BOARD ACTION John Little 05-04-94 Robert Jeffares 05-04-94 David Hall 05-04-94 Robert McDonald 05-04-94 John Talpas 05-04-94 Donald Simpson 05-04-94 Marshall Bloom 05-04-94 Larry Bloom 05-04-94 David Bouchard 05-04-94 Lowell Horwedel 05-04-94 Gerd Schue 05-04-94 12 GREAT LAKES CHEMICAL CORPORATION SUPPLEMENTAL RETIREMENT PLAN APPENDIX A ELIGIBLE EMPLOYEES The Employees listed below compose a select group of management or highly compensated Employees of the Employer who have been named by the Chief Executive Officer as an Eligible Employee for purposes of the Plan. NAME OF EMPLOYEE DATE OF BOARD ACTION Steve Clark March 1, 1995 John Lacci March 13, 1995 Bob Smith March 20, 1995 Joe Holson August 31, 1995 Dick Ferguson February 27, 1996 J. Larry Robertson February 28, 1996 13 GREAT LAKES CHEMICAL CORPORATION SUPPLEMENTAL RETIREMENT PLAN APPENDIX A ELIGIBLE EMPLOYEES The Employees listed below compose a select group of management or highly compensated Employees of the Employer who have been named by the Chief Executive Officer as an Eligible Employee for purposes of the Plan. NAME OF EMPLOYEE DATE OF BOARD ACTION Steve Clark March 1, 1995 John Lacci March 13, 1995 Bob Smith March 20, 1995 14 GREAT LAKES CHEMICAL CORPORATION SUPPLEMENTAL RETIREMENT PLAN APPENDIX A ELIGIBLE EMPLOYEES The Employees listed below compose a select group of management or highly compensated Employees of the Employer who have been named by the Chief Executive Officer as an Eligible Employee for purposes of the Plan. NAME OF EMPLOYEE DATE OF BOARD ACTION Steve Clark March 1, 1995 John Lacci March 13, 1995 Bob Smith March 20, 1995 Joe Holson August 31, 1995 Dick Ferguson February 27, 1996 J. Larry Robertson February 28, 1996 Yuichi Iikubo December 10, 1996 Richard Boehner June 2, 1997 15 GREAT LAKES CHEMICAL CORPORATION SUPPLEMENTAL RETIREMENT PLAN APPENDIX A ELIGIBLE EMPLOYEES The Employees listed below compose a select group of management or highly compensated Employees of the Employer who have been named by the Chief Executive Officer as an Eligible Employee for purposes of the Plan. NAME OF EMPLOYEE DATE OF BOARD ACTION Steve Clark March 1, 1995 John Lacci March 13, 1995 Bob Smith March 20, 1995 Joe Holson August 31, 1995 Dick Ferguson February 27, 1996 J. Larry Robertson February 28, 1996 Yuichi Iikubo December 10, 1996 Richard Boehner June 2, 1997 Mark Esselman September 1, 1997 EX-10.(II) 5 DEFERRED COMPENSATION PLAN 1 Exhibit No. (10)(ii) GREAT LAKES CHEMICAL CORPORATION DEFERRED COMPENSATION PLAN (AMENDED AND RESTATED EFFECTIVE JANUARY 1,1997) 1. PURPOSE The purpose of the Great Lakes Chemical Corporation Deferred Compensation Plan (the "Plan") is to provide an opportunity for certain employees of Great Lakes Chemical Corporation (the "Company"), to elect to defer all or part of the compensation payable by the Company on account of service rendered in the employ of the Company ("Compensation"). The Plan is intended as a means of maximizing the effectiveness and flexibility of compensation arrangements, and as an aid in attracting and retaining individuals of outstanding abilities for employment as Executives with the Company. 2. EFFECTIVE DATE The Plan was originally effective with respect to Compensation paid for services performed after March 1, 1994. Certain employees have previously deferred Compensation that was payable for services rendered prior to the adoption of the Plan. With respect to such Deferred Compensation, the Plan memorializes the understanding between the Company and the Participant. This amendment and restatement of the Plan is effective for services rendered on or after January 1, 1997. Election made to defer Compensation for services prior to January 1, 1997 shall be governed by the terms of the Plan then in effect, unless subsequent payment elections are made as provided therein. 3. PLAN ADMINISTRATION The Plan will be administered by the Board of Directors of the Company (the "Board"), which shall be authorized to interpret the Plan, to adopt rules and practices concerning the administration of the Plan, to resolve questions concerning eligibility for participation, and to delegate all or any portion of its authority hereunder to a committee of the Board, or to designated officers or employees of the Company. The Board's interpretations and construction thereof, and actions hereunder, including any valuation of accounts, or determination of amounts or recipients of any payment hereunder, shall be binding and conclusive on all persons for all purposes. The expense of administering the Plan shall be borne by the Company and shall not be charged against amounts payable hereunder. No member of the Board shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to his own willful misconduct or lack of good faith. 4. ELIGIBILITY Any officer or key employee of the Company to whom participation herein is offered by the Board (each such individual hereinafter referred to as an "Executive") is eligible to participate 2 in the Plan. Any such Executive shall be a participant in the Plan ("Participant") as of the effective date of his or her first election to defer Compensation in accordance with Section 5 hereof, and his or her status as a Participant shall continue until the date of the last payment pursuant to Section 7 hereof. 5. ELECTION TO DEFER (a) In General. Each Executive shall be entitled to make an irrevocable election (a "Deferral Election") to defer receipt of some or all of Compensation otherwise payable to him or her after the date of such election. Such election shall continue in effect for the period set forth therein until the Executive delivers to the Board a written revocation or modification of such election with respect to the Compensation that relates to services to be performed and are payable thereafter. Compensation with respect to which a Deferral Election has been made (and shall not have been revoked) shall be referred to hereinafter as "Deferred Compensation". (b) Manner of Election. Deferral Elections shall be made only with respect to such amounts of Compensation as the Board shall in its sole discretion determine. Deferral Elections shall be made in accordance with such rules and procedures on such form(s) as the Board may prescribe, provided that each Deferral Election shall set forth the amount to be deferred, expressed either as a stated dollar amount or as a percentage of Compensation to be payable, and may be made separately with respect to base pay and to the annual bonus. All Deferral Elections must be made before the calendar year for which the Compensation is payable; provided, however, that in the first year in which an executive becomes eligible to participate in the Plan, the newly eligible Executive may make the applicable Deferral Election for services to be formed subsequent to such election within thirty (30) calendar days after the date on which such Executive becomes eligible. Any Deferral Elections made after the times specified in this Section 5(b) shall be effective for the following calendar year. Each Deferral Election shall remain effective for all subsequent calendar years unless and until revoked. (c) Designation of Beneficiary. Participants shall designate in writing, in accordance with such rules and procedures as the Board may prescribe, the beneficiary or beneficiaries who are to receive the Participant's Deferred Compensation Account in the event of the Participant's death. 6. RECORDS AND CREDITING OF DEFERRED AMOUNTS (a) In General. The Company shall credit to a memorandum account for the benefit of the Participant (his or her "Deferred Compensation Account") the amount of any Deferred Compensation as of the date such Compensation would otherwise have been payable to the Participant. (b) Valuation of Account. Each Participant's Deferred Compensation Account shall be valued each calendar quarter; it shall be increased by any Deferred Compensation credited to the account, decreased by any distribution made to the Participant from the account and credited with earnings based on 90% of the prime rate of Chase Manhattan Bank as of the last business 3 day of each calendar quarter, or at such other rate as may be adopted from time to time by the Board. A change in the rate credited under this Plan shall not require an amendment to this Plan. (c) Unsecured Obligations. The obligation of the Company to make payments of amounts credited to the Participant's Deferred Compensation Account shall be a general obligation of the Company, and such payments shall be made from general assets and property of the Company. The Participant's relationship to the Company under the Plan shall be only that of a general unsecured creditor and neither this Plan nor any agreement entered into hereunder or action taken pursuant hereto shall create or be construed to create a trust or fiduciary relationship of any kind. (d) The credits in Deferred Compensation Accounts are bookkeeping entries only, and do not represent actual assets or cash. The Company shall furnish each Participant with quarterly statements of activity and balances in his or her Deferred Compensation Account. (e) Vesting of Deferred Compensation Account. A Participant shall be one hundred. percent (100%) vested in his or her Deferred Compensation Account. 7. PAYMENT OF DEFERRED COMPENSATION ACCOUNT (a) In General. No withdrawal or payment shall be made from the Participant's Deferred Compensation Account except as provided in this Section 7. (b) Payment Options. The value of a Participant's Deferred Compensation Account shall be payable under two alternative options, at the election of the Participant, as follows: [OPTION ONE: in cash as a single sum payment as soon as practicable following January 1 of the calendar year following the calendar year in which the Participant separated from service, or in the case of a Participant who is or was a covered employee within the meaning of Section 1 62(m)(3) of the Internal Revenue Code as of the later of the date described above or as soon as practicable following January 1 after such Participant is no longer characterized as a covered employee.] [OPTION TWO: in annual installments over 10 years, provided, however, that the Board in its sole and absolute discretion may elect at any time after a Participant separates from service to distribute the remaining balance in the Participant's Deferred Compensation Account in a single sum in full settlement, payments shall be payable annually and shall commence as soon as practicable following January 1 of the calendar year following the calendar year in which the Participant separated from service, or in the case of a Participant who is or was a covered employee within the meaning of Section 162(m)(3) of the Internal Revenue Code as of the later of the date described above or as soon as practicable following the January 1 after such Participant is no longer characterized as a covered employee.] (c) Election of Payment Options. Each Participant shall make an election in respect of payments from his or her Deferred Compensation Account (a "Payment Election"). Payment Elections shall be effective on the beginning of the calendar year commencing at least one year 4 after the election is made; provided, however, that in the first year in which an Executive becomes eligible to participate in the Plan, the newly eligible Executive may make the Payment Election within thirty (30) calendar days after the date on which such Executive becomes eligible, which election shall become effective immediately. Any Payment Election made after the time specified in this Section 7(c) shall be effective beginning the calendar year commencing at least one year after the Payment Election is made. Each Payment Election shall remain effective unless and until revoked or amended. Subject to the foregoing, Payment Elections shall be made on such form(s) as the Board may prescribe. In the absence of an Effective Payment Election, the Executive shall be deemed to have elected Option One pursuant to Section 7(b). (d) The Payment Date. The Payment Date for payment from the Deferred Compensation Account shall commence on the date as provided in Section 7(b). The amount of each installment elected under Option Two in Section 7(b) shall be equal to the quotient obtained by dividing the Participant's account balance as of the date of such installment payment by the number of installment payments remaining to be made to such Participant at the time of calculation. The remaining balance of the Deferred Compensation Account shall earn interest at the rate specified in Section 6(b) until paid. (e) Acceleration for Hardship. The Board in its sole discretion may accelerate payments of amounts credited to a Participant's Deferred Compensation Account if requested to do so and if the requirements of this paragraph (e) are met. Such acceleration may occur only in the event of unforeseeable financial emergency or severe hardship from one or more recent events beyond the control of the Participant and is limited to the amount deemed reasonably necessary to satisfy the emergency or hardship. Payments may not be made to the extent that such hardship is or may be relieved: (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause a severe financial hardship), or (iii) by cessation of participation in the Plan. (f) Death of Participant. In the event that a Participant shall die at any time prior to distribution of his or her Deferred Compensation Account, the unpaid balance of the Participant's Deferred Compensation Account shall be paid in a lump sum to the Participant's designated beneficiary or beneficiaries (or, in absence of such designation, to his or her heirs in accordance with his or her last will and testament or, in the absence of a will, by the laws of intestate succession). (g) Disability of Participant. In the event of Disability of a Participant before attainment of age 65 and prior to termination of service, a Disabled Participant may petition the Board to receive a benefit equal to the remaining balance, if any, of the Participant's Deferred Compensation Account determined under Section 6(b). Such benefit shall be payable pursuant to elections made by the Participant in the manner provided in Section 7(b). Such benefit shall be paid until the earliest of the following events: (i) there is no longer any balance in the Participant's Deferred Compensation Account; (ii) the Participant ceases to be a Disabled Participant and resumes employment with the Company; or (iii) the Participant dies. Disability benefits shall be treated as distributions from the Participant's Deferred Compensation Account. 5 For purposes of this paragraph (g), "Disability" means a condition, as determined by the Board, that totally and continuously prevents the Participant, for at least six consecutive months, from engaging in an "occupation" for compensation or profit. During the first twenty-four (24) months of total disability, "occupation" means the Participant's occupation at the time the disability began. After that period, "occupation" means any occupation for which the Participant is or becomes reasonably fitted by education, training or experience. 8. EFFECT OF CHANGE IN CONTROL If a single individual or entity acquires or offers to acquire more than fifty percent of the outstanding stock of the Company, or if all or substantially all of the assets of the Company are transferred (or the Company agrees to transfer all or substantially all of its assets) to another entity by way of a sale, merger, consolidation or other means (a "change in control"), the entire unpaid balance of each Deferred Compensation Account then maintained by the Company shall be paid in a lump sum to the Participant within 30 days after the change in control 9. INTERESTS NOT TRANSFERABLE Benefits payable under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of a Participant prior to actually being received by the person entitled to the benefit under the terms of the Plan and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to benefits payable hereunder shall be void. The Company shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any person entitled to benefits hereunder. If any person shall attempt to, or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his benefits under this Plan, or if by reason of his bankruptcy or other event happening at any time, such benefit would devolve upon any other person or would not be enjoyed by the person entitled hereto under the Plan, the Board, in its sole and absolute discretion, may terminate the interest in any such benefits of the person entitled thereof under the Plan and hold or apply them to or for the benefit of such person entitled thereto under the Plan in such manner as the Board may deem proper. 10. DESIGNATION OF BENEFICIARIES Each Participant shall have the right to designate in writing, in accordance with such rules and procedures as the Board may prescribe, the beneficiary or beneficiaries who are to receive the payments from his or her Deferred Compensation Account in the event of the Participant's death. 11. BINDING PROVISIONS All of the provision of this Plan shall be binding upon all persons who shall be entitled to any benefits hereunder and their heirs and personal representatives. The Plan shall be binding 6 upon and inure to the benefit of the Company, its successors and assigns and the Participant and his heirs, executors, administrators and legal representatives. 12 INCAPACITY If the Board shall find that any person to whom any payment is payable under the plan is unable to care for his affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative) may be made to the spouse, a child, a parent, or a brother or sister, or to any person deemed by the Board to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Board may determine. Any such payment shall be a complete discharge of the liabilities of the Company under the plan. 13. CONTINUED EMPLOYMENT Nothing contained herein shall be construed as conferring upon the Participant the right to continue in the employ of the Company as an executive or in any other capacity. 14. CLAIMS FOR BENEFITS PROCEDURE (a) Claims for Benefits Procedure. Any claim for benefits under the Plan shall be made in writing to any member of the Board. If such claim for benefit is wholly or partially denied by the Board, the Board shall, within a reasonable period of time, but not later than sixty (60) days after receipt of the claim, notify the claimant of the denial of the claim. Such notice of denial shall be in writing and shall contain: (i) The specific reason or reasons for denial of the claim; (ii) A reference to the relevant Plan provisions upon which the denial is based; (iii) A description of any additional material or information necessary for the claimant to perfect the claim, together with an explanation of why such material or information is necessary; and (iv) an explanation of the Plan's claim review procedure. If no such notice is provided, the claim shall be deemed granted. (b) REQUEST FOR REVIEW of a Denial of a Claim for Benefits. Upon the receipt by the claimant of written notice of denial of the claim, the claimant may within ninety (90) days file a written request to the Board, requesting a review of the denial of the claim, which review shall include a hearing if deemed necessary by the Board. In connection with the claimant's appeal of the denial of his claim, he may review relevant documents and may submit issues and comments in writing. (c) Decision Upon Review of Denial of Claim for Benefits. The Board shall render a decision on the claim review promptly, but no more than sixty (60) days after the receipt of the 7 claimant's request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time, in which case, the sixty (60) day period shall be extended to one hundred-twenty (120) days. Such decision shall: (i) Include specific reasons for the decision; (ii) Be written in a manner to be understood by the claimant; and (iii) Contain specific references to the relevant Plan provisions upon which the decision is based. 15. WITHHOLDING TAXES. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under the Plan, and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld. At the discretion of the Board, such arrangements may include relinquishment of a portion of such benefit. The Company and any Participant or such other person may also make similar arrangements with respect to the payment of any taxes with respect to which withholding is not required. 16. CONTROLLING LAW. The Plan shall be construed in accordance with and governed by the law of the State of Indiana. 17. AMENDMENT AND TERMINATION (a) Amendment. The Plan may be amended in whole or in part by the Board at any time. Notice of any such amendment shall be given in writing to the Board and to each Participant and each Beneficiary of a deceased Participant. No amendment shall decrease the value of a Participant's Deferred Compensation Account, the benefits to which a Participant may be entitled under Section 7 or other benefit entitlements existing prior to any such amendment. (b) Company's Right to Terminate. The Company reserves the sole right to terminate the Plan and/or any Agreement pertaining to the Participant at any time after the Plan Effective Date. In the event of any such termination, the Participant shall be entitled to a Deferred Benefit equal to the amount of his Deferred Compensation Account determined under Section 6(a) and payable in accordance with Section 7. IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officers as of the date first above written. By: _____________________________________ Date: ___________________________________ __________________________________ Secretary EX-10.(III) 6 SUPPLEMENTAL SAVINGS PLAN 1 Exhibit (10)(iii) GREAT LAKES CHEMICAL CORPORATION SUPPLEMENTAL SAVINGS PLAN (EFFECTIVE JANUARY 1, 1995) 2 TABLE OF CONTENTS ARTICLE I ................................................1 Establishment ................................................1 1.1 Establishment and Purpose.......................1 1.2 Applicability...................................1 1.3 Definitions.....................................1 ARTICLE II ................................................2 Participation ................................................2 2.1 Eligibility and Participation...................2 2.2 Duration........................................2 ARTICLE III ................................................3 Contributions ................................................3 3.1 Deferral Election...............................3 3.2 Matching Contribution...........................3 ARTICLE IV ................................................5 Participant's Accounts............................................5 4.1 Participant's Accounts..........................5 4.2 Interest on Accounts............................5 4.3 Valuation of Accounts...........................6 4.4 Quarterly Reports...............................6 4.5 Investments Funds...............................6 ARTICLE V ................................................8 Payment of Deferred Compensation..................................8 5.1 Payments Upon Retirement........................8 5.2 Payment Upon Disability.........................8 5.3 Payments Upon Death.............................8 5.4 Payments Upon Financial Emergency...............9 5.5 Small Payment...................................9 5.6 Beneficiaries...................................9 ARTICLE VI ...............................................11 Funding ...............................................11 6.1 Funding........................................11 ARTICLE V ...............................................12 Amendment, Administration........................................12 7.1 Amendment and Termination......................12 7.2 Administration.................................12 7.3 Deduction of Taxes from Amounts Payable........12 7.4 Indemnification................................12 7.5 Expenses.......................................12 7.6 Claims.........................................12 3 ARTICLE VIII ...............................................13 Miscellaneous ...............................................13 8.1 Interests not Transferable.....................13 8.2 Contract of Employment.........................13 8.3 Headings.......................................13 8.4 Invalidity.....................................13 8.5 Law Governing..................................13 Appendix A ...............................................15 4 GREAT LAKES CHEMICAL CORPORATION SUPPLEMENTAL SAVINGS PLAN (Effective January 1. 1995) ARTICLE I Establishment 1.1 Establishment and Purpose. Great Lakes Chemical Corporation (the "Company") hereby adopts the Great Lakes Chemical Corporation Supplemental Savings Plan (the "Plan"), effective January 1, 1995 (the "Effective Date"). The purpose of the Plan is to provide each Participant in the Plan with the benefits the Participant would have received under the Great Lakes Savings Plan, as amended, ("Savings Plan") except for the limitations on compensation and benefits imposed by various sections of the Internal Revenue Code of 1986, as amended, ("Code") or any successor thereto. The Plan works in conjunction with the Savings Plan to provide the Participants with the same benefits as a percentage of compensation that are available under the Savings Plan to those employees not affected by the Code Limitations. The Company and any entity which, with the approval of the Board of Directors of the Company, adopts the Plan shall be referred to hereinafter as "Employer." The Plan is intended to benefit a select group of management or highly compensated employees of the Employer. 1.2 Applicability. The provisions of the Plan shall apply only to a person who terminates employment with an Employer on or after the Effective Date and shall not apply to any person not in the active employment of an Employer on or after the Effective Date. 1.3 Definitions. Capitalized terms herein shall have the same meaning as the Savings Plan except as defined herein. 5 ARTICLE II Participation 2.1 Eligibility and Participation. Each person, who is (i) a Participant in the Savings Plan and whose right to contribute to or receive an allocation under the Savings Plan is reduced by the limitation on compensation imposed by Section 401(a)(17) of the Code, by the limitations on benefits imposed by Section 415(c) of the Code, by the limitations on pre-tax deferrals imposed by Section 401(k) of the Code and Section 402(g) of the Code, and by the limitations on matching contributions and after-tax contributions under Section 401(m) of the Code (such limitations are collectively referred to as the "Code Limitations"); and (ii) has been named by the Board of Directors of the Company as an eligible employee by having his or her name set forth in Appendix A to the Plan, shall become a Participant; provided, however, no person shall become a Participant prior to the date of execution of the Plan. (Each person who becomes a Participant shall be referred to hereinafter as a "Participant.") The Employer shall establish for each Participant a Deferred Compensation Account. 2.2 Duration. Any person who became a Participant shall continue to be a Participant as long as he is entitled to benefits hereunder. 6 ARTICLE III Contributions 3.1 Deferral Election. (a) Each Participant shall be entitled to make an annual advance written election to defer receipt of up to 15~o of the Compensation otherwise payable to him by the Employer. Such Deferral Amount shall be expressed as a percentage of Compensation. The written election must be received not later than December 15, 1994 to be effective for the first calendar quarter of 1995. A Deferral Election once made shall remain in effect from calendar quarter to calendar quarter and from calendar year to calendar year until changed by the Participant. An election once made or deemed made for a calendar quarter shall not be revocable. A Participant may change and a new Participant may make his election for any future notice to the Committee not less than 30 days prior to the start of the calendar quarter for which the change is to be effective. (b) A Participant may elect to discontinue deferrals at anytime upon reasonable notice to the Committee. (c) A Deferral Amount Election under this Section 3.1 shall be made in conjunction with the Participant's pre-tax election under the Savings Plan, and the Employer shall deposit into the Savings Plan such amount of the Participant's Deferral Amount as is consistent with the provisions of the Savings Plan and with such administrative procedures of the Employer as it may implement from time to time to insure compliance with the requirements of the Savings Plan and the Code Limitations. (d) In the event any amounts under the Savings Plan must be distributed from the Savings Plan to the Participant, such amounts will not be credited to the Participant's Deferred Compensation Account in the Plan unless such amount will not be treated as taxable income to the Participant. 3.2 Matching Contribution. The Employer shall make a deemed contribution to a Participant's Deferred Compensation Account equal to the amount of Matching Contribution to which the Participant would have been entitled under the Savings Plan, had the Participant's Deferral Amount under this Plan been contributed to the Savings 7 Plan without regard to the Code Limitations. The Employer Matching Contribution shall be credited to the Participant's Deferred Compensation Account on the same date as matching contributions are credited to Participants' accounts under the Savings Plan. ARTICLE IV 8 Participant's Accounts 4.1 Participants' Accounts. The Committee shall create and maintain adequate records to disclose the interest in the Plan of each Participant and Beneficiary. Records shall be in the form of individual bookkeeping accounts, and credits and charges shall be made to those accounts pursuant to Article III and the following provisions of this Article IV. Each Participant shall have a separate Deferred Compensation Account. The Participant's interest in that portion of his Deferred Compensation Account attributable to the Participant's pre-tax contributions shall at all times be fully vested. The Participant's interest in that portion of his Deferred Compensation Account attributable to the Employer's matching contributions shall become vested in accordance with the Savings Plan; such that a Participant credited with the completed Years of Service shown below, as determined under the Savings Plan, shall be vested in the percentage of his Employer matching contribution as shown below: Completed Years of Vested Interest in Service Matching Contributions Less than 2 0% 2 20% 3 40% 4 60% 5 80% 6 or more 100% 4.2 Interest on Accounts. Each Participant's Deferred Compensation Account shall be credited with earnings as provided in this section. (a) The Deferred Compensation Account of a Participant shall be credited with earnings and losses from the date it was established through the date the entire Deferred Compensation Account is distributed to the Participant or his Beneficiary. A Participant's Deferred Compensation Account shall be credited with earnings or charged with losses in accordance with procedures and at a rate adopted from time to time by the Committee. 9 (b) The Committee reserves the right, in its sole discretion, to increase or decrease the rate at which earnings are credited to Participants' accounts, but the earnings rate shall not be decreased for periods prior to such action. 4.3 Valuation of Accounts. The value of a Participant's Deferred Compensation Account as of any date shall equal the dollar amount of any deferrals and Employer contributions credited to the Deferred Compensation Account, adjusted for the earnings or losses DEEMED TO BE CREDITED TO THE Deferred Compensation Account in accordance with Section 4.2 and decreased by the amount of any payments made from the Deferred Compensation Account to the Participant or his Beneficiary. Earnings, losses, contributions and distributions are credited or changed to the Deferred Compensation Account each regular business day, i.e., each day the New York Stock Exchange is open for business, in accordance with the procedures of the recordkeeper. 4.4 Quarterly Reports. Within 60 days following the end of each calendar quarter, the Committee shall provide to each Participant a written statement of the amount standing to his credit in the Deferred Compensation Account as of the end of that calendar quarter. 4.5 Investment Funds. (a) Notwithstanding Section 4.2, 4.3 and 4.4, the Committee, in its sole discretion, may elect to establish for each Participant an Employee owned separate investment account in the name of the Employer (Investment Fund) to assist the Employer in accumulating the assets needed to pay the promised benefits. In the event that a separate Investment Fund is established, the Committee may direct that the Participant's Deferred Compensation Accounts shall be invested through such Investment Fund in one or more investment funds to be determined from time to time by the Committee. The Committee shall direct the investment of a Participant's Deferred Compensation Account among the investment funds in the Investment Fund at its discretion, but the Committee may consult with the Participants as to the investment funds in which their Account should be invested. (b) In the event the Committee exercises its discretion as described above, a Participant's Deferred Compensation Account shall be credited with earnings or charged with losses in accordance with the investment funds in which such Investment Fund is invested. The Participant's Account shall be charged with 10 distributions and losses and credited with contributions and earnings in accordance with procedures adopted by the Committee in consultation with any manager of the Investment Funds. (c) Despite the establishment of an Investment Fund or of specific investment funds, a Participant shall have no claim to such specific assets and such funds shall serve merely as a mechanism for assisting the Employer in meeting its obligations under the Plan and measuring the value of a Participant's Account. 11 ARTICLE V Payment of Deferred Compensation 5.1 Payments Upon Retirement. (a) Except as provided in Section 5.5 or Subsection 5.1(b), upon a Participant's separation from service with the Employers, the vested portion of the Participant's Deferred Compensation Account shall be distributed to him in ten substantially equal annual installments, the sum of which shall equal (i) the value of the Participant's Deferred Compensation Account as of the date of his separation from service, plus (ii) the earnings that will accrue on the unpaid balance of the Deferred Compensation Account under Article IV during the payout period, less, (iii) any distributions from the Deferred Compensation Account. The first annual installment shall begin as soon as practicable following the recordkeeper's receipt of authorized instructions from the Committee to make the payments. In addition, the annual installments shall be redetermined each year as soon as practicable following the anniversary of the start of such payments. Annual installments shall be determined in ACCORDANCE WITH THE declining balance method, whereby each year's installment shall equal the product of the Participant's Deferred Compensation Account at the time of payment multiplied by the fraction of 1 over the number of remaining payments. (b) A Participant may elect to receive his Deferred Compensation Account in a single sum payment provided either such election is made not less than one year prior to the Participant's termination of employment with the Employer or in the event the election is made within such one year period, such lump sum distribution shall not be made earlier than the one year anniversary of the election of the lump sum. (c) Notwithstanding (a) or (b) above, the Committee may, in its sole and absolute discretion at any time after a Participant separates from service, distribute to the Participant the remaining balance in the Participant's Deferred Compensation Account. 5.2 Payment Upon Disability. If a Participant suffers a disability, within the meaning of the Employer's long-term disability plan, deferrals and matching contributions that otherwise 12 would have been credited to the Participant's Deferred Compensation Account under this Plan shall cease. The Participant's Deferred Compensation Account will continue to be credited with earnings under Article IV during the period of 60 days beyond the date deferrals and contributions cease, the Participant shall be treated for purposes of this Plan as if he had separated from service, and his Deferred Compensation Account shall be distributed pursuant to Section 5.1. 5.3 Payments Upon Death. If a Participant dies, his remaining Deferred Compensation Account shall be distributed to his Beneficiary in a single lump sum payment as soon as practicable after the Participant's death. The value of the Participant's Deferred Compensation Account shall be determined as of the valuation date that authorized distribution directions are received by the Plan's recordkeeper from the Committee. 5.4 Payments Upon Financial Emergency. A Participant, upon written petition to the Committee, may withdraw some or all of that portion of his Deferred Compensation Account that is attributable to the Participant's contribution (the portion of the Deferred Compensation Account attributable to contributions of the Employer is not available for financial emergencies) if the Committee, in its sole discretion, determines that the requested withdrawal is on account of an unforeseeable financial emergency and that the amount to be withdrawn does not exceed the amount necessary to satisfy the financial emergency. Withdrawals under this section shall not be permitted to the extent that the financial emergency may reasonably be relieved through (a) reimbursement or compensation by insurance or otherwise, (b) liquidation of the Participant's assets (to the extent liquidation would not in itself cause a financial hardship), or (c) suspension or cessation of deferrals under the Plan. For purposes of this section, an "unforeseeable financial emergency" means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or his dependents; loss of the Participant's property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control. 5.5 Small Payment. Notwithstanding any other provision of this Plan, if the value of a Participant's Deferred Compensation Account, upon his separation from service does not exceed $15,000, the balance of his Deferred Compensation Account shall be distributed in the form of a single lump sum payment to the Participant. 5.6 Beneficiaries. A Participant's "Beneficiary" shall be the person or persons, including a trustee, designated in writing pursuant to practices of, or rules prescribed by, the 13 Committee, as the recipient of a benefit payable under the Plan following the Participant's death. To be effective, a Beneficiary designation must be filed with the Committee during the Participant's life on a form prescribed by the Committee; provided, however, that a finalized divorce or marriage (other than a common law marriage) shall automatically revoke a previously filed Beneficiary designation, unless in the case of divorce, the ex-spouse was not designated as Beneficiary or in the case of marriage, the Participant's new spouse is already the designated Beneficiary. If no person has been designated as the Participant's Beneficiary, if a Participant's Beneficiary designation has been revoked by marriage or divorce, or if no person designated as Beneficiary survives the Participant, the Participant's estate shall be his Beneficiary. 14 ARTICLE VI Funding 6.1 Funding. All benefits under this Plan shall be paid directly from the general funds of the Employer, and no special or separate fund shall be established and no other segregation of assets shall be made to assure payment. No Participant, spouse, or beneficiary shall have any right, title or interest whatever in or to any investments which Employer may make to aid the Employer in meeting its obligation hereunder. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between an Employer and any Participant, spouse, or beneficiary of a Participant. Notwithstanding the foregoing, the Employer may at its sole discretion establish the Investment Fund described in Section 4.5 as a vehicle for accumulating the assets needed to pay the promised benefit. To the extent that any person acquires a right to receive payments from the Employer hereunder, such rights shall be no greater than the right of an unsecured creditor of the Employer. 15 ARTICLE VII Amendment, Administration 7.1 Amendment and Termination. The Company reserves THE RIGHT at any time to modify, amend, or terminate the Plan, provided that the Company shall not cancel, reduce, or otherwise adversely affect the amount of benefits of any Participant credited as of the date of any such modification, amendment, or termination, without the consent of the Participant. 7.2 Administration. The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company (the "Committee), which shall be authorized to interpret the Plan, to adopt rules and practices concerning the administration of the Plan, to resolve questions concerning eligibility for the Plan, amounts credited to Deferred Compensation Accounts, timing of distributions, crediting of earnings and other matters regarding the administration of the Plan. 7.3 Deduction of Taxes from Amounts Payable. The Employer may deduct FROM THE amount to be distributed under the Plan such amount as the Employer, in its sole discretion, deems proper for the payment of income, employment, death, succession, inheritance, or other taxes with respect to benefits under the Plan. 7.4 Indemnification. Each Employer shall indemnify and hold harmless each employee, officer, or director of an Employer to whom is delegated duties, responsibilities, and authority with respect to the Plan against all claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed upon him (including but not limited to reasonable attorney fees) which arise as a result of his actions or failure to act in connection with the operation and administration of the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty, or expense is not paid for by liability insurance purchased or paid for by an Employer. Notwithstanding the foregoing, an Employer shall not indemnify any person for any such amount incurred through any settlement or compromise of any action unless the Employer consents in writing to such settlement or compromise. 7.5 Expenses. The expenses of administering the Plan shall be paid by the Employer. 7.6 Claims. Claims for benefits shall be considered by the Committee in accordance with the claims procedures set forth in the Savings Plan. 16 ARTICLE VIII Miscellaneous 8.1 Interests not Transferable. Benefits payable UNDER THIS PLAN SHALL NOT BE SUBJECT IN ANY manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of a Participant prior to actually being received by the person entitled to the benefit under the terms of the Plan, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to benefits payable hereunder shall be void. The Employer shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any person entitled to benefits hereunder. If any person shall attempt to, or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his benefits under this Plan, or if by reason of his bankruptcy or other event happening at any time, such benefit would devolve upon any other person or would not be enjoyed by the person entitled thereto under the Plan, the Board of Directors of the Company, in its discretion, may terminate the interest in any such benefits of the person entitled thereof under the Plan and hold or apply them to or for the benefit of such person entitled thereto under the Plan or his spouse, children, or other dependents, or any of them, in such manner as the Board of Directors of the Company may deem proper. 8.2 Contract of Employment. Nothing contained herein shall be construed to constitute a contract of employment between a Participant and an Employer. 8.3 Headings. The headings of Articles and Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control. 8.4 Invalidity. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof and the Plan shall be construed and enforced as if such provisions, to the extent invalid or unenforceable, had not been included. 8.5 Law Governing. The Plan shall be construed and enforced according to the laws of Indiana other than its laws respecting choice of law. 17 IN WITNESS WHEREOF, the Company has executed this Plan this 2nd day of December, 1994 GREAT LAKES CHEMICAL CORPORATION BY: _____________________________ ATTEST: _______________________________ 18 Amendment No. 1 to Great Lakes Chemical Corporation Supplemental Savings Plan (Effective January 1, 1995) Great Lakes Chemical Corporation hereby adopts this Amendment No. 1 to the Great Lakes Chemical Corporation Supplemental Savings Plan (effective January 1, 1995). The provisions of this Amendment shall be effective as of January 1, 1995. 1. Section 4.5(a) of the Plan is hereby amended by deleting the first sentence of such Section and substituting in place thereof the following: Notwithstanding Section 4.2, 4.3 and 4.4, the Committee, Its sole discretion, may elect to establish on its books a separate investment account in the name of the Employer (Investment Fund) to assist the Employer in accumulating the assets needed to pay the promised benefits. IN WITNESS WHEREOF, the Company has executed this Amendment No. 1 to the Plan this 28th day of July, 1995. GREAT LAKES CHEMICAL CORPORATION By: _____________________________ ATTEST: ___________________________________ 19 SECOND AMENDMENT GREAT LAKES CHEMICAL CORPORATION SUPPLEMENTAL SAVINGS PLAN (Effective JANUARY 1, 1995) WHEREAS, Great Lakes Chemical Corporation (the "Company") established the Great Lakes Chemical Corporation Supplemental Savings Plan (the "Plan") effective January 1, 1995; and WHEREAS, Section 7.1 of the Plan reserves to the Company the right to amend the Plan; and WHEREAS, the Board of Directors of the Company has authorized the extension of coverage under the Plan to additional executives of the Company. NOW, THEREFORE, the following amendments to the Plan are hereby adopted effective as of January 1, 1996: 1. In the Table of Contents replace "Participant's Accounts" under Article 1V with "Participants' Accounts" and change Article V, "Amendment, Administration" to Article VII. 2. Add the word "in" after the words "same meaning as" in Section 1.3, "Definitions". 3. Replace the language in Section 2.1, "Eligibility and Participation" with the following: 2.1 Eligibility and Participation. Each person (a) who is a Participant in the Savings Plan, (b) whose annual base rate of earnings in a Plan Year after 1995 is at least $100,000 and (c) whose right to contribute to or receive an allocation under the Savings Plan is reduced by the limitations (i) on benefits imposed by Section 41 5(c) of the Code, (ii) on pre-tax deferrals imposed by Section 401 (k) of the Code and Section 402(g) of the Code, or (iii) on matching contributions and after-tax contributions under Section 401 (m) of the Code (such limitations are collectively referred to as the "Code Limitations") shall be eligible to become a Participant in the Plan. Such a person shall become a Participant on the first day of the calendar quarter that is coincident with or immediately follows the 30th day after the day on which the Participant satisfies the conditions described in (a), (b) and (c) above. The Employer shall establish for each Participant a Deferred Compensation Account. Notwithstanding the foregoing provisions of this Section 2.1 and the provisions of Section 3.1, an individual who is employed by the Company after December 31, 1995 and whose annual base rate of earnings in a Plan Year after 1995 is at least $100,000 may participate in the Plan although he has not satisfied all the conditions set forth above. Such an individual shall become a Participant as of the first day of the calendar quarter after he is employed by the Company by making an annual advance written election to defer up to 15% of his Compensation, as described in the first sentence of Section 3.1, prior to the first day of said calendar quarter. Once said individual becomes eligible to participate in the Savings Plan his 20 eligibility in this Plan will continue, but he must meet all the conditions contained in the prior paragraph of this Section 2.1 and in Section 3.1 in order to continue to make deferrals under Section 3.1 of this Plan and to receive Matching Contributions under Section 3.2. 4. In the Heading of Article 1V change "Participant's" to "Participants". 5. In the second sentence of Section 4.3, "Valuation of Accounts" replace "changed" with IN WITNESS WHEREOF, the Company has executed this Second Amendment to the Great Lakes Chemical Corporation Supplemental Savings Plan as of the 25th the day of April, 1996. Attest: Great Lakes Chemical Corporation By _______________________________ 21 Amendment No. 3 to Great Lakes Chemical Corporation Supplemental Savings Plan (Effective February 11, 1997) Great Lakes Chemical Corporation hereby adopts this Amendment No. 3 to the Great Lakes Chemical Corporation Supplemental Savings Plan (effective February 11, 1997). The provisions of this Amendment shall be effective as of February 11, 1997. 1. Section 7.2 of the Plan is hereby amended as follows: The Plan shall be administered by the Board of Directors of the Company, which shall be authorized to interpret the Plan, to adopt rules and practices concerning the administration of the Plan, to resolve questions concerning eligibility for the Plan, amounts credited to Deferred Compensation Accounts, timing of distributions, crediting of earnings and other matters regarding the administration of the Plan, and to delegate all or any portion of its authority hereunder to a committee of the Board of Directors or to designated officers or employees of the Company. IN WITNESS WHEREOF, the Company has executed this Amendment No. 3 to the Plan this 17th day of March , 1997. GREAT LAKES CHEMICAL CORPORATION By _______________________________ ATTEST: ___________________________________ 22 AMENDMENT TO GREAT LAKES CHEMICAL CORPORATION SUPPLEMENTAL SAVINGS PLAN The Great Lakes Chemical Corporation Supplemental Savings Plan (the "Plan"), is hereby amended, effective as of November 20, 1997, as set forth below. Any term which is not defined below shall have the meaning set forth in the Plan. 1. Section 4.1 of the Plan is hereby amended by adding the following phrase at the end thereof: provided, however, that the Participant's interest in that portion of his Deferred Compensation Account attributable to the Employer's matching contributions shall become fully vested upon the occurrence of a change in control of the Company. 2. Article IV of the Plan is hereby amended by adding a section 4.6 as follows: 4.6 Funding of Rabbi Trust. Notwithstanding any provision in the Plan to the contrary, in the event of a change in control of the Company (as defined in Section 8.6 hereof), the Company shall immediately fully fund a rabbi trust or similar instrument in an amount equal to the aggregate of each Participant's entire Deferred Compensation Account. 3. Section 6.1 of the Plan is hereby amended and restated to read as follows: Funding. Except as provided for in Section 4.6, all benefits under this Plan shall be paid directly from the general funds of the Employer, and no special or separate fund shall be established and no other segregation of assets shall be made to assure payment. No Participant, spouse, or beneficiary shall have any right, title or interest whatever in or to any investments which Employer may make to aid the Employer in meeting its obligation hereunder. 23 Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between an Employer and any Participant, spouse, or beneficiary of a Participant. Notwithstanding the foregoing, the Employer may at its sole discretion establish the Investment Fund described in Section 4.5 as a vehicle for accumulating the assets needed to pay the promised benefit. To the extent that any person acquires a right to receive payments from the Employer hereunder, such rights shall be no greater than the right of an unsecured creditor of the Employer. 4. Section 7.1 of the Plan is hereby amended and restated to read as follows: Amendment and Termination. The Company reserves the right at any time to modify, amend, or terminate the Plan; provided, that, (i) the Company shall not cancel, reduce, or otherwise adversely affect the amount of benefits of any Participant credited as of the date of any such modification, amendment, or termination, without the written consent of the Participant and (ii) the Company shall not adversely amend or modify the provisions hereof or terminate the Plan following a change in control of the Company (as defined in Section 8.6 hereof) without the written consent of 66 2/3 percent of the Participants. 5. Article VIII of the Plan is hereby amended by adding a section 8.6 as follows: 8.6 Definition of Change in Control. For purposes of the Plan, a "change in control of the Company" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: (a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Ex 2 24 change Act")) other than (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of shares of the Company (any such person is hereinafter referred to as a "Person"), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 20` of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company); (b) there is consummated a merger or consolidation of the Company with or into any other corporation, other than a merger or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto holding securities which represent, in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, immediately after such merger or consolidation, more than 70` of the combined voting power of the voting securities of either the 3 25 Company or the other entity which survives such merger or consolidation or the parent of the entity which survives such merger or consolidation; (c) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; or (d) during any period of two consecutive years (not including any period prior to the date of the Plan), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (a), (b) or (c) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof. For purposes of the Plan, where a change in control of the Company results from a series of related transactions, the change in control of the Company shall be deemed to have occurred on the date of the consummation of the first such transaction. For purposes of clause (a) of this subsection, the stockholders of another 4 26 corporation (other than the Company or a corporation described in subclause (iv) of clause (a) of this subsection) shall be deemed to constitute a Person. Further, it is understood by the parties that the sale, transfer, or other disposition of a subsidiary of the Company shall not constitute a change in control of the Company giving rise to payments or benefits under the Plan. Notwithstanding any other provision hereof, a "change in control of the Company" shall not be deemed to have occurred by virtue of the Company entering into any agreement with respect to, the public announcement of, the approval by the Company's stockholders or directors of, or the consummation of, any transaction or series of integrated transactions (including any merger or other business combination transaction) entered into in connection with, or expressly conditioned upon the occurrence of, a spin-off (such transaction or series of integrated transactions, the "Spin-Off Transaction") immediately following which the recordholders of the common stock of the Company immediately prior to the Spin-Off Transaction continue to have substantially the same proportionate ownership in the spun-off entity as they had in the Company immediately prior to the Spin-Off Transaction; provided that such Spin-Off Transaction (including any related merger of other - business combination transaction) has been approved by a vote of a majority of the Company's Continuing Directors (as defined below) then in office. For purposes of the Plan, a "Continuing Director" shall mean any member of the Board of the Company who is a member of the Board as of the date of the Plan and any person who subsequently becomes a member of the Board, if such person's nomination for election or election to the Board is recommended or approved by a majority of the Continuing Directors. 5 27 IN WITNESS WHEREOF, Great Lakes Chemical Corporation has caused this Amendment to be executed by a duly authorized officer of the Company as of the day and year first above written. GREAT LAKES CHEMICAL CORPORATION By: _______________________________ 6 EX-10.(IV) 7 SEVERENCE AGREEMENTS 1 Exhibit No. (10)(iv) SEVERANCE AND RELEASE AGREEMENT (Read Carefully Before Signing) In consideration of the agreement of Great Lakes Chemical Corporation ("Employer") to pay severance payments and provide benefits to _____________________ ("Employee") as provided in the Severance Plan for Domestic Directors and Key Management Employees Covered Under the Corporate Management Incentive Compensation Plan ("Plan"), which payments and benefits Employer is not otherwise obligated to pay or provide, Employee hereby unconditionally releases and discharges Employer from any claims, damages, wages, bonuses, commissions, or any other compensation, actions, liabilities, obligations, expenses, attorneys' fees, interest, or costs of any kind, known or unknown, directly or indirectly related to, or in any way connected with, Employee's employment with Employer or the termination of his employment with Employer. The parties agree that the severance payments and benefits provided in the Plan shall begin no later than twenty-one (21) calendar days after Employer receives a signed copy of this Agreement from Employee provided that a period of seven (7) calendar days has expired after Employee has signed and delivered this Agreement to Employer without Employee having revoked acceptance of this Agreement. The parties agree that the date of termination of Employee's employment shall be ___________, 199 . At this time Employee shall no longer be employed by Employer and, except as provided in the Plan, shall have no further right to participate in or accrue benefits under any Employer plan, policy or practice. Employee further agrees that execution of this Agreement is required in order to receive severance payments and benefits under the Plan. Employee agrees that he/she shall return to Employer all Employer property in his/her possession or control no later than _____________, 199__, including but not limited to, books, documents, memoranda, computer disks and other software, and other records. Employee further agrees that, as a condition of this Agreement, the fact of and terms and provisions of this Agreement are to remain strictly confidential and shall not be disclosed to any person except his/her legal and/or tax advisor(s), and/or other representatives, or as required by law. Employee further agrees, as a condition of this Agreement, that he/she will not make statements to any third parties which are in any way disparaging to Employer. Employee further understands that, in the event Employee breaches any of the provisions of this Agreement, Employee will return to Employer all severance payments paid to him/her, and will reimburse Employer for the cost of all benefits provided under the Plan (the cost to be calculated by the applicable monthly COBRA premium that would be charged for such benefits) and all attorneys' fees and costs of suit expended by Employer to enforce the provisions of this Agreement. The considerations exchanged herein do not constitute and shall not be interpreted under any local, state, or federal statute, ordinance, regulation or order, or any contract, or under common law, as an admission of wrongdoing, liability or guilt on the part of Employer regarding 2 Employee's employment with and separation of employment from Employer. Rather, this Agreement results solely from the desire by the parties to resolve expeditiously Employee's separation from Employer and any disputed issues of law and fact which may surround his/her employment with or separation of employment from Employer. The parties agree and acknowledge that the claims or actions released herein include, but are not limited to those based on any common law tort action or based on allegations of wrongful discharge and/or breach of contract, and those alleging any violation or allegation of discrimination on the basis of race, color, sex, religion, age, national origin, disability, or any other basis under Title VII of the Civil Rights Act of 1964 (as amended), Section 1981 of the Civil Rights Act of 1866, the Older Workers Benefit Protection Act, the Americans With Disabilities Act, the Family and Medical Leave Act, the Age Discrimination in Employment Act ("ADEA"), the Employee Retirement Income Security Act, all applicable state laws, the United States and all applicable state constitutions, any and all amendments to such statutes and constitutions, and those alleging any right or claim under any other federal, state, or local law, rule, or regulation. Employee also agrees that his alleged rights or claims under the aforementioned statutes and constitutions and any other federal, state, or local law, rule or regulation are waived by this Agreement; however, with regard to claims under the ADEA this Agreement only applies to the extent that those alleged rights or claims arose prior to the execution of this Agreement. The parties understand that, as used in this Agreement, "Employer" includes Great Lakes Chemical Corporation and all of its subsidiaries and affiliates, all of their past and present officers, directors, employees, trustees, agents, corporate parents, partners, shareholders, subsidiaries, affiliates, principals, insurers, any and all employee benefit plans (and any fiduciary of such plans) sponsored by the aforesaid entities, and each of them, and each entity's subsidiaries, affiliates, predecessors, successors, and assigns, and all other entities, persons, firms, or corporations liable or who might be claimed to be liable, none of whom admit any liability to Employee but all of whom expressly deny any such liability. Employee further understands, and it is his/her intent, that in the event this Agreement is ever held to be invalid or unenforceable (in whole or part) as to any particular type of claim or charge or as to any particular circumstances, it shall remain fully valid and enforceable as to all other claims, charges, and circumstances. As to any actions, claims, or charges that would not be released because of the revocation, invalidity, or unenforceability of this Agreement, Employee understands that the return of all severance payments paid to him/her and reimbursement of the cost of all benefits provided under the Plan (the cost to be calculated by the applicable monthly COBRA premium that would be charged for such benefits) is a prerequisite to asserting or bringing any such claims, charges, or actions. Employee further agrees that he/she will not seek re-employment or independent contractor status with Employer and will not in the future be eligible for such employment or independent contractor status with Employer. Employee acknowledges that he/she has read this Agreement, fully understands each and every provision, and signs it voluntarily and on his/her own accord. Employee also acknowledges that in consideration of accepting the consideration described above, he/she may be giving up possible future administrative and/or legal claims. EMPLOYEE ALSO 3 ACKNOWLEDGES THAT HE/SHE HAS BEEN ADVISED BY EMPLOYER TO CONSULT AN ATTORNEY PRIOR TO EXECUTING THIS AGREEMENT. Furthermore, the parties hereby acknowledge and agree that Employee has twenty-one (21) calendar days in which to consider this Agreement, and that this Agreement may be revoked by Employee within seven (7) calendar days after he/she delivers a signed copy to Employer. Written notice of revocation should be delivered to [insert title], Human Resources Department, [location]. The parties also acknowledge and agree that this Agreement shall not be effective or enforceable until the seven (7) calendar day revocation period expires. The parties agree that this Agreement and the Plan sets forth the entire agreement between the parties and supersedes-any written or oral understandings with respect to the subject matter herein. Other than as stated herein, the parties acknowledge and agree that no promise or inducement has been offered for the Agreement and no other promises or agreements shall be binding unless reduced to writing and signed by the parties. The parties agree that this Agreement is deemed made and entered into in the State of Indiana and in all respects shall be interpreted, enforced, and governed under the laws of the State of Indiana, unless otherwise preempted by Federal law. Any dispute under this Agreement shall be adjudicated by a court of competent jurisdiction in the State of Indiana. This Agreement may not be amended, supplemented, or modified except by a written document signed by both parties. This Agreement shall inure to the benefit of, and may be enforced by, and shall be binding on the parties and their assigns and successors in interest. The failure of either party hereto in any one or more instances to insist upon performance of any of the provisions of this Agreement or to pursue its rights hereunder shall not be construed as a waiver of any such provisions or the relinquishment of any such rights. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth below. _________________________________ Signature _________________________________ Printed Name _________________________________ -3- 4 Date Great Lakes Chemical Corporation By: ______________________________ Date: ____________________________ -4- EX-10.(V) 8 DEFERRED COMPENSATION PLAN SUPPLEMENT 1 Exhibit No. (10)(v) DEFERRED COMPENSATION AGREEMENT THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") is made and entered into this 1st day of December , 1992, by and between GREAT LAKES CHEMICAL CORPORATION, a Delaware corporation (the "Corporation"), and ROBERT T. JEFFARES, now residing in West Lafayette, Indiana ("Jeffares"). RECITALS 1. Jeffares is an executive and the Chief Financial Officer of the Corporation. In order to assure the Corporation of the continued benefit of Jeffares' services until his ultimate retirement, the Corporation has decided to provide certain deferred compensation benefits to Jeffares as an incentive to his continued employment with the Corporation. 2. In recognition of the foregoing, the Board of Directors of the Corporation has resolved that, effective January 1, 1991, Jeffares shall be credited with a $40,000 annual compensation increase (in addition to other compensation adjustments that may be decided upon by the Board of Directors from time to time) for the ten (10) year period beginning January 1, 1991 and ending December 31, 2000, and that such increase shall not be paid to Jeffares currently, but instead the Corporation shall provide the deferred compensation benefits set forth in this Agreement in lieu of annual $40,000 cash bonuses during such ten (10) year period. AGREEMENT In consideration of the foregoing and for other good and valuable consideration, the parties hereby agree as follows: 1. Benefits Upon Termination of Employment for Reason Other than Death. Upon the termination of the employment of Jeffares with the Corporation for any reason other than death 1 2 (whether voluntary or involuntary, or with or without cause), the Corporation shall pay to Jeffares, in addition to any other amounts payable by the Corporation to Jeffares under the Corporation's other compensation and benefit programs, annual benefits in the amount set forth below commencing in the month of January 2001 and continuing each January thereafter until fifteen (15) annual installments have been paid, with the last annual installment being due and payable in the month of January 2015. The amount of the said annual benefits shall be determined by reference to the year in which the termination of Jeffares' employment occurs in accordance with the following schedule:
Year of Termination Annual Benefit ------------------- -------------- 1992 $ 32,700 1993 $ 43,600 1994 $ 54,500 1995 $ 65,400 1996 $ 76,300 1997 $ 87,200 1998 $ 98,100 1999 $103,500 2000 $109,000
In the event Jeffares dies after commencement of benefits hereunder but prior to payment of all fifteen (15) annual installments, the remaining installments shall be paid to his beneficiary as designated pursuant to Section 4 below. If Jeffares dies after termination of his employment with the Corporation but prior to January 1 of the calendar year in which his benefits are to commence, then his said designated beneficiary shall receive the death benefits provided for in Section 3 below in lieu of the benefits described in this Section 1. If Jeffares terminates employment with the Corporation as a result of "Disability" (as defined below), then subject to the last paragraph of Section 2 below, Jeffares' termination shall, 2 3 for purposes of this Agreement, be deemed to occur on the date on which Jeffares ceases to perform full-time services for the Corporation as a result of such Disability, regardless of when his termination otherwise may be deemed to occur for purposes of the Corporation's other compensation and benefit programs. As used in this Agreement, "Disability" shall mean the inability of Jeffares to perform the full-time duties of his position with the Corporation as a result of injury or illness suffered by him for which he is entitled to receive (presently or after a designated waiting period) short term or long term disability benefits under any disability program sponsored by the Corporation. The "Disability" of Jeffares shall, for purposes of this Agreement, be deemed to end at such time as Jeffares is no longer entitled to receive short term or long term disability benefits under any disability program sponsored by the Corporation. 2. Acceleration Election. Notwithstanding the provisions of Section 1 above, Jeffares shall be entitled to elect (by written election filed in accordance with this Section 2) to reduce his annual benefits in accordance with the schedule set forth below and to accelerate the payment of such reduced annual benefits so that such benefits shall commence in the month of January of the year following the year in which Jeffares terminates employment with the Corporation and shall continue each January thereafter until fifteen (15) annual installments have been paid; provided, however, that if such termination of employment results from the Disability of Jeffares, then the fifteen (15) annual installments payable hereunder pursuant to Jeffares' said acceleration election shall not commence until the earlier of (a) January 2001, or (b) January of the year following the year in which such Disability ends. In the event Jeffares has filed a valid election to accelerate the payment of his annual benefits pursuant to this Section 2, then the amount of such annual benefits shall be determined 3 4 by multiplying the applicable annual benefit for the year of Jeffares' termination under the schedule set forth in Section 1 above times the following reduction factor based upon the year in which such benefits are to commence:
Year of Benefit Commencement Reduction Factor - - ---------------------------- ---------------- 1993 .6768 1994 .7107 1995 .7462 1996 .7835 1997 .8227 1998 .8638 1999 .9070 2000 .9524 2001 1.0000
For example, if Jeffares terminates employment with the Corporation in 1995 for a reason other than Disability and he has filed a valid acceleration election with the Corporation, then his annual benefit would be $51,241 per year ($65,400 times .7835) commencing in January 1996 and continuing each January thereafter until fifteen (15) annual installments have been paid. If, instead, Jeffares' termination in 1995 results from Disability and his Disability ends in 1998, then his annual benefits would be $59,318 per year ($65,400 times .9070) commencing in January 1999. To constitute a valid acceleration election under this Section 2, such election must be made in writing, must specifically refer to and affirmatively elect the right of acceleration provided for in this Section 2, and must be filed with the Corporation's Director of Human Resources either (a) upon the execution of this Agreement, or (b) at least one (1) year prior to the date on which Jeffares' termination of employment occurs. Any election not meeting these requirements shall be invalid and, in such event, the annual benefits payable to Jeffares hereunder shall be paid as if no election had been made. Jeffares may revoke any acceleration 4 5 election filed by him hereunder at any time prior to one (1) year preceding his termination of employment (but not thereafter), by filing a notice of revocation with the Director of Human Resources which specifically refers to and affirmatively revokes the prior election. Notwithstanding anything contained in this Section 2 to the contrary, if Jeffares terminates employment as a result of Disability and returns to active, full-time employment with the Corporation on or before the last day of the calendar year in which such Disability ends (but prior to January 2001), then (a) any acceleration election theretofore filed by Jeffares shall not be given effect until Jeffares suffers a subsequent termination of employment, and (b) for purposes of determining the amount of the benefit ultimately payable to Jeffares hereunder, if Jeffares shall remain in active, full-time employment of the Corporation for a period of one (1) year following his return to employment, then it shall be deemed as though Jeffares' employment with the Corporation had continued uninterrupted during the period of his Disability and he shall be entitled to receive full benefits hereunder (when such benefits become payable) as though his period of Disability had not occurred. If Jeffares returns to full-time employment with the Corporation on or before the last day of the calendar year in which such Disability ends but does not complete one (1) year of fulltime employment following his return, then Jeffares' benefits shall be calculated by reference to the year in which he first terminated employment as a result of Disability. 3. Payment of Benefits upon Death. If Jeffares shall die (either during his employment or after his employment has terminated) prior to January 1 of the calendar year in which the annual benefits payable under Section 1 or Section 2 above are to commence, then in lieu of the benefits otherwise payable under Sections 1 or 2, the Corporation shall pay annual benefits to Jeffares' beneficiary in the amount of $109,000 per year (without regard to the number of years of 5 6 Jeffares' employment with the Corporation as of the time of his death), commencing in the calendar month following Jeffares' death and continuing in the same calendar month of each year thereafter until a total of fifteen (15) annual installments have been paid. Notwithstanding the foregoing, however, if Jeffares' death shall occur prior to January 1, 1994 as a result of suicide, then in lieu of the annual benefits described in the preceding sentence and the benefits otherwise payable under Sections 1 or 2 above, the Corporation shall pay a single lump sum benefit to Jeffares' beneficiary in the amount of (a) $92,000 if Jeffares' death occurs prior to January 1, 1993, or (b) $145,000 if Jeffares' death occurs after December 31, 1992 but prior to January 1, 1994. 4. Designation of Beneficiary. Jeffares may, from time to time, designate one or more persons, trusts, or entities (primarily, contingently, or successively) to whom the Corporation shall pay the annual benefits hereunder in the event of his death. Such designation shall be in writing, shall specifically refer to this Agreement, and shall be effective upon the filing thereof with the Director of Human Resources of the Corporation. If Jeffares fails to designate a beneficiary in accordance with this Section or if the beneficiary named by Jeffares predeceases him (and no contingent beneficiary has been designated), then the Corporation shall pay the annual benefits hereunder to: (a) Jeffares' spouse; or if he has no spouse who shall survive him, then (b) Jeffares' estate. Benefit Claims Procedures. Any claim by Jeffares or his beneficiary (the "Claimant") for the payment of annual benefits under this Agreement shall be filed in writing with, and shall be reviewed and decided by, the Corporation's Director of Human Resources (the "Claims Manager"). If for any reason a claim for annual benefits is denied by the Claims 6 7 Manager, then the Claims Manager shall deliver to the Claimant, within ninety (90) days of the date the claim is filed with the Claims Manager, a written explanation of such denial, pertinent references to the provisions of this Agreement on which the denial is based, any other relevant data or materials, and information regarding the procedures to be followed by the Claimant in obtaining a review of his claim, all in a manner calculated to be understood by the Claimant. Upon receipt of the Claim Manager's denial of the claim, the Claimant shall have sixty (60) days following such receipt to file a written appeal with the Claims Manager requesting a review of the denial. Such appeal may include pertinent documents and written issues, arguments, and other comments. Within sixty (60) days following receipt of such appeal, the Claims Manager shall review and decide upon the appeal and shall issue a written decision on the appeal which shall include specific reasons for the decision and pertinent provisions of this Agreement on which the decision is based. Such decision shall be written in a manner calculated to be understood by the Claimant, and a copy thereof shall be furnished to the Claimant. If the Claimant does not receive a copy of the said decision within the said sixty (60) day period, then the appeal shall be deemed denied upon review. 6. Arbitration of Denied Claims. Any claim or controversy arising out of or relating to the Claim Manager's final review of an appeal pursuant to Section 5 above shall be settled by binding arbitration in West Lafayette, Indiana in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Any decision of the arbitrator shall be final and conclusive on the parties; there shall be no appeal therefrom other than for fraud or misconduct; and judgment upon such decision may be entered in any court having jurisdiction over the matter, or application may be made to any such court for confirmation of such decision, for a judicial acceptance thereof, for an order of enforcement, or for any other legal remedies which 7 8 may be necessary to effectuate such decision. All attorneys' fees incurred by the parties in connection with such arbitration shall be awarded in such manner as the arbitrator shall deem just and appropriate under the circumstances. Any claim or controversy submitted to arbitration hereunder shall be subject to all applicable statutes of limitation that would apply if such claim or controversy were brought as a suit in a United States District Court under the Employee Retirement Income Security Act of 1974, as amended. 7. Source of Benefits. The annual benefits payable to Jeffares (or his beneficiary) under this Agreement shall not be funded in any respect, but instead shall be paid solely from the Corporation's general assets. Neither Jeffares nor his beneficiary shall have any interest whatever in any specific assets of the Corporation under the terms of this Agreement. This Agreement evidences the Corporation's general unsecured promise to pay the benefits provided for herein, and shall not be considered to create an escrow account, trust fund, or other funding agreement of any kind or a fiduciary relationship between the Corporation and Jeffares. 8. Facility of Payment. If any benefit under this Agreement is payable to a minor or other person under legal disability, then the Corporation shall have the right to pay such benefit to the legal guardian of that person or to such other person or organization as a court of competent jurisdiction may direct. Acceptance of payment of any benefit by any legal guardian or other court appointed person or organization under this Section shall be a complete discharge of any liability the Corporation may have with respect to such benefit. 9. Effect on Other Benefits. The annual benefits payable under this Agreement shall constitute deferred compensation and shall not be deemed salary or other compensation to Jeffares for the purpose of computing benefits to which he may be entitled under any qualified pension or profit sharing plan or other arrangement maintained by the Corporation for the benefit 8 9 of its employees. 10. Contract of Employment. Nothing contained in this Agreement shall be construed as conferring upon Jeffares the right to continue in the Corporation's employ as an executive or in any other capacity. This Agreement shall not constitute an employment contract for a definite term or in any way act as a restriction on the Corporation's right to discharge Jeffares at any time or on Jeffares' right to terminate his employment with the Corporation at any time. 11. Nonalienation of Benefits. Neither Jeffares nor his beneficiary shall have any right whatever (other than by will or the laws of descent and distribution) to anticipate, pledge, alienate, assign, or otherwise transfer any rights or benefits under this Agreement, and any effort to do so shall be null and void. The benefits payable to Jeffares or his beneficiary under this Agreement shall be exempt from the claims of his (or her) creditors or other claimants and from all orders, decrees, levies, and executions and any other legal process to the fullest extent permitted by law. 12. Merger. Consolidation. or Acquisition. In the event of a merger or consolidation by the Corporation with another corporation, or the acquisition of all or substantially all of the assets or outstanding capital stock of the Corporation by another entity, then and in such event the obligations and responsibilities of the Corporation under this Agreement shall be assumed (and the Corporation shall cause them to be assumed) by any such successor or acquiring entity, and all of the rights, privileges, and benefits of Jeffares under this Agreement shall continue in full force and effect. 13. Entire Agreement: Amendment. This Agreement contains all of the terms and provisions of the parties' rights and obligations relating to the subject of this Agreement and constitutes the entire agreement of the parties regarding the subject matter hereof, and any 9 10 alleged terms or provisions other than those contained herein shall be of no effect. This Agreement may not be amended or modified except by a written document signed by all parties to this Agreement. 14. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Indiana to the extent those laws are not preempted by the laws of the United States of America. 15. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, assigns, personal representatives, heirs, and any beneficiary of Jeffares. 16. Section Heading. The section headings of this Agreement are for reference purposes only and shall not affect the meaning or interpretation of the terms and provisions of this Agreement. IN WITNESS WHEREOF, Jeffares and the Corporation have duly executed this Agreement on the day and year first above written. GREAT LAKES CHEMICAL CORPORATION By: ____________________________________ Title: President and CEO ATTEST: _______________________________ Secretary [Corporate Seal] _________________________________ (Seal) Robert T. Jeffares 10 EX-10.(VI) 9 LONG TERM COMPENSATION PLAN 1 Exhibit No. (10)(vi) December 19, 1996 GREAT LAKES CHEMICAL CORPORATION NON-EMPLOYEE DIRECTORS' DEFERRED AND LONG TERM COMPENSATION PLAN 1. PURPOSE The purpose of the Non-Employee Directors' Deferred and Long Term Compensation Plan (the "Plan") is to provide each Non-Employee Director with part of his or her compensation in shares of stock in Great Lakes Chemical Corporation (the "Stock") and to provide each Non-Employee Director with the opportunity to elect to defer all or part of his or her cash compensation ("Cash Compensation"). The Plan is intended as a means of maximizing the effectiveness and flexibility of compensation arrangements, and as an aid in attracting and retaining Non-Employee Directors of outstanding abilities for the long-term growth and profitability of the Great Lakes Chemical Corporation (the "Company"). A "Non-Employee Director" is a member of the Company's board of directors who is not an "employee," as determined by the Compensation and Incentive Committee of the Company's Board of Directors (the "Committee"). 2. EFFECTIVE DATE The Plan shall be effective with respect to services performed after December 31, 1 996 (the "Plan Effective Date"). 3. PLAN ADMINISTRATION The Plan will be administered by the Committee. Full power to implement, interpret and construe the provisions of the Plan shall, except as otherwise provided in the Plan, be vested in the Committee. The Committee's interpretations and construction hereof, and actions hereunder, including any valuation of accounts, or determination of amounts or recipients of any payment hereunder, shall be binding and conclusive on all persons for all purposes. No Committee member may participate in any decisions with respect to that member's benefits under the Plan unless such decision applies to all Non-Employee Directors. No member of the Committee shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to his own willful misconduct or lack of good faith. The expense of administering the Plan shall be borne by the Company and shall not be charged against amounts payable hereunder. 4. ELIGIBILITY Each Non-Employee Director shall be eligible to participate in the Plan. Each Non Employee Director on the date that this Plan is adopted shall be eligible to participate as of 1 2 January 1, 1997. Each Non-Employee Director who first serves after January 1, 1997 shall be eligible to participate in the Plan from the date upon which he or she first serves as a Non-Employee Director. Participation in the Plan by each Non-Employee Director shall continue until the date of the last payment made pursuant to Section 8 hereof. 5. ELECTION TO DEFER CASH COMPENSATION (a) The Election in General. Each Non-Employee Director shall be entitled to make an irrevocable annual election (a "Deferral Election") to defer receipt of some or all of his or her Cash Compensation ("Deferred Compensation"). Deferred Compensation shall be credited to the "Cash Account" designated hereinbelow in such amounts as shall have been specified in the Deferral Election. The amount of Deferred Compensation hereunder shall be credited as of the date such Cash Compensation would otherwise have been paid to the Non-Employee Director. As used in the Plan, "Cash Compensation" shall mean the fees (except telephone conference fees) payable to each Non-Employee Director for his or her services to the Company as a director. (b) Manner of Election. All Deferral Elections must be made before the calendar year for which the Cash Compensation is payable; provided, however, that (i) for the 1997 calendar year, Non-Employee Directors eligible on the Plan Effective Date may make the applicable Deferral Election within thirty (30) calendar days after the Plan Effective Date, and (ii) in the first year in which a Non-Employee Director becomes eligible to participate in the Plan, the newly eligible Non Employee Director may make the applicable Deferral Election for services to be performed subsequent to such election within thirty (30) calendar days after the date on which such Non Employee Director becomes eligible. Any Deferral Elections made after the times specified in this Section 5(b) shall be effective for the following calendar year. Each Deferral Election shall remain effective for all subsequent calendar years unless and until revoked. Subject to the foregoing, Deferral Elections shall be made on such form(s) as the Committee may prescribe. (c) Cash Account Deferred Compensation allocated to the "Cash Account" shall be converted into credits equal to the cash value of such Deferred Compensation. The amount of such credits shall earn interest at a rate equal to 90% of the prime rate of Chase Manhattan Bank as of the last business day of each calendar quarter, or at such other rate as may be adopted from time to time by the Committee. A change in the rate credited under this Plan shall not require an amendment to this Plan. (d) Vesting of Deferred Compensation Account. A Non-Employee Director shall be one hundred percent (100%) vested in his or her Cash Account. 6. LONG TERM COMPENSATION (a) Grants. The Committee may grant long term compensation from time to time to Non Employee Directors. 2 3 (b) Stock Units. Long term compensation shall be expressed in the form of "Stock Units." Each Stock Unit shall represent the right of a Non-Employee Director to receive payment from the Company, subject to the vesting schedule and occurrence of the payment events specified hereinbelow. Each Stock Unit shall be payable in cash in an amount equal to (i) the Market Value of one share of Stock on the date of such payment, multiplied by (ii) the number of Stock Units awarded to such Non-Employee Director as long term compensation. (c) Long Term Compensation Account. Stock Units granted pursuant to the Plan shall be recorded in a "Long Term Compensation Account." The Long Term Compensation Account shall be credited with the equivalents of cash dividends, Stock dividends, Stock splits and similar distributions. (d) Vesting of Long Term Compensation. Unless expressly provided by the Committee in respect of a specific grant of Stock Units to a Non-Employee Director, Stock Units granted to each Non-Employee Director shall vest in accordance with the following schedule (subject to the continuing service of the Non-Employee Director, and subject to Section 8(g)): Vesting Schedule Years of Service as a Non-Employee Director - - ---------------- ------------------------------------------- 0% Less than 1 20% 1 40% 2 60% 3 80% 4 100% 5 or more 7. MARKET VALUE OF THE STOCK The Market Value of the Stock for the purposes of the Plan shall be the Stock's closing price reported on the New York Stock Exchange Composite Tape on the trading day prior to the date as of which such amount would otherwise have been payable as cash. 8. PAYMENTS (a) In General. Except as provided in this Section 8, no withdrawal or payment shall be made from any Non-Employee Director's Cash Account or Long Term Compensation Account (collectively the "Plan Accounts" and individually a "Plan Account"). Payments of Stock Units shall be payable from the Long Term Compensation Account only to the extent that such Stock Units have vested prior to the Payment Date in respect of the Long Term Compensation Account. (b) Payment Options. The value of each Plan Account shall be payable under two alternative options, at the election of the Non-Employee Director as follows: Option one: in cash as a single sum payment as soon as practicable following the Payment Date; and 3 4 Option two: in annual installments over ten years, commencing as soon as practicable following the Payment Date. (c) Election of Payment Options. The elections made by each Non-Employee Director in respect of payments from each of his or her Plan Accounts (individually a "Payment Election" and collectively "Payment Elections") shall be made separately as to each Plan Account. Payment Elections shall apply to all amounts available in each account at the time that the payment is made. All Payment Elections shall be effective on the beginning of the calendar year commencing at least one year after the election is made, provided, however, that (i) for the 1997 calendar year, Non Employee Directors eligible on the Plan Effective Date may make the applicable Payment Election within thirty (30) calendar days after the Plan Effective Date, and (ii) in the first year in which a Non-Employee Director becomes eligible to participate in the Plan, the newly eligible Non Employee Director may make the applicable Payment Election within thirty (30) calendar days after the date on which such Non-Employee Director becomes eligible. Any Payment Election made after the times specified in this Section 8(c) shall be effective beginning the calendar year commencing at least one year after the Payment Election is made. Each Payment Election shall remain effective unless and until revoked or amended. Subject to the foregoing, Payment Elections shall be made on such form(s) as the Committee may prescribe. In the absence of an Effective Payment Election, the Non-Employee Director shall be deemed to have elected Option One pursuant in Section 8(b). (d) The Payment Date. The "Payment Date" for payments from the Cash Account shall commence on the date on which the Non-Employee Director retires or resigns from service. The "Payment Date" for payments from the Long Term Compensation Account shall be the later of (i) the retirement of the Non-Employee Director, or (ii) the date upon which he or she attains age 70, on which date the final value of the stock units shall be established. For the purpose of making such payment(s), each Plan Account shall be valued as of its Payment Date. The amount of each installment elected under Option two in Section 8(b) shall be equal to the quotient obtained by dividing the Non-Employee Director's account balances as of the date of such installment payment by the number of installment payments remaining to be made to such Non Employee Director at the time of calculation. The remaining balance of the Cash Account and the Long Term Compensation Account shall earn interest at the rate specified in Section 5(c) until paid. Acceleration for Hardship. In the event of an Unforeseeable Emergency, a NonEmployee Director may petition the Committee to accelerate payments of balances credited to his or her Cash Account (but not the Long Term Compensation Account). Pursuant to such a petition, the Committee in its sole discretion may distribute to a Non-Employee Director all or part of such balances in a lump sum cash payment. Distributions because of a Unforeseeable Emergency shall be determined on a case by case basis and will be permitted only to the extent reasonably needed to satisfy the emergency need. For the purpose of any such accelerated payment, the value of the Cash Account shall be determined in accordance with Section 5(c) on the date of each such payment. Payments may not be made to the extent that such hardship is or may be relieved: (i) 4 5 through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Non-Employee Director's assets (to the extent the liquidation of such assets would not itself cause a severe financial hardship), or (iii) by cessation of participation in the Plan. (f) Disability of Non-Employee Director. In the event of Disability of a Non-Employee Director before attainment of age seventy-two and prior to retirement or resignation, a Non-Employee Director (or his or her legal representative) may petition the Committee to receive a benefit equal to the remaining balance of his or her Cash Account (but not the Long Term Compensation Account). Such benefit shall be payable pursuant to elections made by the Non- Employee Director in the manner provided in Section 8(b). Such payments shall be made until the earliest of the following events: (i) there is no longer any balance m the designated account(s), (ii) the Non-Employee Director resumes service as a Non-Employee Director, or (iii) the Non-Employee Director dies. For the purpose of any such payments, the value of the Cash Account shall be determined in accordance with Section 5(c) on the date of each such payment. For purposes of this Section 8(f), "Disability" means a condition, as determined by the Committee, that totally and continuously prevents the Non-Employee Director, for at least six consecutive months, from serving as a Non-Employee Director. (g) Death of Non-Employee Director. In the event of the death of a Non-Employee Director either during or after his or her period of service as a Non-Employee Director, the entire balance of his or her Cash Account (but not the Long Term Compensation Account) shall be paid in cash in a lump sum to the Non-Employee Director's designated beneficiaries (or, in absence of such designation, to his or her heirs in accordance with his or her last will and testament or, in the absence of a will, by the laws of intestate succession). For the purpose of any such payments, the value of the Cash Account shall be determined in accordance with Section 5(c) on the date of such payment. In the event of the death of a former Non-Employee Director prior to the date upon which he or she attains age 70, such Non-Employee Director's Long Term Compensation Account shall be forfeited. In the event of the death of an active Non-Employee Director prior to the date upon which he or she retires, such Non-Employee Director's Long Term Compensation Account shall be forfeited. In the event of the death of a Non-Employee Director after his or her period of service and after his or her attaining age 70, the remaining vested portion of his or her Long Term Compensation Account shall be paid in cash in a lump sum to the Non-Employee Director's designated beneficiaries (or, in absence of such designation, to his or her heirs in accordance with his or her last will and testament or, in the absence of a will, by the laws of intestate succession). 9. EFFECT OF CHANGE IN CONTROL If a single individual or legal entity acquires or offers to acquire more than fifty percent of the outstanding Stock, or if all or substantially all of the assets of the Company are transferred (or the Company agrees to transfer all or substantially all of its assets) to another entity by way of sale, merger, consolidation or other means (a "change in control"), then the entire balance of a NonEmployee Director's Plan Accounts shall be paid in a lump sum cash distribution to such NonEmployee Director within 30 days after the change in control. For the purpose of any such payment, the value of the Plan Accounts shall determined in accordance with Sections 5(c) and 5 6 6(c) and (d) on the date of the change in control. 10. UNSECURED OBLIGATIONS (a) The credits in Plan Accounts are bookkeeping entries only, and do not represent actual shares of Stock or cash. The Company shall furnish each Non-Employee Director with quarterly statements of activity and balances in his or her Plan Accounts. (b) The obligation of the Company to make payments of amounts credited to the NonEmployee Director's Plan Accounts shall be a general obligation of the Company, and such payments shall be made from general assets and property of the Company. The Non-Employee Director's relationship to the Company under the Plan shall be only that of a general unsecured creditor and neither this Plan nor any agreement entered into hereunder or action taken pursuant hereto shall create or be construed to create a trust or fiduciary relationship of any kind. 11. INTERESTS NOT TRANSFERABLE Benefits payable under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of a Non-Employee Director prior to actually being received by the person entitled to the benefit under the terms of the Plan, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to benefits payable hereunder shall be void. The Company shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any person entitled to benefits hereunder. If any person shall attempt to, or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his benefits under this Plan, or if by any reason of his bankruptcy or other event happening at any time, such benefit would devolve upon any other person or would not be enjoyed by the person entitled hereto under the Plan, the Committee, in its sole and absolute discretion, may terminate the interest in any such benefits of the person entitled thereof under the Plan and hold or apply them to or for the benefit of such person entitled thereto under the Plan in such manner as the Committee may deem proper. 12. DESIGNATION OF BENEFICIARIES Non-Employee Directors shall have the right to designate in writing, in accordance with such rules and procedures as the Committee may prescribe, the beneficiary or beneficiaries who are to receive the payments from his or her Cash Account, and the vested and non-forfeitable portion of his or her Long Term Compensation Account, if any, in the event of the Non-Employee Director's death. 13. INCAPACITY If the Committee shall find that any person to whom any payment is payable under the 6 7 Plan is unable to care for his affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, or a brother or sister, or to any person deemed by the Committee to have incurred expense for such person otherwise entitled to payment, in such a manner and proportions as the Committee may determine. Any such payment shall be a complete discharge of the liabilities of the Company under the Plan. 14. CONTINUED DIRECTORSHIP Nothing contained herein shall be construed as conferring upon the Non-Employee Director the right to continue to serve as a Non-Employee Director. 15. CONTROLLING LAW The Plan shall be construed in accordance with and governed by the law of the State of Indiana. 16. AMENDMENT AND TERMINATION (a) Amendment. The Plan may be amended in whole or in part by the Committee at any time. Notice of any such amendment shall be given in writing by the Committee to each Non-Employee Director and each Beneficiary of a deceased Non-Employee Director. No amendment shall decrease the value of a Non-Employee Director's Plan Accounts, the benefits to which a NonEmployee Director may be entitled under Section 8 or other benefit entitlements existing prior to any such amendment. (b) Board of Director's Right to Terminate. The Board of Directors reserves the sole right to terminate the Plan and/or any grant or other agreement pertaining to a Non-Employee Director at any time after the Plan Effective Date. In the event of any such termination, the Non-Employee Director shall be entitled to a payment equal to the balance as of the date of termination of his Plan Accounts determined under Sections 5 and 6 and payable in accordance with Section 8. * * * 7 EX-10.(VII) 10 SPLIT-DOLLAR LIFE INSURANCE 1 Exhibit No. (10)(vii) SPLIT DOLLAR LIFE INSURANCE THIS AGREEMENT, made and entered into this 1st day of January, 1996, by and among Great Lakes Chemical Corporation (hereinafter referred to as the "Corporation"), a Corporation organized and existing under the laws of Delaware, and ____________________ (hereinafter referred to as the Employee). WHEREAS, the Employee has performed his duties in an efficient and capable manner; and/or WHEREAS, the Corporation is desirous of retaining the services of the Employee; and WHEREAS, the Corporation is desirous of assisting the Employee in paying for life insurance on his life; and WHEREAS, the Corporation has determined that this assistance can best be provided under a "split-dollar" arrangement; and WHEREAS, the Employee has applied for, and is the owner of Insurance Policy No. 8887370 (the "Policy") issued by New England Mutual Life Insurance Company ("The New England") in the face amount of $590,000 which is described in Exhibit A attached hereto and by reference made a part hereof; and WHEREAS, the Employee and the Corporation agree to make said insurance policy subject to this split-dollar agreement; and WHEREAS, the Employee has assigned the Policy to the Corporation as collateral for amounts to be advanced by the Corporation under this Agreement by an instrument of assignment, dated January 1, 1996, (the "Assignment"); and WHEREAS, it is now understood and agreed that this split-dollar Agreement is to be effective as of the date on which the Policy was assigned to the Corporation; NOW, THEREFORE, for value received and in consideration of the mutual covenants contained herein, the parties agree as follows: ARTICLE I - DEFINITIONS For purposes of this Agreement, the following terms will have the meanings set forth below: 1.) "CASH SURRENDER VALUE OF THE POLICY" will mean the Cash Value of the Policy; plus the cash value of any paid-up dividends; and less any Policy Loan Balance. 2.) "CASH VALUE OF THE POLICY" will mean the cash value as illustrated in the table of values shown in the Policy. 3.) "CORPORATION'S INTEREST IN THE POLICY" will be as defined in Article VII. 4.) "CURRENT LOAN VALUE OF THE POLICY" will mean the Loan Value of the Policy reduced by any outstanding Policy Loan Balance. 5.) "LOAN VALUE OF THE POLICY" will mean the amount which with loan interest will equal the Cash Value of the Policy and of any paid-up additions on the next loan interest due date or on the next premium due date, whichever is the smaller amount. 6.) "POLICY LOAN BALANCE" at any time will mean policy loans outstanding plus interest 2 accrued to date. ARTICLE II - OWNERSHIP OF POLICY 1.) The Employee has purchased the Policy from The New England in the total Face amount of $590,000. The parties hereto agree that they will take all necessary action to cause the New England to conform to the provisions of this Agreement. The parties hereto agree that the Policy shall be subject to the terms and conditions of this Agreement and of the collateral assignment filed with the Insurer relating to the Policy. 2.) The Employee shall be the sole and absolute owner of the policy, and may exercise all ownership rights granted to the owner thereof by the terms of the Policy, except as may otherwise be provided herein. ARTICLE III - ALLOCATION OF PREMIUMS The Corporation will pay all premiums on the Policy when due, or within the grace period provided under the policy. The Corporation shall annually furnish to the Employee a statement of the amount of income reportable by the Employee for federal and state income tax purposes, as a result of the insurance protection provided the Employee's beneficiary. ARTICLE IV- WAIVER OF PREMIUMS RIDER Upon written request by the Corporation, the Employee will add to the Policy a rider providing for the waiver of premiums in the event of disability. Any additional premium attributable to such rider will be payable by the Corporation. ARTICLE V - OTHER RIDERS AND SUPPLEMENTAL AGREEMENTS Should the Corporation deem it desirable, the Employee will add to the Policy one or more of such other riders or supplemental agreements which may be available from The New England. Any additional premium attributable to such rider or supplemental agreement will be payable by the Corporation. Any additional death benefits provided by such rider or supplemental agreement will be paid to the Corporation. ARTICLE VI - APPLICATION OF POLICY DIVIDENDS All dividends attributable to the Policy will be applied to provide paid-up additional insurance as set forth in the Policy. 3 ARTICLE VII - RIGHTS IN THE POLICY The Employee may exercise all rights, options and privileges of ownership in the Policy except those granted to the Corporation in the Assignment. The Corporation will have those rights in the Policy given to it in the Assignment except as hereinafter modified. The Corporation may not surrender the Policy for cancellation except upon expiration of the thirty (30) day period described in Article X. The Corporation will not without the written consent of the Employee assign it's rights in the Policy, other than for purposes of obtaining a loan against the Policy, to anyone other than the Employee. The Corporation will not take any action in dealing with The New England that would impair any right or interest of the Employee in the Policy. The Corporation will have the right to borrow from the New England, and to secure that loan by the Policy, an amount which, together with the unpaid interest accrued thereon, will at no time exceed the lesser of (a) the Corporation's Interest in the Policy, and (b) the Loan Value of the Policy. The Corporation's Interest in the Policy will be the face value of the Policy, less any death benefits payable pursuant to Article VIII. "Corporation's Interest in the Policy N will mean, at any time at which the value of such interest is to be determined under this Agreement prior to the Employee's death, the total of premiums theretofore paid on the Policy by the Corporation accumulated at four percent (4%) per annum compound interest (including premiums paid by loans charged automatically against the Policy), reduced by the Policy Loan Balance, with respect to any loans made or charged automatically against the Policy by the Corporation. In the event that the Corporation has paid additional premiums attributable to a rider providing for the waiver of premiums in the event of the Employee's disability, Premiums" as used in the preceding sentence will not include any premiums waived pursuant to the terms of such rider while this Agreement is in force. ARTICLE VIII - RIGHTS TO THE PROCEEDS AT DEATH In the event of the Employee's death while this Agreement is in force, the beneficiary designated by the Employee will receive two times the Employee's annual base compensation payable as of the date of the Employee's death. On January 1 of the year following the Employee's retirement, the amount payable to the Employee's beneficiary will be reduced to one times the amount of the Employee's base annual compensation. The amount payable to the Employee's beneficiary will be further reduced by 10% each January 1 thereafter for five years. ARTICLE IX- TERMINATION OF AGREEMENT This Agreement may be terminated at any time while the insured is living by written notice thereof by either the Corporation or the Employee to the other; and, in any event, this Agreement will terminate upon the earlier of the termination of the Employee's employment for reasons other than retirement and the payment of all benefits under the Policy in accordance with this Agreement following the Employee's death. 4 ARTICLE X - EMPLOYEE RIGHTS UPON TERMINATION The Employee will, for thirty (30) days immediately following the date on which termination occurs, have the right to obtain a release of the Assignment by paying to the Corporation an amount equal to the Corporation's Interest in the Policy. Upon such payment the Corporation will release it's Interest in the Policy to the Employee. Alternatively, at the election of the Employee prior to the expiration of said (30) day period and upon the payment by him of the excess, if any, of the Corporation's Interest in the Policy over the Current Loan Value of the Policy, the Corporation will make a collateral policy loan from the New England in the amount of the Current Loan Value of the Policy, or in the amount of the Corporation's Interest in the Policy, if less, and release it's Interest in the Policy to the Employee. Upon release by the Corporation of all it's Interest in the Policy, the Employee will thereafter own the Policy free from the Assignment and from this Agreement, but subject to any Policy Loan Balance. If the Employee fails to make either the payment provided for in the first paragraph or the election (and payment, if any) provided for in the second paragraph of this Article, the Employee agrees to transfer all of his right, title and interest in the Policy to the Corporation, by executing such documents as are necessary to transfer such right, title and interest to the Corporation as of the date of termination. The Corporation will thereafter be able to deal with the policy in any way that it may seem fit. ARTICLE XI - STATUS OF AGREEMENT VS. COLLATERAL ASSIGNMENT As between the Employee and the Corporation, this Agreement will take precedence over any provisions of the Assignment. The Corporation agrees not to exercise any rights possessed by it under the Assignment except in conformity with this Agreement. ARTICLE XII - SATISFACTION OF CLAIM The Employee's rights and interest, and rights and interest of any persons taking under or through him, will be completely satisfied upon compliance by the Corporation with the provisions of this Agreement. ARTICLE XIII - AMENDMENT AND ASSIGNMENT This Agreement may be altered, amended or modified, including the addition of any extra policy provisions, by a written instrument signed by the Corporation and the Employee. Either party may, subject to the limitations of Article VII, assign it's interest and obligations under this Agreement, provided, however, that any assignment will be subject to the terms of this Agreement. 5 ARTICLE XIV - POSSESSION OF POLICY The Corporation will keep possession of the Policy, and will provide an exact duplicate of the Policy to the Employee. ARTICLE XV - ADMINISTRATION 1.) The Corporation is hereby designated as the named fiduciary under this Agreement. The named fiduciary shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy consistent with the objectives of this Agreement. 2.) The Corporation shall have sole and absolute discretion to interpret the provisions of this Agreement (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of this Agreement), to determine the rights and status under this Agreement of the Employee, his beneficiary and other persons, to decide disputes arising under this Agreement, and to make any determinations and findings with respect to the benefits payable thereunder and the persons entitled thereto as may be required for the purposes of this Agreement. In furtherance of, but without limiting, the foregoing, the Corporation is hereby granted the following specific authorities, which it shall discharge in its sole and absolute discretion in accordance with the terms of this Agreement (as interpreted, to the extent necessary, by the Corporation): (a) To resolve all questions arising under the provisions of this Agreement as to any individual's entitlement to become a Participant; (b) To determine the amount of benefits, if any, payable to any person under this Agreement; and (c) To conduct the review procedure specified in Section 4 of this Article. All decisions of the Corporation as to the facts of any case, as to the interpretation of any provision of this Agreement or its application to any case, and as to any other interpretive matter or other determination or questions under this Agreement shall be final and binding on all persons affected thereby, subject to the provisions of Section 3 of this Article. 3.) The Employee, his beneficiary or any other individual (hereinafter referred to as the "Claimant") who believes that he is entitled to receive a benefit under this Agreement that he has not received may file a written claim with the Corporation (on a form furnished by the Corporation) specifying the basis for his claim and the facts upon which he relies in making such claim. Such claim must be signed by the Claimant or his authorized representative and shall be deemed filed when delivered to the Corporation. (a) Unless such claim is allowed in full, within 90 days after such claim is filed (plus an additional period of 90 days if required for processing and if notice of the 6 extension is given to the claimant within the first 90 - day period), the Corporation shall cause written notice to be mailed to the Claimant of the total or partial denial of such claim. Such notice shall be written in a manner calculated to be understood by the Claimant and shall state: (1) The specific reason(s) for the denial of the claim: (2) Specific reference(s) to pertinent provisions of the Agreement on which the denial of the claim was based; (3) A description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary; and this Article. (4) An explanation of the review procedures specified in Section 4 of (b) If notice of denial of a claim is not furnished within the time specified above, the claim shall be deemed to have been denied in full. 4.) (a) Within 60 days after the denial of a claim, such Claimant may appeal such denial by filing with the Corporation a written request for a review of such claim on a form provided by the Corporation. If such Claimant does not file such a request with the Corporation within such 60 - day period, the Claimant shall be conclusively presumed to have accepted as final and binding the initial decision of the Corporation on his claim. (b) If such an appeal is so filed within 60 days, the Corporation shall (1) conduct a full and fair review of such claim and (2) mail or deliver to the Claimant a written decision on the matter based on the facts and pertinent provisions of the Agreement within a period of 60 days after the receipt of the request for review unless special circumstances require an extension of time, in which case such decision shall be rendered not later than 120 days after receipt of such request. If an extension of time for review is required, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension. (c) Such decision (1) shall be written in a manner calculated to be understood by the Claimant, (2) shall state the specific reason(s) for the decision, (3) shall make specific reference(s) to pertinent provisions of this Agreement on which the decision is based and (4) shall, to the extent permitted by applicable law, be final and binding on all interested persons. (d) During such review, the Claimant or his duly authorized representative shall be given an opportunity to review the documents that are pertinent to the Claimant's claim and to submit issues and comments in writing. (e) If the decision on review is not furnished within such 60 - day or 120 - day period, as the case may be, the claim shall be deemed denied in full on review. 7 ARTICLE XVI - GOVERNING LAW This Agreement sets forth the entire agreement of the parties hereto, and any and all prior Agreements, to the extent inconsistent herewith, are hereby superseded. This Agreement will be governed by the laws of the State of Delaware except to the extent preempted by federal law. ARTICLE XVII - INTERPRETATION Where appropriate in this Agreement, words used in the singular will include the plural and words used in the masculine will include the feminine. IN WITNESS WHEREOF, the parties have hereunto set their hands and seals, the Corporation by it's duly authorized officer, on the day and year first above written. ___________________________ (L.S.) EMPLOYEE GREAT LAKES CHEMICAL CORPORATION, BY ___________________________ (L.S.) TITLE: 8 EXHIBIT A The following life insurance policy is subject to the attached Agreement: INSURER: New England Mutual Life Insurance Company INSURED: POLICY NUMBER: FACE AMOUNT: DATE OF ISSUE: EX-10.(VIII) 11 CHANGE IN CONTROL AGREEMENTS 1 Exhibit No. (10)(viii) CHANGE OF CONTROL AGREEMENT March 16, 1998 Dear Great Lakes Chemical Corporation (the "Company") considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its stockholders. In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control exists and that such possibility, and the uncertainty and questions which it may raise among management, could result in the departure or distraction of key management personnel to the detriment of the Company and its stockholders. Accordingly, the Company's Board of Directors (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including yourself, to their assigned duties without distraction and disruption in the event of a threatened or actual change in control of the Company. This letter does not constitute an employment contract, nor does it alter your status as an at will employee of the Company or any subsidiary thereof. This letter agreement merely sets forth the severance benefits which the Company agrees will be provided to you in the event, but only in the event, that your employment with the Company and its subsidiaries terminates or is deemed to terminate subsequent to a "change in control of the Company" or a "potential change in control of the Company" as defined in paragraph 2 hereof under the circumstances specified herein. In order to accomplish the purposes specified herein, the parties hereby agree as follows: 1. TERM. (a) This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1999; provided, however, that commencing on January 1, 1999 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30th of the preceding year, the Company shall have given you notice that it does not wish to extend this Agreement or a change in control of the Company, as defined in paragraph 2 hereof, shall have occurred prior to such January 1; provided, however, (i) if a change in control of the Company shall have occurred during the term of this Agreement, this Agreement shall continue in effect for a period of not less than thirty-six (36) months beyond the month in which such change in control of the Company occurs, and (ii) this Agreement shall continue in effect during the pendency of a "potential change in control of the Company" (as defined in paragraph 2(b) hereof) (or in the case of a potential change in control of the Company described in paragraph 2(b)(i), for a period of three (3) months following the occurrence of such potential change in control of the Company). 2 (b) This Agreement shall be immediately terminated, and you shall have no right to the payment of any compensation or benefits under this Agreement, in the event that your employment with the Company and its subsidiaries is terminated, with or without Cause, prior to the occurrence of a change in control of the Company. Nothing in this Agreement shall confer upon you any right to continue in the employ of the Company and its subsidiaries prior to a change in control of the Company or shall interfere with or restrict in any way the rights of the Company and its subsidiaries, which are hereby expressly reserved, to discharge you at any time prior to a change in control of the Company for any reason whatsoever. (c) Notwithstanding the provisions of paragraph l(b) hereof, in the event that your employment with the Company and its subsidiaries is terminated by the Company and its subsidiaries during the pendency of a "potential change in control of the Company" (as defined in paragraph 2(b) hereof) (or, in the case of a potential change in control of the Company described in paragraph 2(b)(i), within three (3) months following the occurrence of such potential change in control of the Company), then such termination shall be deemed to be a termination subsequent to a change in control of the Company for purposes of this Agreement entitling you to the severance and all other benefits hereinafter set forth as if your employment had terminated subsequent to a change in control of the Company. 2. CHANGE IN CONTROL AND POTENTIAL CHANGE IN CONTROL. (a) Definition of Change in Control of the Company. For purposes of this Agreement, a "change in control of the Company" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: (i) any "person" (as such term is used in Section 1 3(d) and 14(d) of the Securities Exchange Act of 1934 (as in effect as of the date of this Agreement (the "Exchange Act")) other than (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of shares of the Company (any such person is hereinafter referred to as a "Person"), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 20% of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company); 3 (ii) there is consummated a merger or consolidation of the Company with or into any other corporation, other than a merger or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto holding securities which represent, in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, immediately after such merger or consolidation, more than 70% of the combined voting power of the voting securities of either the Company or the other entity which survives such merger or consolidation or the parent of the entity which survives such merger or consolidation; (iii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; or (iv) during any period of two consecutive years (not including any period prior to the date of this Agreement), individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii) or (iii) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof. For purposes of this Agreement, where a change in control of the Company results from a series of related transactions, the change in control of the Company shall be deemed to have occurred on the date of the consummation of the first such transaction. For purposes of clause (i) of this subsection (a), the stockholders of another corporation (other than the Company or a corporation described in subclause (iv) of clause (i) of this subsection (a)) shall be deemed to constitute a Person. Further, it is understood by the parties that the sale, transfer, or other disposition of a subsidiary of the Company shall not constitute a change in control of the Company giving rise to benefits under this Agreement. (b) Definition of Potential Change in Control of the Company. For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if the conditions set forth in any one of the following clauses shall have been satisfied: (i) any Person is or becomes the beneficial owner, directly or indirectly, of 10% or more of the outstanding common stock of the Company unless such Person has reported or is required to report such ownership on Schedule 13G under the Exchange Act (or any comparable or successor report) or on Schedule 13D under 4 the Exchange Act (or any comparable or successor report) which Schedule 1 3D does not state any intention to or reserve the right to control or influence the management or policies of the Company or engage in any of the actions specified in Item 4 of such Schedule (other than the disposition of the common stock) so long as such Person neither reports nor is required to report such ownership other than as described in this clause; or (ii) the Company enters into an agreement, the consummation of which would result in the occurrence of a change in control of the Company; or (iii) any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute or result in a change in control of the Company; or (iv) any Person commences a solicitation (as defined in Rule 14a-1 of the Exchange Act) of proxies or consents which has the purpose of effecting or would (if successful) result in a change in control of the Company; or (v) a tender or exchange offer for at least 10% of the outstanding voting securities of the Company, made by a Person, is first published or sent or given (within the meaning of Rule 14d-2(a) of the Exchange Act). (c) Exception for Spin-Off Transaction. Notwithstanding the provisions of paragraphs 2(a) and 2(b) or any other provision hereof, neither a "change in control of the Company" nor a "potential change in control of the Company" shall be deemed to have occurred by virtue of the Company entering into any agreement with respect to, the public announcement of, the approval by the Company's stockholders or directors of, or the consummation of, any transaction or series of integrated transactions (including any merger or other business combination transaction) entered into in connection with, or expressly conditioned upon the occurrence of, a spin-off (such transaction or series of integrated transactions, the "Spin-Off Transaction") immediately following which the recordholders of the common stock of the Company immediately prior to the Spin-Off Transaction continue to have substantially the same proportionate ownership in the spun-off entity as they had in the Company immediately prior to the Spin-Off Transaction; provided that such Spin-Off Transaction (including any related merger of other business combination transaction) has been approved by a vote of a majority of the Company's Continuing Directors (as defined below) then in office. For purposes of this agreement, a "Continuing Director" shall mean any member of the Board of Directors of the Company who is a member of the Board of Directors as of the date of this Agreement and any person who subsequently becomes a member of the Board of Directors, if such person's nomination for election or election to the 5 Board of Directors is recommended or approved by a majority of the Continuing Directors. CONDITIONS OF TERMINATION FOLLOWING A CHANGE IN CONTROL. If a change in control of the Company (as defined in paragraph 2(a) hereof) occurs, the Company and its subsidiaries or you may terminate your employment with the Company and its subsidiaries under the following terms and conditions: (a) Cause. The Company and its subsidiaries may terminate your employment for Cause. For the purposes of this Agreement, the Company and its subsidiaries shall have "Cause" to terminate your employment hereunder upon (1) the willful and continued failure by you to substantially perform your duties with the Company or any subsidiary thereof (other than any such failure resulting from your incapacity due to physical or mental illness), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (2) the willful engaging by you in gross misconduct, which is materially injurious to the Company and its subsidiaries. For purposes of this paragraph, no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company and its subsidiaries. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for that purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (1) or (2) of the first sentence of this paragraph and specifying the particulars thereof in detail. (b) Good Reason. You may terminate your employment with the Company and its subsidiaries for Good Reason; provided however, that you must provide written notice of termination to the Company within ninety (90) days from the event (or from the last in a series of events) relied upon by you as a basis for termination for Good Reason hereunder. For purposes of this Agreement, "Good Reason" shall mean: (1) without your express written consent, a material reduction in your duties, responsibilities or status with the Company and its subsidiaries as in effect immediately prior to a change in control of the Company, or a change in your titles or offices (to a lesser title or office) as in effect immediately prior to a change in control, or any removal of you from or any failure to reelect or reappoint you to any of such positions, except in connection with the termination of your employment for Cause or by you other than for Good Reason; (2) a reduction by the Company and its subsidiaries in your base salary or perquisites as in effect on the date hereof or as the same may be increased from time to time; the material reduction by the Company and its subsidiaries of the benefits 6 provided to you in any thrift, incentive or compensation plan, or any pension, life insurance, health and accident or disability plan in which you are participating at the time of a change in control of the Company (or plans providing you with substantially similar benefits), or the taking of any action by the Company and its subsidiaries which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you at the time of the change in control of the Company, unless such reduction or action is generally applicable to all employees of the Company or the relevant subsidiary; or (4) the Company and its subsidiaries require you regularly to perform your duties of employment beyond a fifty mile radius from the location of your employment immediately prior to the change in control of the Company; provided, however, that (i) any termination of employment by you shall not be considered a termination for Good Reason for purposes of this Agreement if such termination occurs after you have been absent from your job for a continuous period of at least six months as a result of your incapacity due to physical or mental illness (a "Disability Period") and occurs while you are receiving benefits under the Company's (or any subsidiary's) long-term disability plan(s) (if such benefits are at least as favorable to you as those available under the Company's (or such subsidiary's) long-term disability plan(s) in effect immediately prior to the change in control of the Company) and (ii) if you return to work following a Disability Period, clause (1) of this paragraph 3(b) shall be inapplicable in determining whether Good Reason exists following such return. (c) Burden of Proof. In any judicial or other proceedings in which your right to, or the amount of, benefits hereunder is disputed, the ultimate burden of proof shall be on the Company. (d) Change in Control Required. Except as expressly provided in this Agreement, the above provisions of this paragraph 3 and the provisions of paragraph 4 shall be applicable after a change in control of the Company or a potential change in control of the Company has occurred, and not prior thereto. (e) Notice of Termination. Any termination of your employment by the Company and its subsidiaries for Cause under paragraph 3(a) hereof or by you for Good Reason pursuant to paragraph 3 (b) hereof shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (1) if your employment is terminated for Good Reason pursuant to paragraph 3(b) above, the date specified in the Notice of Termination, and (2) if your employment is terminated for any other reason, the date on which a Notice of Termination is given. 7 4. COMPENSATION UPON TERMINATION FOLLOWING A CHANGE IN CONTROL. The following compensation will be provided to you by the Company in the event your employment with the Company and its subsidiaries is terminated (i) by the Company and its subsidiaries for Cause (as defined in paragraph 3(a) hereof), (ii) by the Company and its subsidiaries, other than for Cause or (iii) by you for Good Reason (as defined in paragraph 3(b) hereof), in each case either subsequent to a change in control of the Company as defined in paragraph 2 hereof or deemed to be subsequent to a change in control of the Company pursuant to paragraph 1 (c) hereof: (a) If your employment with the Company and its subsidiaries is terminated by the Company and its subsidiaries for Cause under paragraph 3(a) hereof, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations to you under this Agreement. (b) If the Company and its subsidiaries terminate your employment with the Company and its subsidiaries other than for Cause under paragraph 3(a) hereof, or if you terminate your employment for Good Reason under paragraph 3 (b) hereof, then the Company shall pay to you as severance pay (and without regard to the provisions of any benefit plan) in a lump sum payment, the sum of the following amounts: (1) your full base salary through the Date of Termination at a rate equal to the greater of the rate in effect immediately prior to the occurrence of the event(s) giving rise to the Notice of Termination or the rate in effect immediately prior to the change in control of the Company; plus a pro-rata bonus based on the bonus received by you in the calendar year immediately preceding the year in which the Date of Termination occurs, multiplied by (the number of days in the calendar year in which the Date of Termination occurs, up to and including the Date of Termination, divided by 365); plus an amount equal to unpaid salary with respect to any vacation days accrued but not taken as of the Date of Termination; (2) an amount equal to the product of (x) the sum of your annual base salary at a rate equal to the greater of the rate in effect immediately prior to the occurrence of the event(s) giving rise to the Notice of Termination or the rate in effect immediately prior to the change in control of the Company, plus the highest bonus or other amount paid or awarded (although not yet paid) to you by the Company and its subsidiaries in the year in which the Date of Termination occurs or the two full calendar years immediately preceding the year in which such Date of Termination occurs (amounts or awards in shares being taken for this purpose at the closing price on the New York Stock Exchange, or other appropriate exchange, on the last trading day before the allotment date), multiplied by (y) the number three (3); and. (3) in lieu of any further payments under any long term incentive or compensation 8 plan of the Company or any subsidiary thereof or any successor plan, an amount equal to all awards thereunder earned or accrued, but not yet paid, for periods up to and including the Date of Termination. (c) If the Company and its subsidiaries shall terminate your employment with the Company and its subsidiaries other than for Cause under paragraph 3(a) hereof, or if you shall terminate your employment with the Company and its subsidiaries for Good Reason under paragraph 3(b) hereof, in addition to any payment made or owed to you by the Company under paragraph 4(b) hereof: (1) the Company shall maintain in full force and effect, for your continued benefit for three years after the Date of Termination, all life insurance, health and accident or disability plans and programs in which you were entitled to participate immediately prior to the occurrence of the event(s) giving rise to the Notice of Termination, provided that your continued participation is possible under the general terms and provisions of such plans and programs. In the event that your continued participation in any such plan or program is barred, the Company shall arrange upon comparable terms to provide you with benefits substantially similar to those benefits which you would otherwise have been entitled to receive under such plans and programs. At the end of the period of coverage, you shall have the option to have assigned to you, at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Company or any subsidiary thereof and relating specifically to you. The receipt by you, from a new employer, of any of the benefits described in this paragraph 4(c)(1), shall not eliminate the Company's obligations to provide you with such benefits (or their equivalent), but shall act merely as an offset to the Company's obligations hereunder; (2) In addition to the retirement benefits to which you are entitled under each pension plan of the Company or any subsidiary thereof (a "Pension Plan") or any successor plans thereto, including, but not limited to the Retirement Plan and the Supplemental Retirement Plan, the Company shall pay you a lump sum amount, in cash, equal to the excess of (x) the actuarial equivalent of the retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at Normal Retirement Age (as defined in the Retirement Plan) or any earlier date, but in no event earlier than the third anniversary of the Date of Termination, whichever annuity the actuarial equivalent of which is greatest) which you would have accrued under the terms of each such Pension Plan (without regard to any amendment to such Pension Plan made subsequent to a change in control of the Company, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if you were fully vested thereunder and had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder and had been credited under each such Pension Plan during such period with compensation equal to (i) the higher of (a) your annual base salary in effect immediately preceding the occurrence of the event(s) giving rise to your Notice of Termination or (b) your annual base salary in effect immediately preceding the change in control of the Company, plus (ii) the higher of (a) your 9 target bonus under any applicable incentive compensation plan in effect as of the Date of Termination or (b) the highest bonus or other amount paid or awarded (although not yet paid) to you by the Company and its subsidiaries in the year in which the Date of Termination occurs or the two full calendar years immediately preceding the year in which such Date of Termination occurs, over (y) the actuarial equivalent of the retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at Normal Retirement Age or any earlier date, but in no event earlier than the Date of Termination, whichever annuity the actuarial equivalent is greatest) which you had accrued pursuant to the provisions of each such Pension Plan as of the Date of Termination. For purposes of this paragraph 4(c)(2), "actuarial equivalent" shall be determined using the same methods and assumptions utilized under each of the Pension Plans, as applicable, immediately prior to occurrence of the event(s) giving rise to the Notice of Termination (without regard to any amendment of such methods and assumptions made subsequent to a change in control of the Company, which amendment results in a lower payment under this paragraph 4(c)(2)); (3) All outstanding stock options previously granted to you, and not yet expired, will become fully and immediately vested and exercisable by you on the Date of Termination and for ninety (90) days thereafter. You may, at your option, elect to receive in lieu of the exercise of all, or any portion of, the above options, a lump sum payment from the Company (such sum to be paid within ten (10) days after such election) in an amount equal to the difference between (i) total number of such options elected by you multiplied by the greater of (1) the market price of the Company's common stock on the Date of Termination or (2) the highest price paid for the Company's common stock in connection with the change in control of the Company and (ii) the aggregate exercise price of all such options elected by you; (4) the Company shall reimburse you for individual out placement services to be provided by a firm of your choice or, at your election, will provide you the use of office space, office supplies and secretarial assistance satisfactory to you. The aggregate expenditures of the Company pursuant to this paragraph 4(c)(4) shall not exceed $20,000; (5) the Company shall cause title to the automobile, if any, provided by the Company or any of its subsidiaries to you as of the date of the change in control to be transferred to you within 10 days following the Termination Date and shall pay all license and title registration fees and sales and transfer taxes applicable in connection with the transfer; and (6) the Company will pay all reasonable out-of-pocket expenses, including reasonable legal fees and legal expenses, incurred by you in connection with any judicial or other proceeding, including any arbitration proceeding under paragraph 16 hereof, to enforce this Agreement or to construe, or to determine or defend the validity of this Agreement, or otherwise, in connection herewith. (d) You shall not be required to mitigate the amount of any payment or benefits provided for in paragraph 4 by seeking other employment or otherwise, nor (except as provided in paragraph 4(c)(1)) shall the amount of any payment or benefits provided for in paragraph 4 be 10 reduced by any payments or benefits received by you as the result of employment by another employer after the Date of Termination, or otherwise; provided, however, that the amount payable under paragraph 4 hereof shall be reduced by the amount of any severance, termination or notice pay (or any other similar amounts) required by law to be paid to you by the Company or its subsidiaries and by any salary or other amounts paid to you during any notice period which the Company or its subsidiaries is required by law to provide. (e) In the event that any payment or benefit received or to be received by you in connection with a change in control of the Company or the termination of your employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company) (all such payments and benefits being hereinafter called "Total Payments") would be subject to (in whole or part) the excise tax imposed under Section 4999 of the Code (the "Excise Tax"), the Company shall pay you an additional amount (the "Gross-Up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Total Payments and any federal, state and local income tax and Excise Tax upon the payment provided for by this paragraph 4(e), shall be equal to the Total Payments. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) your Total Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(l ) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the accounting firm which was, immediately prior to the actual or deemed change in control of the Company, the Company's independent auditor (the "Auditor") and reasonably acceptable to you, such other payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the Total Payments or (B) the amount of excess parachute payments within the meaning of Section 280G(b)(l) of the Code (after applying clause (i), above), and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of your residence (or, if higher, in the state and locality of our principal place of business) on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of your employment, you shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the 11 Gross-Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the Gross-Up Payment being repaid by you to the extent that such repayment results in a reduction in Excise Tax and/or a federal, state or local income tax deduction) plus interest on the amount of such repayment at 120% of the rate provided in Section 1 274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of your employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by you with respect to such excess) at the time that the amount of such excess is finally determined. You and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Severance Payments. (f) The cash payment obligations of the Company under paragraphs 4(b), 4(c)(2), and 4(e) hereof shall be paid to you in a lump sum within thirty (30) days of the Date of Termination. 5. DEFAULT IN PAYMENT. Any payment not made within ten days after it is due in accordance with this Agreement shall thereafter bear interest, compounded quarterly, at the prime rate from time to time in effect at the Chase Manhattan Bank of New York. 6. CONTINUED EMPLOYMENT. As consideration for the benefits to be provided to you by the Company under this Agreement, after a potential change in control of the Company but prior to the occurrence of a change in control, you agree to deliver to the Company 60 days' prior written notice of any voluntary termination by you of your employment with the Company and its subsidiaries. 7. EFFECT ON OTHER PLANS. AGREEMENTS AND BENEFITS. Except to the extent expressly set forth herein, any benefit or compensation to which you are entitled under any agreement between you and the Company or any of its subsidiaries or under any plan maintained by the Company or any of its subsidiaries in which you participate or participated shall not be modified or lessened in any way, but shall be payable according to the terms of the applicable plan or agreement. The terms of this Agreement shall supersede and terminate any prior change in control severance agreement, or the provisions of any other agreement providing benefits following a change in control, entered into between you and the Company or any subsidiary thereof. Notwithstanding the above, any benefits received by you pursuant to this Agreement shall be in lieu of any severance benefits to which you would otherwise be entitled under any general severance policy maintained by the Company or the relevant subsidiary for its management personnel or under any employment contract between you and the Company or any subsidiary thereof. 8. UNSECURED OBLIGATION. All rights of you or any beneficiary of yours who succeeds to your rights to payments or benefits under this Agreement shall at all times be entirely 12 unfunded and no provision shall at any time be made with respect to segregating any assets of the Company or payment of any amounts due hereunder. Neither you nor any such beneficiary shall have any interest in or rights against any specific assets of the Company or any of its subsidiaries, and you and any such beneficiary shall have only the rights of a general unsecured creditor of the Company. 9. SUCCESSORS BINDING AGREEMENT. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason subsequent to a change in control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined, and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this paragraph 9 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee, or other designee or, if there be no such designee, to your estate. 10. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when mailed, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Chief Executive Officer of the Company with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 11. MODIFICATION AND WAIVER. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and is signed by you and such officer as may be specifically designated by the Board of the Company. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect such party's rights at a later time to enforce the same. No waiver by either party of any provisions or breach of this Agreement, whether by conduct or 13 otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of such provision or breach or a waiver of any other provision or breach. 12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and understanding of the parties in respect of the transaction contemplated herein and supersedes all prior agreements, arrangements or understandings, whether written or oral, relating to the subject matter hereof, including, without limitation, any letters, agreements, or understandings between you and the Company or any subsidiary thereof prior to the date hereof. Execution of this Agreement shall supersede and terminate any prior change in control severance agreement, or the provisions of any other agreement providing benefits following a change in control, entered into between you and the Company or any subsidiary thereof. 13. GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Indiana. 14. SEVERABILITY. If any provision of the Agreement shall be held to be invalid, illegal or unenforceable, the remainder of this Agreement shall not be affected thereby. If any provisions of this Agreement are held by a court of competent jurisdiction to conflict with any federal, state or local law, such provisions are hereby declared to be of such force and effect as is permissible in such jurisdiction. 15. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument. 16. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois, by three arbitrators, one of whom shall be appointed by the Company, one of whom shall be appointed by you and the third of whom shall be appointed by the first two arbitrators. If either the Company or you fails to appoint an arbitrator within twenty (20) days of a request in writing by the other to do so, or if the first two arbitrators cannot agree on the appointment of a third arbitrator within 20 days after the second arbitrator is designated, then such arbitrator shall be appointed by the Chief Judge of the United States District Court located in the city of Chicago, or upon his failure to act, by the American Arbitration Association so as to enable the arbitrators to render an award within ninety (90) days after the three arbitrators have been appointed. Following the selection of arbitrators as set forth above, the arbitration shall be conducted promptly and expeditiously and in accordance with the rules of the American Arbitration Association. Pending the resolution of such dispute or controversy, the Company will continue to pay you without interruption your full base salary in effect immediately prior to the notice giving rise to the dispute was given and continue you as a participant in all thrift, incentive, compensation, pension, life insurance, health and accident or disability plans in which you were participating when the notice giving rise to the dispute was given at a level equal to the level that was in effect immediately prior to such notice. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement. 14 The Company shall bear all of the expenses relating to any arbitration under this Agreement. 17. INTERPRETATION. References herein to action taken by the Company and its subsidiaries shall mean action taken by the Company and its subsidiaries taken together as a single entity. For example, if you are receiving benefits from a subsidiary and such benefits are no longer provided by such subsidiary but the same or equivalent benefits are instead provided by the Company or a different subsidiary, the Company and its subsidiaries shall be deemed for purposes of this Agreement not to have reduced or changed your benefits. As a further example, if your responsibilities with the Company are replaced with similar responsibilities with a subsidiary of the Company, the Company and its subsidiaries shall be deemed for purposes of this Agreement not to have changed your responsibilities. References herein to your employment or status with the Company and its subsidiaries shall mean your employment or status with the Company and its subsidiaries taken together as a single entity. References herein to the termination of your employment with the Company and its subsidiaries shall mean the termination of your employment with the Company and its subsidiaries such that after such termination you are no longer employed by the Company or any of its then subsidiaries. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, GREAT LAKES CHEMICAL CORPORATION By: ----------------------------------------- Title: Chief Executive Officer and President ----------------------------------------- Date: ----------------------------------------- AGREED TO: By: ---------------------------------- Title: ---------------------------------- Date: ---------------------------------- EX-10.(IX) 12 DIRECTORS RETIREMENT PLAN 1 Exhibit No. (10)(ix) GREAT LAKES CHEMICAL CORPORATION DIRECTORS RETIREMENT PLAN (Effective January 1, 1993) 2 GREAT LAKES CHEMICAL CORPORATION DIRECTORS RETIREMENT PLAN (EFFECTIVE JANUARY 1, 1993) Table of Contents ARTICLE 1 Establishment 1 1.1 Establishment and Purpose 1 1.2 Applicability 1 ARTICLE II Participation 2 2.1 Eligibility and Participation 2 2.2 Duration 2 ARTICLE III Benefit; Payment 3 3.1 Accrued Benefit 3 3.2 Time and Method of Payment 3 ARTICLE IV Funding 4 4.1 Funding 4 ARTICLE V Amendment, Administration 5 5.1 Amendment and Termination 5 5.2 Administration 5 5.3 Deduction of Taxes from Amounts Payable 5 5.4 Indemnification 5 5.5 Expenses 5 ARTICLE VI Miscellaneous 6 6.1 Interests not Transferable 6 6.2 Contract of Employment 6 6.3 Headings 6 6.4 Invalidity 6 6.5 Law Governing 6 3 GREAT LAKES CHEMICAL CORPORATION DIRECTORS RETIREMENT PLAN (EFFECTIVE JANUARY 1, 1993) ARTICLE I ESTABLISHMENT 1.1 ESTABLISHMENT AND PURPOSE. Great Lakes Chemical Corporation (the "Company") hereby restates the Great Lakes Chemical Corporation Directors Retirement Plan (the "Plan"), effective January 1, 1993 (the "Effective Date"). The purpose of the Plan is to provide former non-employee members of the Board of Directors (the "Board") of the Company with a pension benefit in recognition of their service to the Company. 1.2 APPLICABILITY. The provisions of the Plan shall apply only to a non-employee Director who terminates his directorship on or after the Effective Date. Page 1 4 ARTICLE II PARTICIPATION 2.1 ELIGIBILITY AND PARTICIPATION. Each non-employee Director shall be eligible for a benefit after completing five (5) years of service as a member of the Board. A Director shall be credited with one year of service for eligibility or benefit calculation purposes for each calendar year during which the Director was a member of the Board for six or more calendar months. 2.2 DURATION. Any Director who became a Participant shall continue to be a Participant as long as he is entitled to benefits hereunder. Page 2 5 ARTICLE III BENEFIT; PAYMENT 3.1 ACCRUED BENEFIT. An eligible Director shall be entitled to an annual benefit, payable for his lifetime only, equal to the percentage (%) determined below of the Annual Retainer paid to the Director for his last completed calendar year of service as a Director. No benefit shall be payable under the Plan upon the death of a Director or former Director.
ANNUAL BENEFIT YEARS -------------- ----- % OF DIRECTOR'S FEES OF SERVICE -------------------- ---------- 0% Less than 5 50% 5 60% 6 70% 7 80% 8 90% 9 100% 10 or more
The Annual Retainer is the annual retainer paid by the Corporation for Board membership; it does not include meeting fees, fees paid for membership on board committees, special retainers, fees paid for attending meetings of the Board or of its committees, expense reimbursement or per diem. The Annual Benefit shall be equal to the Annual Retainer in effect immediately prior to the Director's retirement date. 3.2 TIME AND METHOD OF PAYMENT. The Accrued Benefit shall commence to be paid annually (or more frequently at the election of the Company), upon the first day of the month following the later of the former Director's attainment of age 70 or the last day the Director is a member of the Board. Page 3 6 ARTICLE IV FUNDING 4.1 FUNDING. All benefits under this Plan shall be paid directly from the general funds of the Company, and no special or separate fund shall be established and no other segregation of assets shall be made to assure payment. No Director shall have a right, title or interest whatever in or to any investments which the Company may make to aid the Company in meeting its obligation hereunder. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and a Director. To the extent that any person acquires a right to receive payments from the Company hereunder, such rights shall be no greater than the right of an unsecured creditor of the Company. Page 4 7 ARTICLE V AMENDMENT, ADMINISTRATION 5.1 AMENDMENT AND TERMINATION. The Company intends the Plan to be permanent, but reserves the right at any time to modify, amend, or terminate the Plan, provided that the Company shall not cancel, reduce, or otherwise adversely affect the amount of benefits of any Participant accrued as of the date of any such modification, amendment, or termination, without the consent of the Participant. 5.2 ADMINISTRATION. The Plan shall be administered by the Executive Committee of the Board of Directors of the Company, which shall be authorized to interpret the Plan, to adopt rules and practices concerning the administration of the Plan, to resolve questions concerning the eligibility for the amount of the Accrued Benefit, and to delegate all or any portion of its authority hereunder to designated officers or employees of the Company. A Director shall not have the power to take part in any discriminatory decision or action affecting his own interest as a Participant unless such decision or action is upon a matter which affects all other Participants similarly situated and confers no special right, privilege or benefit not simultaneously conferred upon all other such Participants. 5.3 DEDUCTION OF TAXES FROM AMOUNTS PAYABLE. The Company may deduct from the amount to be distributed such amount as the Company, in its sole discretion, deems proper for the payment of income, employment, death, succession, inheritance, or other taxes with respect to benefits under the Plan. 5.4 INDEMNIFICATION. The Company shall indemnify and hold harmless each employee, officer, or director of the Company to whom is delegated duties, responsibilities, and authority with respect to the Plan against all claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed upon him (including but not limited to reasonable attorney fees) which arise as a result of his actions or failure to act in connection with the operation and administration of the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty, or expense is not paid for by liability insurance purchased or paid for by the Company. Notwithstanding the foregoing, the Company shall not indemnify any person for any such amount incurred through any settlement or compromise of any action unless the Company consents in writing to such settlement or compromise. 5.5 EXPENSES. The expenses of administering the Plan shall be paid by the Company. Page 5 8 ARTICLE VI MISCELLANEOUS 6.1 INTERESTS NOT TRANSFERABLE. Benefits payable under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of a Participant prior to actually being received by the person entitled to the benefit under the terms of the Plan, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to benefits payable hereunder shall be void. The Company shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any person entitled to benefits hereunder. If any person shall attempt to, or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his benefits under this Plan, or if by any reason of his bankruptcy or other event happening at any time, such benefit would devolve upon any other person or would not be enjoyed by the person entitled hereto under the Plan, the Executive Committee of the Board, in its discretion, may terminate the interest in any such benefits of the person entitled thereof under the Plan and hold or apply them to or for the benefit of such person entitled thereto under the Plan in such manner as the Board may deem proper. 6.2 CONTRACT OF EMPLOYMENT. Nothing contained herein shall be construed to constitute a contract of employment between a Participant and the Company or to confer any right of a Director to remain on the Board. 6.3 HEADINGS. The headings of Articles and Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control. 6.4 INVALIDITY. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof and the Plan shall be construed and enforced as if such provisions, to the extent invalid or unenforceable, had not been included. 6.5 LAW GOVERNING. The Plan shall be construed and enforced according to the laws of Indiana other than its laws respecting choice of law. Page 6 9 IN WITNESS WHEREOF, the Company has executed this Plan this 28 day of December, 1993. GREAT LAKES CHEMICAL CORPORATION By: ------------------------------ ------------------------------ ------------------------------ ------------------------------ EX-10.(X) 13 1993 EMPLOYEES STOCK COMPENSATION PLAN 1 Exhibit No. (10)(x) GREAT LAKES CHEMICAL CORPORATION 1993 EMPLOYEE STOCK COMPENSATION PLAN As amended by the Board of Directors on November 21, 1997 1. SHARES SUBJECT TO PLAN. 2,000,000 shares of common stock, par value $1.00 per share, shall be reserved for Awards granted under this Plan (the "1993 Plan"). That number does not include 251,900 shares which are reserved for options granted under the company's 1984 Employee Stock Option Plan, as last amended on March 6, 1995 (the "1984 Plan"), and which are not subject to presently outstanding options granted under the 1984 and 1975 Plans. If any Award granted under this 1993 Plan shall terminate or expire without being fully exercised for any reason prior to the end of the period under which Awards may be granted, the shares of common stock to which such termination or expiration relates shall again become available for Awards thereafter granted. 2. EFFECTIVE DATE AND DURATION. This 1993 Plan became effective on May 6, 1993, upon its approval by the holders of a majority of the common stock of the company present and voting (in person or by proxy) at the 1993 Annual Meeting of Stockholders, and shall continue in effect for a period of ten (10) years from the date of such stockholder approval. Upon expiration of such ten-year period, no further Awards shall be granted (although unexercised Awards theretofore granted shall continue in effect). 3. AWARDS. The Board may grant Awards, including Incentive Stock Options meeting the requirements of Section 422(a) of the Internal Revenue Code of 1986, as amended, (the "Code") and Non-Qualified Options, or other stock-based awards, collectively referred to as "Awards." 4. ADMINISTRATION OF THE 1993 PLAN. The Board of Directors (the "Board"), which may act through its Compensation and Incentive Committee (the "Committee"), shall administer this 1993 Plan. It may in its sole discretion determine the person or persons to whom Awards are to be granted and the number of shares to be covered by each such Award, all within the limitations set forth in this 1993 Plan. It may interpret the provisions of this 1993 Plan and decide all questions of fact arising out of its application, and all such interpretations and determinations shall be conclusive and binding upon the individual employees involved and all persons claiming under them. 2 GREAT LAKES CHEMICAL CORPORATION 1993 EMPLOYEE STOCK COMPENSATION PLAN As amended on November 21, 1997 Page 2 5. PERSONS ELIGIBLE FOR AWARDS. Individuals who are (a) executive officers, (b) other key employees (including those who are also directors) or (c) non-employee directors, in each case of the company or any of its subsidiaries (the "Company") may be granted Awards. For this purpose, the term "subsidiary" shall mean any corporation in which the company owns stock having 50 percent or more of the total combined voting power of all classes of such corporation's stock. A person is a key employee by virtue of meeting all of the following standards: (i) such person is employed by the company, (ii) such person has managerial, supervisory, professional, scientific, engineering or similar responsibilities, and (iii) such person is not covered by any collective bargaining agreement binding on the company. No Award shall be granted to any director of the company who is not also an executive officer or key employee of the company on the date the Award is granted. 6. TERMS AND CONDITIONS OF OPTIONS. Options granted may be either Incentive Stock Options as defined in Section 422(a) of the Code, (hereinafter referred to as "ISOs") or options which are not within the 422(a) definition (hereinafter referred to as "Non-Qualified Options") (ISOs and Non-Qualified Options are referred to collectively as "Options"). (a) INCENTIVE STOCK OPTIONS. The terms of each ISO granted shall include those terms which are required by Section 422(a) of the Code, and other such terms, not inconsistent therewith as the Board may determine. (b) NON-QUALIFIED OPTIONS. Subject to the minimum option price specified in paragraph (c), the terms of each Non-Qualified Option granted, which may be different in each case, shall be determined by the Board. (c) MINIMUM OPTION PRICE. The option price payable for the shares of stock subject to each Option granted shall not be less than the fair market value of the company's common stock at the time of the grant of that Option. The fair market value of the company's stock at the time of the grant of an Option shall be deemed to be equal to the closing price on the preceding trading day on the New York Stock Exchange; provided, however, that during the [60]-day period from and after a change in control, "fair market value" shall mean, other than in the case of shares of common stock subject to ISOs, the higher of (X) the highest closing price on the New York Stock Exchange during the 60-day period prior to the change in control and (Y) if the change in control is the result of a transaction or series of transactions described in paragraphs (a), (b) or (c) of Section 13(A)(v) hereof, the highest price for shares of common stock paid in such transaction or series of transactions, which in the case of such paragraph (a) shall be the highest price for shares of common stock as reflected in a Schedule 13D filed under the Exchange Act (as defined in Section 13(A)(v)(a) hereof) by the person having made the acquisition. 3 GREAT LAKES CHEMICAL CORPORATION 1993 EMPLOYEE STOCK COMPENSATION PLAN As amended on November 21, 1997 Page 3 (d) MAXIMUM NUMBER OF SHARES. Subject to the provisions of Paragraph 11 hereof, the maximum number of shares that may be awarded to any employee in any year hereunder shall not exceed 150,000. 7. TERMS AND CONDITIONS OF OTHER STOCK-BASED AWARDS. The Committee may grant other stock-based Awards either alone or in addition to other Awards under the 1993 Plan. The Committee will place such restrictions on such Awards as the Committee determines to be necessary. 8. TRANSFER LIMITATIONS. No Award granted shall be transferable otherwise than by will or the laws of descent and distribution, and no Award granted may be exercised by any person other than the person to whom the Award shall initially have been granted during the lifetime of such initial Awardee. 9. EXERCISE OF AWARDS. Awards shall be exercised by written notice to the company. Option exercise notices must be accompanied by payment in full of the option price and may be exercised in one or more installments. Payment of the option price may be made as specified in each Award Agreement (as discussed below), in cash, by exchanging common stock of the company already owned by the optionee for at least six months prior to the date of exercise, or by delivery of a combination of cash and common stock. The exchanged shares, plus cash, if any, must be equal to the aggregate option price of the shares acquired upon exercise of the Option. The value to be used for any exchanged shares shall be the closing market price of the company's common stock on the preceding trading day on the New York Stock Exchange. Notwithstanding the foregoing, during the [60]-day period from and after a change in control, all optionees, with respect to any or all of their respective Options (including, in the case of Non-Qualified Options, Options already outstanding on [insert effective date of amendment], 1997), shall, unless the Committee shall determine otherwise at the time of grant, have the right, in lieu of the payment of the full Option price of the shares of common stock being purchased under the Options and by giving written notice to the company in form satisfactory to the Committee, to elect (within such [60]-day period) to surrender all or part of the Options to the Company and to receive in cash an amount equal to the amount by which the fair market value of shares of common stock on the date of exercise exceeds the option price per share of common stock under the Options multiplied by the number of shares of common stock granted under the Options as to which the right granted by this proviso shall have been exercised. (a) MANDATORY WITHHOLDING TAXES. Whenever a Non-Qualified Option is exercised, the company may require as a condition of delivery that the optionee remit an amount sufficient to satisfy all federal, state and local withholding tax requirements related thereto. The optionee may elect to pay the tax by remitting (1) cash, (2) shares of common stock already owned by the optionee for at least six months, (3) withholding a 4 GREAT LAKES CHEMICAL CORPORATION 1993 EMPLOYEE STOCK COMPENSATION PLAN As amended on November 21, 1997 Page 4 portion of the shares otherwise deliverable to the optionee upon the exercise, or (4) by any combination of the above. The value to be used for any shares delivered or withheld shall be the closing market price the preceding trading day on the New York Stock Exchange. (b) DISQUALIFYING DISPOSITIONS OF ISO SHARES. An optionee shall be required to notify the Company of any disposition of shares issued pursuant to the exercise of an ISO under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), within ten days of such disposition. 10. AWARD AGREEMENT. No person shall have any rights unless and until the company and the person to whom such Award shall have been granted shall have executed and delivered an Award Agreement containing provisions setting forth the terms of the Award. 11. ANTI-DILUTION PROVISION. If, prior to the complete exercise of any Award, there shall be declared and paid a stock dividend upon the shares of common stock of the Company or if the shares shall be split up, converted, reclassified, changed into, or exchanged for, a different number or kind of securities of the Company, the Award, to the extent that it has not been exercised, shall entitle the holder upon the future exercise of such Award to such number and kind of securities or other property subject to the terms of the Award to which the holder would be entitled had such holder actually owned the shares subject to the unexercised portion of the Award at the time of the occurrence of such stock dividend, split-up, conversion, exchange, reclassification or exchange; and the aggregate purchase price upon the future exercise of the Award shall be the same as if originally optioned or awarded shares were being purchased thereunder; or the Compensation and Incentive Committee shall make such other adjustment to such Award as it deems appropriate. If any such event should occur, the number of shares with respect to which Awards remain to be issued, or with respect to which awards may be reissued, shall be similarly adjusted. In the event the outstanding shares of common stock shall be changed into or exchanged for any other class or series of capital stock or cash, securities or other property pursuant to a recapitalization, reclassification, merger, consolidation, combination or similar transaction (other than a transaction described in the previous paragraph), then each Award shall thereafter become exercisable for the number and/or kind of capital stock, and/or the amount of cash, securities or other property so distributed, into which the shares subject to the Award would have been changed or exchanged had the Award been exercised in full prior to such transaction, provided that, if the kind or amount of capital stock or cash, securities or other property received in such transaction is not the same for each outstanding share, then the kind or amount of capital stock or cash, securities or other property for which the Award shall thereafter become exercisable shall be the kind and amount so receivable per share by a plurality of the shares; or the Compensation 5 GREAT LAKES CHEMICAL CORPORATION 1993 EMPLOYEE STOCK COMPENSATION PLAN As amended on November 21, 1997 Page 5 and Incentive Committee shall make such other adjustment to such Award as it deems appropriate. If any such event should occur, the number of shares with respect to which Awards remain to be issued, or with respect to which awards may be reissued, shall be similarly adjusted. 12. AWARDS GRANTED UNDER OPTION PLANS. Options granted under the 1975 and 1984 Plans shall be governed by the provisions of the respective Plan as amended. Awards granted under this 1993 Plan shall be governed by the provisions of this 1993 Plan. 13. ADDITIONAL PROVISIONS. A. VESTING, TERMINATION OF EMPLOYMENT. The following provisions shall be applicable to all Awardees; provided, however, that in the case of an Awardee whose employment terminates in connection with the distribution to company stockholders of the stock of Octel Corp., such provisions (including but not limited to any provisions relating to vesting and post-termination exercisability) shall be so applicable except as may be otherwise determined by the Board or the Compensation and Incentive Committee. (i) Upon a change in control of the Company (as defined below), all Options shall immediately vest and become exercisable and all restrictions on other Awards shall immediately lapse. (ii) An Award shall be exercisable only during the Awardee's employment by or service with the Company and for up to three months after the termination of such employment or service for any reason (including but not limited to any such termination of employment or service which occurs following a change in control of the Company), except that in the Board's (or, if such authority is delegated by the Board, the Compensation and Incentive Committee's or the Chief Executive Officer's) discretion, an Award may be exercisable for a period of up to three years after retirement or death, or for up to ten years after mandatory retirement under the Executive Mandatory Retirement Policy. (iii) An Award may be exercised after the termination of an Awardee's employment or service with the Company only to the extent that (a) the Awardee was entitled to do so on the date of termination (after giving effect to Section 13(A)(i) above), and (b) the Award would not have expired had the Awardee continued to be employed by (or to be in the service of) the Company. (iv) The Board (or if such authority is delegated by the Board, the Compensation and Incentive Committee or the Chief Executive Officer) may in its discretion determine 6 GREAT LAKES CHEMICAL CORPORATION 1993 EMPLOYEE STOCK COMPENSATION PLAN As amended on November 21, 1997 Page 6 that an authorized leave of absence or disability shall be deemed to satisfy this 1993 Plan's employment or service requirements. (v) For purposes of this 1993 Plan, a "change in control of the Company" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: (a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of shares of the Company (any such person is hereinafter referred to as a "Person"), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 20% of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company); (b) there is consummated a merger or consolidation of the Company with or into any other corporation, other than a merger or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto holding securities which represent, in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, immediately after such merger or consolidation, more than 70% of the combined voting power of the voting securities of either the Company or the other entity which survives such merger or consolidation or the parent of the entity which survives such merger or consolidation; (c) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; or (d) during any period of two consecutive years (not including any period prior to the date of this 1993 Plan), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a 7 GREAT LAKES CHEMICAL CORPORATION 1993 EMPLOYEE STOCK COMPENSATION PLAN As amended on November 21, 1997 Page 7 transaction described in clause (a), (b) or (c) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof. For purposes of this 1993 Plan, where a change in control of the Company results from a series of related transactions, the change in control of the Company shall be deemed to have occurred on the date of the consummation of the first such transaction. For purposes of clause (a) of this subsection, the stockholders of another corporation (other than the Company or a corporation described in subclause (iv) of clause (a) of this subsection) shall be deemed to constitute a Person. Further, the sale, transfer, or other disposition of a subsidiary of the Company shall not constitute a change in control of the Company giving rise to payments or benefits under this 1993 Plan. Notwithstanding any other provision hereof, a "change in control of the Company" shall not be deemed to have occurred by virtue of the Company entering into any agreement with respect to, the public announcement of, the approval by the Company's stockholders or directors of, or the consummation of, any transaction or series of integrated transactions (including any merger or other business combination transaction) entered into in connection with, or expressly conditioned upon the occurrence of, a spin-off (such transaction or series of integrated transactions, the "Spin-Off Transaction") immediately following which the recordholders of the common stock of the Company immediately prior to the Spin-Off Transaction continue to have substantially the same proportionate ownership in the spun-off entity as they had in the Company immediately prior to the Spin-Off Transaction; provided that such Spin-Off Transaction (including any related merger of other business combination transaction) has been approved by a vote of a majority of the Company's Continuing Directors (as defined below) then in office. For purposes of this 1993 Plan, a "Continuing Director" shall mean any member of the Board of the Company who is a member of the Board as of the date of this 1993 Plan and any person who subsequently becomes a member of the Board, if such person's nomination for election or election to the Board is recommended or approved by a majority of the Continuing Directors. Notwithstanding any other provision hereof, "Company," for purposes of the definition of "change in control of the Company," shall mean Great Lakes Chemical Corporation. B. LISTINGS, REGISTRATION AND COMPLIANCE WITH LAWS AND REGULATIONS. (i) Each Award shall be subject to the requirement that if at anytime the Board shall determine, in its discretion, that the listing, registration, or qualification of the shares 8 GREAT LAKES CHEMICAL CORPORATION 1993 EMPLOYEE STOCK COMPENSATION PLAN As amended on November 21, 1997 Page 8 subject to the Award upon any securities exchange or under any state or federal securities or other law or regulation, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to or in connection with the granting of such Award or the issue or purchase of shares thereunder, no such Award may be exercised or paid in common stock in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board and the Awardee will supply the company with such certificates, representations and information as the company shall request and shall otherwise cooperate with the company in obtaining such listing, registration, qualification, consent or approval. In the case of executive officers and other persons subject to Section 16(b) of the Securities Exchange Act of 1934, the Board may at any time impose any limitations upon the exercise of an Award which, in the Board's discretion, are necessary or desirable in order to comply with Section 16(b) and the rules and regulations thereunder. If the company, as part of an offering of securities or otherwise, finds it desirable because of federal or state regulatory requirements to reduce the period during which any Award may be exercised, the Board may, in its discretion and without the Awardee's consent, so reduce such period on not less than 15 days written notice to the Awardee. (ii) Notwithstanding the terms of this paragraph, no Awardee shall have the right to require the company to register, list or qualify said Award or any of the stock underlying such Option. C. AMENDMENT OF THE 1993 PLAN. Except as provided in the following sentence and as required by law, the company's Board shall have complete power and authority to amend this 1993 Plan at any time and no approval by the company's stockholders or by any other person, committee or other entity of any kind shall be required to make any such amendment effective. The Board shall not, however, increase the maximum number of shares available for Awards granted unless such increase shall either be approved by the company's stockholders or shall be permitted by Paragraph 11. No termination or amendment may, without the consent of the individual to whom any Award shall have been granted under the 1993 Plan, adversely affect the rights of such individual under such Award. D. CAPTIONS. The captions (i.e., all boldfaced words) are for convenience only, do not constitute a part of this 1993 Plan, and shall not be deemed to limit, characterize or affect in any way any provisions of this 1993 Plan, and all provisions shall be construed as if no captions had been used. E. SEVERABILITY. Whenever possible, each provision in this 1993 Plan and in every Award at any time granted under this 1993 Plan shall be interpreted in such manner as to 9 GREAT LAKES CHEMICAL CORPORATION 1993 EMPLOYEE STOCK COMPENSATION PLAN As amended on November 21, 1997 Page 9 be effective and valid under applicable law, but if any provision of this 1993 Plan or any Award at any time granted under this 1993 Plan shall be held to be prohibited by or invalid under applicable law, then (i) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law, and (ii) all other provisions and every Award at any time granted under this 1993 Plan shall remain in full force and effect. F. NO STRICT CONSTRUCTION. No rule of strict construction shall be applied against the company, the Board, or any other person in the interpretation of any of the terms of this 1993 Plan, any Award granted under this 1993 Plan or any rule or procedure established by the Board. G. APPLICABLE LAW. Every Award at any time granted under this 1993 Plan shall be deemed to be a contract made under the laws of the State of Indiana. For all purposes, both this 1993 Plan and every Award granted under this 1993 Plan shall be construed in accordance with and governed by the laws of the State of Indiana. 2/20/98 EX-10.(XI) 14 1984 EMPLOYEE STOCK OPTION PLAN 1 Exhibit No. (10)(xi) GREAT LAKES CHEMICAL CORPORATION 1984 EMPLOYEE STOCK OPTION PLAN As amended by the Board of Directors on November 21, 1997 1. Shares Subject to Option. 3,600,000 shares of common stock (after adjustments for the 100 percent stock dividends in 1989 and 1991), par value $1.00 per share, of the company (the "common stock") shall be reserved for options granted under this Plan (the "Plan"). That number does not include 103,100 shares which are reserved for options granted under the company's 1975 Employee Stock Option Plan, as amended (the "1975 Plan"), and which are not subject to presently outstanding options granted under the 1975 Plan. If any option granted under this Plan shall terminate or expire without being fully exercised for any reason prior to the end of the period under which options may be granted under the Plan, the shares of common stock to which such termination or expiration relates shall again become available for options thereafter granted under this Plan. 2. Effective Date and Duration of Plan. This Plan shall become effective upon its approval by the holders of a majority of the common stock of the Company present and voting (in person or by proxy) at the 1984 Annual Meeting of Stockholders, and shall continue in effect for a period of ten (10) years from the date of such stockholder approval. Upon expiration of such 10-year period, no further options shall be granted under this Plan (although unexercised options theretofore granted under this Plan shall continue in effect). 3. Administration of the Plan. The Board of Directors (the "Board"), which may act through its Compensation and Incentive Committee (previously the Stock Option Committee) shall administer this Plan. It may in its sole discretion determine the person or persons to whom options are to be granted and the number of shares to be covered by each such option, all within the limitations set forth in this Plan. It may interpret the provisions of the Plan and decide all questions of fact arising in application of this Plan, and all such interpretations and determinations shall be conclusive and binding upon the individual employees involved and all persons claiming under them. 4. Persons Eligible for Options. Only officers and other key employees (including those who are also directors) of the company or any of its subsidiaries may be granted options under this Plan. A person is a key employee by virtue of meeting all of the following standards: (I) such person is employed by the company or subsidiary, (ii) such person has managerial, supervisory 2 GREAT LAKES CHEMICAL CORPORATION 1984 EMPLOYEE STOCK OPTION PLAN As amended on February 10, 1997 Page 2 or professional, scientific, engineering or similar responsibilities, and (iii) such person is not covered by any collective bargaining agreement binding on such person's employer. No option shall be granted to any director of the company or subsidiary who is not also an officer or key employee of the company or one of its subsidiaries on the date the option is granted. For this purpose, the term "subsidiary" shall mean any corporation in which the company owns stock having 50 percent or more of the total combined voting power of all classes of such corporation's stock. 5. Terms and Conditions of Options. Options granted under this Plan may be either Incentive Stock Options as defined in Section 422(a) of the Internal Revenue Code of 1954, as amended (the "Code") (hereinafter referred to as "ISOs") or options which are not within the Section 422(a) definition (hereinafter referred to as "Nonstatutory Options") (ISOs and Nonstatutory Options are hereinafter referred to collectively as "options"). (a) Incentive Stock Options. The terms of each ISO granted under this Plan shall include those terms which are required by Section 422(a)of the Code and such other terms not inconsistent therewith as the Board may determine. The aggregate fair market value (determined as of the time of the granting of each option) of the shares of stock for which any officer or other key employee is granted such options (whether pursuant to this Plan or the 1975 Plan) in any calendar year shall not exceed the limitations provided by Section 422(a)(8) of the Code as the same may be amended from time to time, said limit at this time being $100,000 plus any unused limit carryover to such year (as defined in Section 422(a) of the Code). (b) Nonstatutory Options. Subject to the minimum option price specified in paragraph (c), the terms of each Nonstatutory Option granted under this Plan, which may be different in each case, shall be determined by the Board. (c) Minimum Option Price. The option price payable for the shares of stock subject to each ISO or Nonstatutory Option granted under this Plan shall not be less than the market value of the company's common stock on the date of the grant of such option. The fair market value of the company's stock at the time of grant of an option shall be deemed to be equal to the closing price on the preceding trading day on the American Stock Exchange or the New York Stock Exchange, as the case may be; provided, however, that during the [60]-day period from and after a change in control, "fair market value" shall mean, other than in the case of shares of common stock subject to ISOs, the higher of (X) the highest closing price on the American Stock Exchange or the New York Stock Exchange, as the case may 3 GREAT LAKES CHEMICAL CORPORATION 1984 EMPLOYEE STOCK OPTION PLAN As amended on February 10, 1997 Page 3 be, during the 60-day period prior to the change in control and (Y) if the change in control is the result of a transaction or series of transactions described in paragraphs (a), (b) or (c) of Section 12(A)(v) hereof, the highest price for shares of common stock paid in such transaction or series of transactions, which in the case of such paragraph (a) shall be the highest price for shares of common stock as reflected in a Schedule 13D filed under the Exchange Act (as defined in Section 12(A)(v)(a) hereof) by the person having made the acquisition. 6. Cash Payments. Any one or more of the Nonstatutory Options granted under this Plan may, in the discretion of the Board, provide that, upon the exercise of such option, the optionee will receive a cash payment equal to the excess of the market value (on the date of exercise) of the shares of the company's common stock purchased upon exercise of the option over the option price. 7. Transfer Limitations. No option granted under this Plan shall be transferable otherwise than by will or the laws of descent and distribution, and no option granted under this Plan may be exercised by any person other than the person to whom the option shall initially have been granted during the lifetime of such initial optionee. 8. Exercise of Options. Options shall be exercised by written notice to the Company accompanied by payment in full of the option price and may be exercised in one or more installments. Payment of the option price may be made as specified in each Option Agreement (as discussed below), in cash (including check, bank draft or money order), by exchanging common stock of the company already owned by the optionee, or by delivery of a combination of cash and common stock. The exchanged shares, plus cash, if any, must have a market value on the date of exercise equal to the aggregate option price of the shares acquired upon exercise of the option. The market value shall be considered to be the closing price the preceding trading day on the American Stock Exchange or the New York Stock Exchange, as the case may be. Notwithstanding the foregoing, during the [60]-day period from and after a change in control, all optionees, with respect to any or all of their respective options (including, in the case of Nonstatutory Options, options already outstanding on [insert effective date of amendment], 1997), shall, unless the Compensation and Incentive Committee shall determine otherwise at the time of grant, have the right, in lieu of the payment of the full option price of the shares of common stock being purchased under the options and by giving written notice to the company in form satisfactory to the Compensation and Incentive Committee, to elect (within such [60]-day period) to surrender all or part of the options to the Company and to receive in cash an amount equal to the amount by which the fair market value of shares of common stock on the date of 4 GREAT LAKES CHEMICAL CORPORATION 1984 EMPLOYEE STOCK OPTION PLAN As amended on February 10, 1997 Page 4 exercise exceeds the option price per share of common stock under the options multiplied by the number of shares of common stock granted under the options as to which the right granted by this proviso shall have been exercised. 9. Option Agreement. No person shall have any rights under this Plan unless and until the company and the person to whom such option shall have been granted shall have executed and delivered an agreement expressly granting the option to such person and containing provision setting forth the terms of the option. 10. Anti-Dilution Provision. If, prior to the complete exercise of any option, there shall be declared and paid a stock dividend upon the shares of common stock of the Company or if the shares shall be split up, converted, reclassified, changed into, or exchanged for, a different number or kind of securities of the Company, the option, to the extent that it has not been exercised, shall entitle the holder upon the future exercise of such option to such number and kind of securities or other property subject to the terms of the option to which the holder would be entitled had such holder actually owned the shares subject to the unexercised portion of the option at the time of the occurrence of such stock dividend, split-up, conversion, exchange, reclassification or exchange; and the aggregate purchase price upon the future exercise of the option shall be the same as if originally optioned shares were being purchased thereunder. If any such event should occur, the number of shares with respect to which options remain to be issued, or with respect to which options may be reissued, shall be similarly adjusted. In the event the outstanding shares of common stock shall be changed into or exchanged for any other class or series of capital stock or cash, securities or other property pursuant to a recapitalization, reclassification, merger, consolidation, combination or similar transaction (other than a transaction described in the previous paragraph), then each option shall thereafter become exercisable for the number and/or kind of capital stock, and/or the amount of cash, securities or other property so distributed, into which the shares subject to the option would have been changed or exchanged had the option been exercised in full prior to such transaction, provided that, if the kind or amount of capital stock or cash, securities or other property received in such transaction is not the same for each outstanding share, then the kind or amount of capital stock or cash, securities or other property for which the option shall thereafter become exercisable shall be the kind and amount so receivable per share by a plurality of the shares. 11. Options Granted Under This Plan and 1975 Plan. Options which have been or which may be granted under the 1975 Plan shall be governed by the provisions of the 1975 Plan as amended. Options granted under this Plan shall be governed by the provision of this Plan. 5 GREAT LAKES CHEMICAL CORPORATION 1984 EMPLOYEE STOCK OPTION PLAN As amended on February 10, 1997 Page 5 12. Additional Provisions. A. VESTING, TERMINATION OF EMPLOYMENT. (i) Upon a change in control of the Company (as defined below), all options shall immediately vest and become exercisable. (ii) An option shall be exercisable only during the optionee's employment by the Company or a subsidiary and for up to three months after the termination of such employment for any reason (including but not limited to any such termination of employment which occurs following a change in control of the Company), except that in the Board's (or, if such authority is delegated by the Board, the Compensation and Incentive Committee's or the Chief Executive Officer's) discretion, an option may be exercisable for a period of up to three years after retirement or death, or for up to ten years after mandatory retirement under the Executive Mandatory Retirement Policy. (iii) An option may be exercised after the termination of an optionee's employment with the Company only to the extent that (a) the optionee was entitled to do so on the date of termination (after giving effect to Section 12(A)(i) above), and (b) the Award would not have expired had the Awardee continued to be employed by the Company or a subsidiary. (iv) The Board (or if such authority is delegated by the Board, the Compensation and Incentive Committee or the Chief Executive Officer) may in its discretion determine that an authorized leave of absence or disability shall be deemed to satisfy this Plan's employment requirements. (v) For purposes of this Plan, a "change in control of the Company" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: (a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or 6 GREAT LAKES CHEMICAL CORPORATION 1984 EMPLOYEE STOCK OPTION PLAN As amended on February 10, 1997 Page 6 (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of shares of the Company (any such person is hereinafter referred to as a "Person"), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 20% of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company); (b) there is consummated a merger or consolidation of the Company with or into any other corporation, other than a merger or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto holding securities which represent, in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, immediately after such merger or consolidation, more than 70% of the combined voting power of the voting securities of either the Company or the other entity which survives such merger or consolidation or the parent of the entity which survives such merger or consolidation; (c) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; or (d) during any period of two consecutive years (not including any period prior to the date of this Plan), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (a), (b) or (c) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof. 7 GREAT LAKES CHEMICAL CORPORATION 1984 EMPLOYEE STOCK OPTION PLAN As amended on February 10, 1997 Page 7 For purposes of this Plan, where a change in control of the Company results from a series of related transactions, the change in control of the Company shall be deemed to have occurred on the date of the consummation of the first such transaction. For purposes of clause (a) of this subsection, the stockholders of another corporation (other than the Company or a corporation described in subclause (iv) of clause (a) of this subsection) shall be deemed to constitute a Person. Further, the sale, transfer, or other disposition of a subsidiary of the Company shall not constitute a change in control of the Company giving rise to payments or benefits under this Plan. Notwithstanding any other provision hereof, a "change in control of the Company" shall not be deemed to have occurred by virtue of the Company entering into any agreement with respect to, the public announcement of, the approval by the Company's stockholders or directors of, or the consummation of, any transaction or series of integrated transactions (including any merger or other business combination transaction) entered into in connection with, or expressly conditioned upon the occurrence of, a spin-off (such transaction or series of integrated transactions, the "Spin-Off Transaction") immediately following which the recordholders of the common stock of the Company immediately prior to the Spin-Off Transaction continue to have substantially the same proportionate ownership in the spun-off entity as they had in the Company immediately prior to the Spin-Off Transaction; provided that such Spin-Off Transaction (including any related merger of other business combination transaction) has been approved by a vote of a majority of the Company's Continuing Directors (as defined below) then in office. For purposes of this Plan, a "Continuing Director" shall mean any member of the Board of the Company who is a member of the Board as of the date of this Plan and any person who subsequently becomes a member of the Board, if such person's nomination for election or election to the Board is recommended or approved by a majority of the Continuing Directors. B. Listings, Registration and Compliance With Laws and Regulations. (i) Each option shall be subject to the requirement that if at any time the Board shall determine, in its discretion, that the listing, registration, or qualification of the shares subject to the option upon any securities exchange or under any state or federal securities or other law or regulation, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to or in connection with the granting of such 8 GREAT LAKES CHEMICAL CORPORATION 1984 EMPLOYEE STOCK OPTION PLAN As amended on February 10, 1997 Page 8 option or the issue or purchase of shares thereunder, no such option may be exercised or paid in common stock in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board and the optionee will supply the company with such certificates, representations and information as the company shall request and shall otherwise cooperate with the company in obtaining such listing, registration, qualification, consent or approval. In the case of officers and other persons subject to Section 16(b) of the Securities Exchange Act of 1934, the Board may at any time impose any limitations upon the exercise of an option which, in the Board's discretion are necessary or desirable in order to comply with Section 16(b) and the rules and regulations thereunder. If the company, as part of an offering of securities or otherwise, finds it desirable because of federal or state regulatory requirements to reduce the period during which any options may be exercised, the Board may, in its discretion and without the optionee's consent, so reduce such period on not less than 15 days' written notice to the optionee. (ii) Notwithstanding the terms of this paragraph, no optionee shall have the right to require the company to register, list or qualify said option or any of the stock underlying such option. C. Amendment of the Plan. Except as provided in the following sentence and as required by law, the company's Board shall have complete power and authority to amend this Plan at any time and no approval by the company's stockholders or by any other person, committee or other entity of any kind shall be required to make any such amendment effective. The Board shall not, however, increase the maximum number of shares available for options granted under this Plan unless such increase shall either be approved by the company's stockholders or shall be permitted by Paragraph 10. No termination or amendment of this Plan may, without the consent of the individual to whom any option shall theretofore have been granted under this Plan, adversely affect the rights of such individual under such option. D. Captions. The captions (i.e., all italicized words) used in this Plan are for convenience only, do not constitute a part of this Plan, and shall not be deemed to limit, characterize or affect in any way any provision of this Plan, and all provisions in this Plan shall be construed as if no captions had been used in this Plan. E. Severability. Whenever possible, each provision in this Plan and in every option at any time granted under this Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Plan or any option at any time granted under 9 GREAT LAKES CHEMICAL CORPORATION 1984 EMPLOYEE STOCK OPTION PLAN As amended on February 10, 1997 Page 9 this Plan shall be held to be prohibited by or invalid under applicable law, then (I) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (ii) all other provisions of this Plan and every option at any time granted under this Plan shall remain full force and effect. F. No Strict Construction. No rule of strict construction shall be applied against the company, the Board, or any other person in the interpretation of any of the terms of this Plan, any option granted under this Plan or any rule or procedure established by the Board. G. Applicable Law. Every option at any time granted under this Plan shall be deemed to be a contract made under the laws of the State of Indiana. For all purposes, both this Plan and every option granted under this Plan shall be construed in accordance with and governed by the laws of the State of Indiana. EX-13 15 ANNUAL REPORT 1 EXHIBIT 13 [LOGO] GREAT LAKES CHEMICAL CORPORATION BUSINESS PROFILE 1997 Revenue by Business Unit (in millions) - - ------------------------------------------------------------------------------- [PIE CHART] -- $309 FLAME RETARDANTS The world's leading producer of brominated flame retardants is now the leading supplier of antimony-based flame retardant products as well. Our customers use these synergistic products, in combination as well as independently, to reduce or eliminate the inherent flammability of a wide variety of combustible materials, such as engineered plastics, urethane foams and epoxy resins. - - ------------------------------------------------------------------------------- [PIE CHART] -- $211 INTERMEDIATES AND FINE CHEMICALS Great Lakes is leveraging its expertise in complex chemical synthesis and experience in handling specialized chemistries to become a world-leading developer and manufacturer of custom chemicals. With ISO 9000 quality manufacturing facilities on two continents, Great Lakes is well positioned to serve a growing number of customers around the globe that choose to outsource the custom manufacture of a variety of intermediates and fine chemicals. - - ------------------------------------------------------------------------------- [PIE CHART] -- $245 POLYMER STABILIZERS A broad range of stabilizing products -- from antioxidants to hindered amine light stabilizers -- enhances critical polymer performance characteristics such as heat and light resistance and color consistency. Great Lakes is also a pioneer in the development and manufacture of alternative physical forms, such as patented No Dust Blends, which satisfy market demand for additives that are easier to process and safer for employees and the environment. - - ------------------------------------------------------------------------------- [PIE CHART] -- $194 SPECIALIZED SERVICES AND MANUFACTURING The company's highly profitable, narrowly focused specialty businesses exemplify the entrepreneurial spirit that propelled Great Lakes to the forefront of the specialty chemical industry. Serving high-growth niche markets, these businesses open dynamic markets for Great Lakes' high-margin, value-added products and services. - - ------------------------------------------------------------------------------- [PIE CHART] -- $352 WATER TREATMENT Great Lakes is the premier supplier of recreational water treatment products to consumers throughout the world. The company's BioLab and Bayrol subsidiaries develop and market popular pool and spa products in North America, Europe, Australia and South Africa. In addition, Great Lakes is the world's leading producer of bromine-based water treatment chemicals used for cooling towers, municipal wastewater treatment and other specialty applications. 6 2 [ LOGO ] GREAT LAKES CHEMICAL CORPORATION FLAME RETARDANTS [ PHOTO ] Look around any home, office or vehicle, and chances are Great Lakes flame retardant additives are hard at work, silently protecting the products consumers rely on from the destructive effects of fire. These additives are built into the plastic casings of computer monitors. They protect the circuit boards found in electronic appliances. They're part of the foams and fabrics used in furniture and automobiles, and the wiring behind walls and inside of components. As the world's leading supplier of brominated, antimony-based and other specialty flame retardants, Great Lakes helps manufacturers ensure that the products they produce are safe to use. 8 3 IN INDUSTRIES AS DIVERSE AS PLASTICS, CONSUMER ELECTRONICS, TEXTILES AND BUILDING MATERIALS, MANUFACTURERS FACE THE SAME FUNDAMENTAL CHALLENGE: FINDING A DEPENDABLE, EFFICIENT WAY TO INCORPORATE FLAME RETARDANCY AND OTHER PERFORMANCE CHARACTERISTICS INTO THEIR PRODUCTS. AS THESE PRODUCTS BECOME MORE COMPLEX, AND AS REGULATORS ESTABLISH NEW STANDARDS FOR FIRE SAFETY IN MARKETS AROUND THE WORLD, COMPANIES TURN TO GREAT LAKES AND ITS COMPREHENSIVE LINE OF FLAME RETARDANTS TO MEET THEIR HIGHLY SPECIFIC PRODUCTION REQUIREMENTS. AS THE WORLD'S LEADING MANUFACTURER OF FLAME RETARDANT COMPOUNDS, GREAT LAKES HAS THE TECHNOLOGY, GLOBAL RESOURCES AND EXPERTISE TO DEVELOP SOLUTIONS THAT OPTIMIZE PRODUCT PERFORMANCE WHILE CONTRIBUTING TO MORE EFFICIENT AND HIGHER QUALITY PROCESSING. FLAME RETARDANTS [ BAR CHART ] [in millions] 93 240 94 265 95 300 96 294 97 309 After a stagnant 1996, the worldwide flame retardant market gained momentum during 1997 and approached its traditional growth levels. Increased demand from the consumer electronics and plastics industries, especially in the fourth quarter, propelled worldwide volumes of Great Lakes flame retardants to an eight percent gain over 1996. Earnings from the company's joint venture tetrabrombisphenol-A (TBBA) plant in Israel improved markedly as the facility operated well above last year's level. In addition, volumes of staple products such as pentabromodiphenyloxide (PBDPO), polydibromostyrene (PDBS), hexabromocyclododecane (HBCD) and a number of custom flame retardant compounds all surpassed 1996 levels. Despite this strong volume performance, revenues were partially constrained by price erosion in select areas that resulted from increased competition and general foreign currency weakness against the U.S. dollar. Great Lakes continues to emphasize customer- and market-focused research and development as the key to meeting the evolving needs of its customers. These efforts have produced a variety of new products, some of which began commercialization in 1997. The company's South Arkansas plant began commercial production of BI-70, a new brominated flame retardant used in both wire and cable and light-stable packaging film applications. Sales are likewise accelerating for BZ-54, a new non-diphenyloxide (non-DPO) product for the flexible urethane market. In addition, the company successfully piloted its first non-halogenated flame retardant compound with large-scale commercial potential -- a new phosphorous-based product developed to meet a customer's specific engineering thermoplastics requirements. Commercialization of this product is slated for 1998. The company further expanded its flame retardant product line -- and fortified its world leadership position -- when it acquired Anzon, the leading global manufacturer of antimony products. In addition to antimony trioxide, the key synergist used with halogenated flame retardants, Anzon manufactures a variety of user friendly products that eliminate dust and reduce yield loss. Anzon also boasts a robust new product pipeline, which includes its recently commercialized "super-submicron" technology that disperses additives more quickly and completely to give customers better quality and more cost-effective processing. While offering complementary products to most of the current Great Lakes customer base, the Anzon acquisition also opens new downstream markets for Great Lakes and provides a solid platform for developing new specialty chemicals. Quality improvement represents another strong platform for growth. In 1997 the company demonstrated its commitment to meeting the high quality standards of its customers by investing in a number of quality improvement projects. These projects will ensure that Great Lakes' products lead the industry in quality and performance. 1998 OUTLOOK The market conditions that contributed to strong flame retardant volumes in the fourth quarter should provide abundant growth opportunities in 1998. The Asian financial instability, which had no measurable effect on 1997 results, in all likelihood will have an impact in 1998, the extent of which is not yet known. In any event, Great Lakes stands ready with the industry's broadest array of existing flame retardant products -- and a customer-focused approach to research, development and applications testing -- to help manufacturers meet new and stricter performance criteria. Great Lakes also anticipates increased sales to electronics manufacturers as this industry projects seven to eight percent growth in 1998. In the year ahead, Great Lakes will boost revenues and margins by capitalizing on synergies afforded by both the Anzon acquisition and the Polymer Stabilizers business unit, to provide the most comprehensive basket of high-quality polymer additives to the plastics industry. All these factors point to 1998 as a year of steady, consistent growth. 9 4 [ LOGO ] GREAT LAKES CHEMICAL CORPORATION INTERMEDIATES AND FINE CHEMICALS [ PHOTO ] Complex chemical synthesis is often required to help products achieve their highly specialized performance characteristics. Great Lakes' fine chemicals and intermediates are key building blocks for many of the pharmaceutical products that keep consumers healthy. They work their magic in agricultural products that protect crops from insects and disease. They function as a key reactive agent in the photographic process. And Great Lakes has developed a number of end-product applications, such as a family of new bromine-based solvents for precision and electronic cleaning. 10 5 IN TODAY'S FAST-PACED MANUFACTURING ENVIRONMENT, COMPETITIVE ADVANTAGE GOES TO THOSE COMPANIES THAT CAN STREAMLINE AND ACCELERATE THE PROCESS OF DEVELOPING AND INTRODUCING NEW, HIGH QUALITY PRODUCTS. WITH INCREASING FREQUENCY, COMPANIES ARE MEETING THIS OBJECTIVE BY OUTSOURCING STRATEGIC SEGMENTS OF THE PRODUCT DEVELOPMENT PROCESS TO ORGANIZATIONS WITH THE BROAD RESOURCES AND PROVEN EXPERTISE TO MEET HIGHLY SPECIFIC REQUIREMENTS. GREAT LAKES IS FAST EMERGING AS A LEADING RESOURCE FOR PERFORMING THE COMPLEX CHEMICAL PROCESSES THAT ARE VITAL TO NEW PRODUCT DEVELOPMENT. WITH A STRONG PRESENCE IN BOTH THE UNITED STATES AND EUROPE, GREAT LAKES IS WELL EQUIPPED TO PERFORM A VARIETY OF ACTIVITIES -- FROM CREATING COMPLEX ORGANIC MOLECULES THAT MEET SPECIFIC PERFORMANCE CRITERIA, TO DEVELOPING AND PILOTING ECONOMICAL MANUFACTURING PROCESSES FOR PHARMACEUTICAL, AGROCHEMICAL AND OTHER FINISHED PRODUCTS DEVELOPED BY CUSTOMERS. INTERMEDIATES AND FINE CHEMICALS [ BAR CHART ] [in millions] 93 145 94 167 95 197 96 196 97 211 Great Lakes' strategic decision to focus on those core specialty businesses that offer the best potential for high, consistent growth has changed the face of its intermediates and fine chemicals business. In 1997 Great Lakes began the process of exiting the furfural and derivatives business to concentrate on meeting growing customer demand for high-value fine chemical compounds, as well as bromine-based chemicals. As part of the company's plan to spin off its petroleum additives business, the European bromine and fine chemicals businesses formerly managed by Octel were integrated into Great Lakes' global bromine and fine chemicals businesses. This more focused approach will allow the company to leverage its raw materials and technology resources to serve areas where recent performance promises a significant return on this investment. Great Lakes built on its strong 1996 sales of bromine and bromine derivatives by meeting or exceeding its 1997 performance targets in these areas. In addition to increasing its sales of derivatives to the photographic and pharmaceutical markets, the company signed a number of new contracts with companies worldwide to perform custom research projects. Results in 1997 also reflect the successful introduction of several price increases for certain bromine derivatives and intermediates. In 1998 and beyond, this business unit should realize further enhanced margins as the company explores new bromine production strategies that will impact the company's entire range of bromine products. The company's custom synthesis activities continue to yield significant long-term manufacturing opportunities that contribute significantly to the business unit's revenue stream. Great Lakes' Newport, Tennessee, facility is operating at optimal capacity to meet the requirements of a seven-year contract to supply one customer with DBB, a key agrochemical intermediate used in an acaricide. Full-scale production is also underway for BMA, a key intermediate used in a new AIDS drug, and for OTBN, a new intermediate used in a variety of beta-blocker drugs. Revenues should continue to increase as more agrochemical and pharmaceutical manufacturers see the benefits of outsourcing their complex intermediate and fine chemical synthesis. Great Lakes is exploiting this market opportunity by fortifying relationships with major life science customers, by making acquisitions and by developing new process technologies. Great Lakes also made its first deliveries of its HyperSolve(TM) NPB, the first of a family of new Great Lakes solvents based on n-propyl bromide chemistry. HyperSolve, which the U.S. Environmental Protection Agency is expected to approve under its Significant New Alternatives Policy, offers a lower cost, environmentally friendly alternative to ozone depleting solvents used in precision applications such as electronics, aerospace and the military. This new technology, which is also under review by manufacturers of sealants and adhesives as a raw material solvent, leaves Great Lakes well positioned to increase its share of the more than $10 billion solvent market. 1998 OUTLOOK As Great Lakes refocuses on its core specialty chemical businesses, the Intermediates and Fine Chemicals business unit becomes an even more important ingredient in the company's formula for success. The continuing challenge is to manage our bromine resources strategically to concentrate on the highest value-added applications. We will also exploit our global manufacturing capacity and expertise to develop our niches in custom intermediate and fine chemical synthesis and to penetrate new and expanding markets. 11 6 [ LOGO ] GREAT LAKES CHEMICAL CORPORATION POLYMER STABILIZERS [ PHOTO ] Plastics compounds gain many of their important performance characteristics from special polymer stabilizer additives such as antioxidants and UV stabilizers produced by Great Lakes. Manufacturers use them to protect a variety of products -- from car seats and steering wheels to the colorful fibers used in carpets and upholstery -- from the damaging effects of sunlight. They are incorporated into polyethylene pipes used for water and natural gas transmission to assure long-term stability. And Great Lakes' revolutionary No Dust Blends simplify manufacturing processes by compressing multiple additives into precisely calibrated granular mixtures. 12 7 LESS THAN FIVE YEARS AFTER IT ENTERED THE DYNAMIC AND FAST-GROWING POLYMER STABILIZERS BUSINESS, GREAT LAKES HAS BECOME THE WORLD'S SECOND-LARGEST SUPPLIER OF POLYMER STABILIZERS BY DEVELOPING HIGH-PERFORMANCE NEW PRODUCTS, RESPONDING TO INCREASING DEMANDS OF THE MARKET AND EXPANDING ITS GLOBAL MANUFACTURING AND DISTRIBUTION CAPABILITIES. EVEN IN THE FACE OF FIERCE COMPETITION, GREAT LAKES CONTINUES TO IMPROVE ITS MARKET SHARE BY WORKING WITH CUSTOMERS TO DEVELOP INNOVATIVE STABILIZATION SYSTEMS, BY FORMULATING CUSTOM BLENDS AND BY PROVIDING TECHNICAL SERVICE WORLDWIDE. POLYMER STABILIZERS [ BAR CHART ] [in millions] 93 81 94 164 95 224 96 242 97 245 Great Lakes manufactures antioxidants, ultraviolet light stabilizers and customized additive blends in the three major polymer stabilizer markets -- Europe, North America and the Far East. These products expand the use of plastics by providing better protection against heat and light degradation and by making them cleaner to process and easier to recycle. In 1997 sales volume increased 16 percent worldwide despite severe price competition and an unusually strong U.S. dollar. Operating income rose more than 30 percent as increased volumes, more efficient manufacturing operations and other cost reduction initiatives boosted profit margins. The company's antioxidant plant in Newport, Tennessee, enabled Great Lakes to establish a strong manufacturing base in the key North American market, which accounts for almost one-third of the worldwide volume of plastics additives. The facility began production last year of Anox(R) 20, a high-volume, high-performance phenolic antioxidant used in polyolefins and engineering polymers. In the spring of 1998, the company will start up a second manufacturing line in Newport to produce the phenolic antioxidant Anox(R) PP-18, thereby gaining economies of scale, optimizing throughput and lowering production costs. New product introductions are providing additional platforms for growth. Sales of UV stabilizers such as Lowilite(R) 77, Lowilite(R) 62 and Uvasil(R) 299, exceeded expectations and should continue to grow following recent approvals by large polymer manufacturers. Great Lakes' proprietary No Dust Blend (NDB) technology -- which provides a calibrated, uniform combination of high-performance additives blended into one dustless granule -- should continue its above-average growth in 1998 as an alternative to commonly used powders. These NDB compounds simplify processing, handling and storage; enhance product quality; eliminate the use of inactive binders; and reduce workers' health and safety risks. Great Lakes plans to produce commercial quantities of another new product, a silicon-based antioxidant, whose low extractability will expand the use of plastics. The company will further extend its geographic reach through a world-scale antioxidants joint venture in Saudi Arabia, one of the fastest growing polyolefin producing countries in the world. The company's acquisition of the Anzon antimony business provides yet another opportunity to exploit the natural synergies with the Flame Retardants business unit. Great Lakes now offers an even broader combination of high-performance polymer additives, strengthening the company's commit-ment to provide comprehensive solutions to all its customers' additive needs. 1998 OUTLOOK Growth will be driven by innovative solutions for polymer stabilization, enhanced sales and technical service, as well as further efforts to increase the company's market penetration and manufacturing presence in China, South America and other regions. Great Lakes has the solid customer relationships, global manufacturing capabilities and enhanced service support systems to increase its share of the highly competitive $1.6 billion plastics additives market. 13 8 [ LOGO ] GREAT LAKES CHEMICAL CORPORATION SPECIALIZED SERVICES AND MANUFACTURING [ PHOTO ] Great Lakes excels in identifying niche markets that provide outlets for its value-added products. In 1997 FM-200(R) portable fire extinguishers were unveiled to protect the interiors of military vehicles and other close quarters where human safety is critical. FM-200 systems also protect valuable possessions such as the Thrust SSC supersonic car and collections of sensitive materials like digital tapes. The company's OSCA subsidiary uses specially designed marine vessels to extend its oil field services beyond the Gulf of Mexico's shelf to the deep-water market. The toxicological testing services of WIL Research help many industries develop new products that are as safe as they are effective. 14 9 THROUGH INVESTMENTS IN COMPLEMENTARY, HIGH-MARGIN BUSINESSES, GREAT LAKES LEVERAGES ITS CORE COMPETENCIES AND CAPITALIZES ON OPPORTUNITIES FOR LONG-TERM GROWTH. IN 1997 GREAT LAKES STRENGTHENED ITS SPECIALIZED SERVICES AND MANUFACTURING BUSINESS BY RETAINING ONLY THOSE BUSINESSES THAT COMPLEMENT THE COMPANY'S WELL FOCUSED SPECIALTY CHEMICAL PORTFOLIO WHILE MEETING KEY OPERATING PERFORMANCE CRITERIA. EACH OF THESE BUSINESSES RECORDED INCREASES IN BOTH SALES AND OPERATING INCOME. SPECIALIZED SERVICES AND MANUFACTURING [ BAR CHART ] [in millions] 93 125 94 118 95 152 96 190 97 194 OIL FIELD SERVICES Through its OSCA, Inc. subsidiary, Great Lakes finds a unique and profitable outlet for its bromine technology. OSCA's wide product array includes bromine-based well completion, drill-in and stimulation fluids as well as ancillary services. OSCA's on-site personnel help customers increase production through such services as gravel packing, high-pressure frac packing, well stimulation and coiled tubing well intervention. Steadily growing oil demand and declining reserves continue to fuel increased drilling activity. In 1997 OSCA bolstered its leadership position with products and services that enhance the productivity of existing oil and gas wells and contribute to the recovery of energy resources. Boosted by the strong performance of its domestic completion services division and recent investments in marine services and coiled tubing businesses, OSCA posted 18 percent revenue gains over 1996. OSCA successfully entered the marine well services business in 1997 with a vessel designed to provide high-pressure frac packing services. In 1998 OSCA will add two more vessels that are specially designed for the challenging deep-water segment of the Gulf of Mexico. These vessels have the capacity to provide sand control, stimulation and completion fluid for five to 10 wells at a time. This floating warehouse strategy has diversified OSCA's service offerings and created pull-through sales for its down-hole tool and coiled tubing divisions. For 1998 OSCA will apply this strategy to other key geographic regions, particularly the North Sea and Latin America. By adding these complementary services internationally, OSCA will further capitalize on its strong, vertically integrated service capabilities. FLUORINE CHEMICALS With worldwide industry sales of $6 billion, fluorine chemicals represent a key growth platform for Great Lakes to capitalize on its core strengths in manufacturing, technology and process development. The company is implementing a specialty chemical niche market strategy with its fluorine-based compounds, FM-200(R) and HFC-32, which continue to gain worldwide recognition and acceptance for their superior performance and environmental benefits. Increased demand for both of these products boosted sales and operating income to record heights in 1997. FM-200, an environmentally friendly fire extinguishing agent that leaves no residue, is now used in tens of thousands of total-flooding fire suppression systems around the world. In 1997 it received approval by the U.S. Environmental Protection Agency for use in portable fire extinguishers, opening new sales opportunities in applications requiring a safe, non-ozone depleting alternative to halon 1211. FM-200's space-weight ratio and performance characteristics, combined with its unmatched safety features, make it the most successful halon replacement on the market. Because of this superior performance, FM-200 systems were selected to protect an array of high-value critical assets last year, such as historical artifacts at the Antiques Library in Cairo, the first draft of the Declaration of Independence, the U.S. Navy's new nuclear-powered air-craft carrier under construction, and the engine of Thrust SSC, a supersonic car that shattered the land-speed record. Success with Thrust SSC proves FM-200 can meet or exceed the strictest performance criteria and may lead to other opportunities in the aerospace industry. HFC-32 is a key component of environmentally friendly refrigerant blends used in commercial refrigeration applications. With demand growing in North America and Europe, Great Lakes has the production capabilities and sales support to give major manufacturers access to the latest technology. TOXICOLOGICAL TESTING WIL Research Laboratories, Inc. provides a broad array of interdisciplinary research and toxicological assessment services. From its recently expanded facility in Ashland, Ohio, WIL conducts critical product research and develop-ment for pharmaceutical, chemical, veterinary medical, agricultural, food and consumer products industries. This expanded capacity propelled WIL to record sales and forms a solid platform for continued growth. 1998 OUTLOOK By expanding global penetration and distribution of their customer-preferred products and services, these businesses are poised to take advantage of high growth rates in diverse specialty markets and contribute to the overall success of Great Lakes. 15 10 [ LOGO ] GREAT LAKES CHEMICAL CORPORATION WATER TREATMENT [ PHOTO ] Pool owners may not recognize Great Lakes by name, but they know all about the pool and spa chemical products manufactured by the company's BioLab and Bayrol subsidiaries. Their patented water treatment technologies provide exceptional pool and spa maintenance results, keeping the water clear and algae free. Innovations like Smart Sticks(TM) demonstrate how improvements in formulation can make pool and spa care more easy and effective than ever. An active research and development effort is also producing an expanding range of product offerings. 16 11 AGGRESSIVE INTERNAL GROWTH INITIATIVES, COUPLED WITH EXPANDING MARKETS AND CONSISTENT GROWTH IN NEW POOL CONSTRUCTION, ARE INCREASING BUSINESS OPPORTUNITIES FOR GREAT LAKES, A LEADING GLOBAL SUPPLIER OF WATER SANITIZERS FOR RESIDENTIAL, COMMERCIAL AND INSTITUTIONAL POOLS AND SPAS AND RECREATIONAL MARKETS SUCH AS THEME PARKS. THROUGH ITS BIOLAB AND BAYROL SUBSIDIARIES, THE COMPANY HAS A STRONG PRESENCE IN THE MAJOR RECREATIONAL WATER MARKETS OF NORTH AMERICA, EUROPE, AUSTRALIA, NEW ZEALAND AND SOUTH AFRICA, WITH BRANDS SUCH AS BIOGUARD(R), OMNI(R), GUARDEX(R), HYDROTECH(R), POOL TIME(R), AQUA CHEM(R) AND BAYROL(R). IN ADDITION, GREAT LAKES IS THE WORLD'S LEADING PRODUCER OF BROMINE-BASED WATER TREATMENT CHEMICALS USED FOR COOLING TOWERS, MUNICIPAL WASTEWATER TREATMENT AND OTHER SPECIALTY APPLICATIONS. WATER TREATMENT [ BAR CHART ] [in millions] 93 361 94 383 95 419 96 430 97 352 Despite unfavorable weather conditions in certain markets throughout the year, the domestic water treatment business recorded a 16 percent increase in sales, excluding the divested pool products distribution network. Tighter cost controls and improved manufacturing efficiencies also fueled a 35 percent gain in operating income over 1996. In 1997 BioLab discontinued its BCDMH manufacturing line in Lake Charles, Louisiana, and consolidated production at its Adrian, Michigan, facility, an ISO 9002 plant. In Europe, the company's Bayrol subsidiary improved operating efficiencies and reduced inventories by more than 40 percent. BioLab received a record eight new technology and process-based patents in 1997 and filed applications for several new ones in both domestic and international markets. The company also achieved increased market penetration with several new product introductions, including Polysheen(R) Blue, Optimizer(R) and the Softswim(R) filter cleaner. Great Lakes continued to help customers, consumers, employees and suppliers keep pace with its new products and advanced technologies by offering a number of educational seminars. With the cooperation and support of its dealer network, the company presented seminars on pool and spa maintenance to more than 25,000 consumers. In addition, it held two extensive professional conferences in the United States for its network of BioGuard Authorized Dealers, as well as additional conferences in Canada, Australia and South Africa. It also conducted 23 educational seminars covering chemical technology at locations throughout the United States. These programs are among the most comprehensive educational programs available in the industry. The Internet is providing yet another forum for Great Lakes' water treatment business to communicate product information and advance its marketing initiatives. To reach pool and spa owners, it launched World Wide Web sites dedicated to specific product lines such as BioGuard, OMNI, Pool Time and AQUA CHEM. Visitors to these sites can find valuable pool and spa product information, promotions, product updates and tips on pool care. The BioGuard site also provides consumers access to their nearest U.S. dealer locations. The company also redesigned several product lines, including BioGuard's SpaGuard(R) and the distributor products division's Guardex product lines, to strengthen brand recognition and accentuate specific product features. These product lines feature new packaging with an important color-coded functionality designed to enhance consumers' understanding of pool care and maintenance. Also, updated designs helped establish consumer friendly identities. Globally, Great Lakes introduced new product lines in Australia and expanded distribution of its BioGuard products in South Africa by targeting pool builders and smaller retailers. The company also introduced its industrial water treatment compounds to pulp and paper manufacturers in several new markets, including Europe and Japan. 1998 OUTLOOK With a strong portfolio of new products, Great Lakes' worldwide water treatment business is poised to strengthen and leverage its leadership position. In the United States, approximately 140,000 new in-ground pools, 450,000 above-ground pools and 350,000 spas are added each year, creating a corresponding growth in demand for water-treatment chemicals and related products. In addition, the company's bromine-based biocides are gaining broader market acceptance as environmentally friendly solutions for commercial, industrial and household water treatment applications, as well as for applications in the pulp and paper industries. This technology will continue to be a strong focus in 1998. Great Lakes' well established presence in important world markets gives the company a solid base from which to optimize the revenue potential for its multiple brands and related products. By building on the base of its recognized brand names, extending the applications and reach of its products, and achieving further operational efficiencies, Great Lakes expects to grow well ahead of water treatment industry averages in 1998. 17 12 FINANCIAL REVIEW
- - ------------------------------------------------------------------------------------------------------ (in millions of dollars, except per share data) 1997 1996 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------ SUMMARY OF EARNINGS Net sales $1,311.2 1,352.3 1,291.6 1,097.1 952.0 Operating income $ 141.8 183.9 198.3 151.6 150.6 Income from continuing operations before income taxes $ 117.2 184.0 200.2 169.7 166.0 Income taxes $ 45.4 63.4 68.0 44.0 37.6 Percent of income before income taxes 38.7 34.5 34.0 25.9 22.6 Net income from continuing operations $ 71.8 120.6 132.2 125.7 128.4 Net (loss) income from discontinued operations (14.9) 129.7 163.4 153.0 144.3 - - ------------------------------------------------------------------------------------------------------ Total net income $ 56.9 250.3 295.6 278.7 272.8 Percent of stockholders' average equity 4.1 17.2 21.7 21.7 23.6 FINANCIAL POSITION AT YEAR-END Working capital $ 364.2 424.1 399.7 286.8 283.2 Current ratio 2.2 2.5 2.4 2.3 2.5 Capital expenditures $ 133.0 168.7 182.9 86.0 57.8 Total assets $2,270.4 2,352.7 2,179.9 1,810.8 1,632.8 Long-term debt $ 561.5 496.2 331.2 133.1 49.0 Percent of total capitalization 29.1 24.4 18.9 8.8 4.3 Stockholders' equity $1,307.4 1,486.9 1,416.2 1,310.9 1,256.6 Per share $ 22.18 24.13 21.92 19.48 17.63 SHARE DATA Basic earnings (loss) per share Continuing operations $ 1.20 1.90 2.02 1.80 1.80 Discontinued operations (0.25) 2.04 2.50 2.20 2.02 - - ------------------------------------------------------------------------------------------------------ Total $ 0.95 3.94 4.52 4.00 3.82 Diluted earnings (loss) per share Continuing operations $ 1.19 1.89 2.00 1.79 1.78 Discontinued operations (0.25) 2.02 2.48 2.17 1.99 - - ------------------------------------------------------------------------------------------------------ Total $ 0.94 3.91 4.48 3.96 3.77 Cash dividends per share Declared during year $ 0.63 0.57 0.44 0.39 0.35 Paid during year $ 0.62 0.54 0.43 0.38 0.34 Payout as percent of net income 66.3 14.5 9.7 9.8 9.2 Shares outstanding (basic) Average during year 60,041 63,539 65,364 69,659 71,329 At year-end 58,944 61,613 64,604 67,297 71,275 Stock price High $ 54 7/8 78 5/8 74 5/8 82 84 Low $ 41 1/2 44 1/4 55 3/4 48 3/4 64 1/2 At year-end $ 44 7/8 46 3/4 72 57 74 5/8 - - ------------------------------------------------------------------------------------------------------
Great Lakes Chemical Corporation 19 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This annual report, including Management's Discussion and Analysis, contains both historical information and forward-looking statements. The forward-looking statements involve risks and uncertainties that could affect the Company's operations, markets, products, services, prices and factors as discussed in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. These risks and uncertainties include, but are not limited to, economic, competitive, governmental and technological factors. Accordingly, there is no assurance that the Company's expectations will be realized. OVERVIEW In 1997 the Company took a number of actions to focus on its core specialty chemical businesses. Reported as discontinued operations in the accompanying financial statements is the announced spin-off of the Company's petroleum additives business (Octel) as well as several non-core and underperforming businesses--furfural and derivatives, Eastern European trading (Chemol) and environmental services--that the Company decided to exit. In addition, the Company recorded a special charge to provide for the cost associated with restructuring remaining operations, exiting certain product lines and to write down impaired assets. Also, the Company strengthened its polymer additives market position by acquiring Anzon, a producer of antimony-based flame retardants and other products. CONTINUING OPERATIONS The following table sets forth for the Company's continuing operations the percentage relationship to net sales of certain income statement items:
- - ------------------------------------------------------------------ 1997 1996 1995 - - ------------------------------------------------------------------ Net Sales 100.0% 100.0% 100.0% Gross Profit 28.5 28.3 30.5 Selling and Administrative Expense 10.7 11.5 11.9 Research and Development Expense 3.2 3.2 3.2 Special Charge 3.8 -- -- - - ------------------------------------------------------------------ Operating Income 10.8 13.6 15.4 Interest and Other Income 2.4 4.2 2.1 Interest and Other Expense 4.2 4.2 2.0 - - ------------------------------------------------------------------ Income before Income Taxes 9.0 13.6 15.5 Income Taxes 3.5 4.7 5.3 - - ------------------------------------------------------------------ Net Income from Continuing Operations 5.5% 8.9% 10.2% ==================================================================
RESULTS OF CONTINUING OPERATIONS -- 1997 COMPARED WITH 1996 Sales for the year amounted to $1,311 million, a decrease of $41 million from the prior year. Sales by business unit are shown in the following table (in millions):
- - -------------------------------------------------------------------------- Percent Inc./ (Dec.) Over 1997 1996 1995 Prior Year - - -------------------------------------------------------------------------- $ % $ % $ % 1997 1996 - - -------------------------------------------------------------------------- Flame Retardants 309 24 294 22 300 23 5 (2) Intermediates and Fine Chemicals 211 16 196 14 197 15 8 (1) Polymer Stabilizers 245 19 242 18 224 17 1 8 Specialized Services and Manufacturing 194 14 190 14 152 13 2 25 Water Treatment 352 27 430 32 419 32 (18) 3 - - -------------------------------------------------------------------------- 1,311 100 1,352 100 1,292 100 (3) 5 ==========================================================================
On an overall basis, the increase (decrease) from the prior year results from the following (in millions):
- - -------------------------------------------------------------------------- 1997 1996 - - -------------------------------------------------------------------------- Selling Prices $ (23) $ 8 Volume 155 86 Dispositions (155) (27) Acquisitions 9 3 Foreign Exchange (27) (10) - - -------------------------------------------------------------------------- $ (41) $ 60 ==========================================================================
Flame Retardants sales were $309 million in 1997, an increase of $15 million over the $294 million reported in 1996. The acquisition of Anzon, a producer of antimony-based products, contributed about $9 million of the increase. Excluding the acquisition, the business recorded a strong volume improvement which was primarily offset by the negative effects of lower selling prices and foreign exchange as the U.S. dollar strengthened vis-a-vis the Japanese yen and the German mark. Volume for key products was strong throughout the year in U.S. and Far Eastern markets. European markets showed improvement in the latter part of the year. Selling prices, which began to soften in late 1996, remained under pressure throughout 1997. It appears that some price stabilization has occurred as selective price increases were successfully implemented in the Far East during the second half of 1997 and in Europe during the fourth quarter of 1997. Worldwide market share was maintained in a very competitive environment. Intermediates and Fine Chemicals sales of $211 million increased $15 million over the $196 million reported in 1996. The increase results primarily from the introduction of new fine chemical products developed in collaboration with customers and the introduction of HyperSolve(TM), a bromine-based solvent. Prices and foreign exchange were small positives for the year. Polymer Stabilizers sales amounted to $245 million as compared to $242 million recorded in the prior year. Volume improvements of about 16 percent were offset by a decline in its average selling prices of about 8 percent and unfavorable currency effects. Antioxidant volume gains led a volume expansion that was achieved across all product areas. The growth in antioxidants 20 Great Lakes Chemical Corporation 14 resulted from customer acceptance of new proprietary products and physical forms and expanded presence in both the U.S. and Far Eastern markets. Recent market indications suggest that price pressure is beginning to ease. Specialized Services and Manufacturing sales were $194 million in 1997 as compared to $190 million in 1996. The 1996 amount included the sales of E/M Corporation which was sold in November 1996. Excluding the divestiture, 1997 sales increased almost 20 percent primarily due to volume improvements. Sales in the fluorine segment increased approximately 18 percent over 1996 as the FM-200(R) fire extinguishant product expanded its geographic presence and entered the marine market with a portable fire extinguisher. OSCA, our oil field services business, posted increased sales of about 18 percent as a result of meeting customer requirements for a full service supplier and by entering into the deep water well marine service market. WIL, our toxicological testing service business, sales increased approximately 27 percent due to increased utilization of its expanded facilities and changes in the type of test services provided. Water Treatment sales totaled $352 million in 1997 compared to $430 million in the prior year. Results in 1996 included $126 million of sales related to a pool products distribution business that was sold in September, 1996. Excluding the divestiture, sales increased approximately 16 percent over the prior year. The sales gain was essentially all volume related as average selling prices improved only 1 percent while currency had a 2 percent negative effect. Volume gains were achieved in all markets except Europe. The U.S. recreational water treatment business achieved significant growth in both its branded and distributor market segments. Gross profits for 1997 amounted to $374 million compared to $383 million in 1996. The change in gross profit from the prior year resulted from the following (in millions):
- - -------------------------------------------------------- Selling Price Decreases $ (23) Volume Increases 55 Cost Increases (11) Dispositions (29) Acquisitions 2 Foreign Exchange (3) - - -------------------------------------------------------- $ (9) ========================================================
Cost increases resulted from higher cost of raw materials, primarily chlorine and energy, and increased depreciation. Capacity utilization increased in most facilities. As a percentage of sales, gross profit was 28.5 percent, a slight improvement over the 28.3 percent in the prior year. Selling, administrative and research expenditures amounted to $182 million in 1997 compared to $199 million in 1996, a decrease of $17 million from the prior year. The reduction reflected the benefits of divestitures, $24 million, and favorable foreign exchange, $5 million, offset, in part, by cost increases including a $3 million provision for potential litigation settlements. As a percentage of sales, SAR improved about 1 percentage point amounting to approximately 14 percent for 1997. This improvement resulted from the disposition of a business that had a disproportionately high selling and administrative cost structure. Spending on research and development has remained constant as a percentage of sales over the last several years. The special charge of $50 million in 1997 provides for, among other things, the restructuring of the Company's European water treatment business, closing a BCDMH manufacturing facility in Louisiana and a pharmaceutical intermediates plant in Arkansas, and withdrawal from a European joint venture. It is estimated that these actions will result in a pre-tax savings of approximately $3 million in 1998, primarily from depreciation. Operating income, including the special charge, amounted to 11 percent of sales. Excluding the special charge, operating income was 15 percent of sales, a 1 percentage point improvement from the 14 percent achieved in 1996. Interest and other income amounted to $32 million for 1997 compared to $57 million for the prior year. 1996 included a net gain of $19 million from breakup fees when NOWSCO Well Service Ltd. accepted an acquisition offer that the Company was unwilling to meet and a net gain of $13 million from the sale of the Company's subsidiary, E/M. Excluding the aforementioned items, the $7 million increase in 1997 was attributable to increased interest income, in part, related to loans to Octel to finance the acquisition of minority owners and the increased earnings of affiliates. Interest and other expenses in both 1997 and 1996 amounted to approximately $56 million as follows (in millions):
- - ------------------------------------------------------------- 1997 1996 - - ------------------------------------------------------------- Interest Expense $28 $18 Amortization of Goodwill 4 4 Environmental 10 11 Asset Write-off and Redundancy -- 11 Other 14 12 - - ------------------------------------------------------------- $56 $56 =============================================================
The increase in interest expense resulted from higher borrowings related to acquisitions, capital expenditures and share repurchases. Environmental expense in both years is related to a provision for estimated remediation costs of a former plant site sold by the Company in the early 1980s. Income taxes were $45 million, or effectively 38.7 percent of income, for 1997 compared to $63 million, or effectively 34.5 percent, for 1996. The increase in the effective rate is primarily related to the lower tax rate on the special charge of approximately 22 percent because certain charges are not expected to result in a tax benefit. Excluding the effect of this special charge, the effective tax rate was 34 percent. Reported net income for 1997 was $72 million, or $1.19 per share, compared to $121 million, or $1.89 per share, in 1996. Excluding the after-tax effect of the special charge, $39 million, and the environmental and legal provision of $6 million and $2 million, respectively, net income amounts to $119 million, or $1.97 per share, as compared to 1996 net income of $120 million, or $1.88 per share, adjusted for after-tax effects of miscellaneous charges, gains on E/M and on the NOWSCO break-up fee. Great Lakes Chemical Corporation 21 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF CONTINUING OPERATIONS -- 1996 COMPARED WITH 1995 Sales for 1996 amounted to $1,352 million compared to $1,292 million in 1995, an increase of $60 million, or 4.6 percent. Flame Retardants sales of $294 million were approximately 2 percent short of the record performance in 1995. Even though volumes increased, reduced product prices and the negative effects of a strong dollar vis-a-vis both the Japanese yen and the German mark more than offset the volume improvement. Market demand was weak all year, particularly in automotive, wire and cable and consumer electronics. A sluggish European economy also held down customer requirements. Intermediates and Fine Chemicals sales of $196 million were comparable with the prior year. Sales of agricultural chemicals, bromine and derivatives and fine chemicals were essentially flat following a very strong performance in 1995. Polymer Stabilizers sales for the year increased $18 million, or approximately 8 percent, over 1995. On an overall basis, the sales improvement was attributable to volume gains as market conditions and competitive activity restricted price improvements and the effect of currency fluctuations was negative. The lower growth rate experienced by this business unit in 1996 reflected a stagnant European economy, our largest market, where total plastics output declined about 10 percent in 1996. End-use markets in North America and the Far East grew at a modest rate. The business unit improved market share outside of Europe, in part, by bringing onstream an antioxidant production facility in Newport, Tennessee, and establishing a joint venture in Korea. Specialized Services and Manufacturing sales were $190 million in 1996 as compared to $152 million in 1995. OSCA, the Company's oil field services business, sales improved approximately 35 percent from the prior year as drilling activity in the Gulf of Mexico expanded and the business extended its presence in international markets. Fluorine chemicals sales grew approximately 25 percent as the FM-200(R) fire extinguishing product strengthened its worldwide market position. Water Treatment sales gained $11 million primarily due to volume improvements. U.S. recreational water treatment sales posted strong growth to distributors and mass merchandisers in an average weather year. Volumes in Europe suffered due to cool weather conditions during the pool season. Competitive pressure allowed only minimal price improvements which were mostly offset by unfavorable currency effects. Gross profits amounted to $383 million in 1996 compared to $394 million in 1995. The $11 million decline reflects the negative effects of divestitures, higher manufacturing and raw materials costs and unfavorable currency effects partially offset by increased prices and volumes. SAR expense of $199 million increased $3 million over the prior-year period and as a percentage of sales was 15 percent, a slight decline from the prior-year period. Interest and other income increased $30 million from 1995 primarily due to the break-up fees associated with the failed NOWSCO acquisition and the gain on the sale of E/M. Interest and other expense increased $31 million from 1995 primarily due to provision for environmental and redundancy costs and asset write-off recorded in 1996. Net income from continuing operations was $121 million, or $1.89 per share, compared to $132 million, or $2.00 per share in the 1995 period. The share repurchase program benefited earnings by approximately $0.02 per share. DISCONTINUED OPERATIONS Discontinued operations include the results of the Company's petroleum additives business, Octel, and the furfural and derivatives, Eastern European trading and environmental services businesses. Also included is a special provision of $137 million, net of income taxes, related to estimated losses on divestitures and taxes related to repatriation of earnings from Octel. The historical operating results of the Octel business which will be spun off to shareholders is reviewed below. These results may not reflect the results of operations that Octel would have achieved had Octel been a separate independent company. 1997 compared to 1996 -- Excluding special provisions, Octel reported sales of $531 million and net income of $119 million for 1997 compared to sales of $590 million and net income of $131 million for 1996. The decline in sales and earnings continues to reflect the reduction in demand for alkyl lead antiknock compound (TEL). Retail TEL volume declined about 13 percent from the prior year while price improvement averaged about 2 percent. Volume declines exceeded recent trends, in part, due to the timing of deliveries. The lower level of price improvement reflects a continued shift in the geographic mix of customers and price competition. Wholesale volumes declined by about 20 percent from 1996 because of the Mexican phaseout of leaded gasoline. This market had been served by E.I. du Pont de Nemours & Company with TEL purchased from Octel. Prices in the wholesale market improved due to contractual price escalators. The ratio between retail TELsales and wholesale TEL sales was 70/30. Operating income, as a percent of sales, was 42 percent for 1997, a decline of 1 percentage point from 1996, as Octel has been generally successful in scaling back operations in line with the decline in TEL. 1996 compared to 1995 -- Octel's net sales decreased $32 million in 1996 to $590 million from $622 million in 1995. Net income was $131 million and $149 million in 1996 and 1995, respectively. The decrease in net sales was primarily attributable to a decline in sales volumes of $48 million, which was partly offset by a price increase of $19 million. In addition, foreign exchange losses totaled $3 million. In 1996, the retail volume of TEL sold declined approximately 13 percent, which was higher than the 8 to 10 percent annual market decline experienced previously. No single factor accounted for the decline, and the Company believes it maintained its share of the worldwide retail TEL market during this period. Retail sales prices of TEL increased by approximately 4 percent in 1996 as compared to 1995, which is lower than the rate of increase in 1995. Sales of TEL on a wholesale basis increased approximately 5 percent in 1996 as compared to 1995. The ratio between the Company's retail TEL sales and wholesale TEL sales was 68/32 in 1996 as compared to 72/28 in 1995. Income declined because lower TEL volumes were only partially offset by increased sales prices. FINANCIAL CONDITIONS AND LIQUIDITY Cash flow from operating activities of the continuing operations amounted to $193 million compared to the $209 million generated in 1996. This cash flow, coupled with increased commercial paper borrowings of $58 million, cash provided by the discontinued operations of $64 million and use of cash and cash equivalents of $67 million, funded $133 million in plant and equipment additions, acquisitions of $91 million, share repurchases of $129 million and $38 million in dividends to shareholders. 22 Great Lakes Chemical Corporation 16 The Company's investment in working capital, excluding cash and cash equivalents, increased approximately $8 million. Accounts receivable increased $4 million from 1996 as a result of trade accounts receivable increasing almost $15 million due to increased sales and the acquisition of Anzon offset by a $12 million reduction in non-trade accounts receivable. Day sales outstanding in accounts receivable improved four days from 73 days to 69 days. Inventories at December 31, 1997, were $298 million, an increase of approximately $21 million from the prior year. The increase resulted from the Anzon acquisition and a planned build-up in the polymer stabilizer business to meet anticipated demand. Inventory turnover at 3.3 times per year improved slightly from the prior year. Accounts payable and accrued liabilities increased $49 million from the prior year due, in part, to liabilities related to the special charge and amounts due on stock repurchases. Spending on plant and equipment in 1997 amounted to $133 million, compared to $169 million in 1996. In 1997 the emphasis on capital projects shifted from capacity expansion and additions toward projects to improve infrastructure and efficiency, primarily the LINX enterprise-wide computer support system project. In 1997 capital approval for capacity expansions amounted to about 30 percent, down from 45 percent in 1996. Over the two years, projects for capacity maintenance, cost savings and safety and regulatory accounted for about 20 percent, 10 percent and 7 percent, respectively. Capital spending in 1998 is expected to total about $150 million with a distribution pattern similar to 1997. Capital spending on environmental projects was $4 million in 1997 compared to $12 million in 1996. Capital requirements in 1998 for environmental-related projects is estimated to be about the same as 1997. The Company utilizes commercial paper borrowings as its primary source of external financing which, because of its predictably strong cash flows, substantially reduces its cost of debt. Commercial paper borrowings at December 31, 1997, amounted to $530 million compared to $467 million at December 31, 1996. At December 31, 1997, debt to total capitalization was 29 percent compared to 24 percent at December 31, 1996. The Company has a $600 million credit facility with various banks. The credit facility provides back-up to the Company's $600 million commercial paper program. The Company's senior debt rating is A/A2 and its commercial paper rating is A1/P1. These ratings were lowered due to the pending spin-off of Octel and the announced divestitures. The spin-off will also require a renegotiation of the credit facility. Stockholders' equity was $1.3 billion, or $22.18 per share, at December 31, 1997, compared to $1.5 billion, or $24.13 per share, at December 31, 1996. Dividends declared increased for the 25th consecutive year totaling $38 million, compared with $36 million in the prior year. On a per-share basis, dividends declared of $0.63 per share were increased 11 percent over the $0.57 per share declared in 1996. In 1997 the Company purchased 2.8 million shares of its stock for a total cost of $129 million under share repurchase authorization by the Board of Directors. The average price per share of the stock purchased was $46.17. During the four-year period ended December 31, 1997, the Company repurchased 13.1 million shares at a cost of approximately $717 million, or $54.83 per share. As of December 31, 1997, management is authorized to repurchase an additional 6.5 million shares. Management intends to repurchase additional shares as market conditions warrant. The cumulative translation adjustment component of stockholders' equity represents the translation of foreign currency-denominated financial statements into U.S. dollars. The change in the cumulative translation adjustment decreased stockholders' equity by $70 million in 1997. The decrease primarily related to the strength of the U.S. dollar against most European currencies. Approximately 50 percent of the Company's net assets are in Europe. OTHER MATTERS Spin-Off Of Petroleum Additives Business On July 16, 1997, the Company's Board of Directors approved a plan to spin off its petroleum additives business, establishing a new independently traded public Company (Octel). The Company created by the spin-off will consist of the Company's tetraethyl lead antiknock compounds business and its non-lead petroleum additives businesses. As part of the process to affect the spin-off, Chevron Chemical Company's (Chevron) 10.65 percent interest in Octel was redeemed in November 1997 at a cost of approximately $117 million. Current plans call for Octel to raise approximately $450 million through borrowings in the public and private sector prior to the spin-off. A portion of the proceeds will be used to repay Great Lakes' advances related to the acquisition of the Chevron interest with the remainder of the proceeds, plus available cash from Octel, less taxes and transaction costs, distributed to Great Lakes in the form of a special distribution of roughly $300 million. It is anticipated that the debt will mature over eight years and have an average interest cost of 9.5 percent. This level of debt will result in Octel having debt to total capitalization of about 60 percent at the time of the spin. The transaction will be carried out in the form of a tax-free distribution to Great Lakes shareholders of shares in Octel, and it is expected to be completed during the first half of 1998. The transaction is subject to receipt of a favorable ruling from the Internal Revenue Service and final approval by Great Lakes' Board of Directors of the structure and financing of the new Company. Dispositions In December 1997 the Board of Directors approved a comprehensive restructuring plan including exiting the furfural and derivatives, Eastern European trading and environmental services businesses. A pre-tax charge of $145 million, $96 million after income taxes, was recorded in connection with these actions. The Company expects to affect the dispositions during 1998 and anticipates realizing approximately $150 million in cash. Acquisitions On November 3, 1997, the Company completed the acquisition of Cookson Group plc's global antimony products business, Anzon, for $90 million. Anzon is a global producer of antimony-based components for use as flame retardants. Market Risks The Company's operations are exposed to changes in foreign currency exchange and interest rates primarily in its cash, debt and foreign currency transactions. Derivative instruments, including swaps, forward contracts and options, are used to manage certain of these exposures. The derivative instruments utilized by the Company in its hedging activities are considered risk management tools and are not used for trading or speculative purposes. The Company diversifies the counterparties used and monitors the concentration of risk to limit its counterparty exposure. Great Lakes Chemical Corporation 23 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS International operations, including U.S. export sales, constitute a significant portion of the Company's revenues and identifiable assets. These operations result in a large volume of foreign currency commitment and transaction exposures and foreign currency net asset exposures. Since the Company manufactures its products in a number of locations around the world, principally North America and Europe, it has a cost base that is diversified over a number of different currencies which mitigates, in part, its currency transaction risk. Management of foreign currency exposure is coordinated at the corporate headquarters level, and exposures that are not offset are hedged. The Company forecasts foreign-currency-denominated cash flow for 12-month periods and aggregates these flows by currency to determine the amount of exposure. Hedging decisions are made based on the amount of exposure and the near-term outlook for each currency. The Company's policy is to hedge approximately 60-80 percent of key currencies using forward or option contracts. Hedges are set to mature coincident with the estimated timing of the underlying transactions. The Company currently does not hedge foreign currency net asset positions; however, by borrowing in local currency, it reduces such exposure. Considering the Company's operating profile, a uniform 10 percent change in the value of the dollar from December 31, 1997, would result in approximately a $1 million change in annual net income. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar, and does not factor in any potential changes in sales levels or local currency prices which may result from changes in exchange rates. Currently, commercial paper is the primary source of external financing which exposes the Company to changes in short-term interest rates. The Company monitors interest rate trends for volatility. The Company presently does not hold interest rate derivative contracts against its debt portfolio. Based on the commercial paper balance outstanding at December 31, 1997, a hypothetical 1 percentage point change in interest rates for a one-year period would change net income by $3 million. The sensitivity does not consider any effect a change in interest rates would have on overall economic activity nor management actions to mitigate the impact of interest rate changes. Environmental The Company's operations, like those of most companies which use or make chemicals, are subject to various laws and regulations relating to maintaining or protecting the quality of the environment. Such laws and regulations, along with the Company's own internal compliance efforts, have required and will continue to require capital expenditures and associated operating costs. Spending for environmental compliance, including expenditures associated with waste minimization and pollution prevention programs, amounted to approximately $40 million in 1997 and about $47 million in 1996. These amounts include approximately $4 million and $12 million for capital equipment in 1997 and 1996, respectively. Spending for environmental compliance is anticipated to be in the $45 million range in 1998. The Company is a party to several proceedings and lawsuits involving environmental matters, including being named as defendant, respondent or a potentially responsible party, together with other companies, under CERCLA, and similar state laws, in which recovery is sought for the cost of cleanup of contaminated manufacturing and waste disposal sites. Due to the prevailing practices of manufacturing facilities, waste disposal haulers and disposal facilities prior to adoption and implementation of various environmental laws and regulations, it is difficult to accurately determine the Company's liability with respect to these sites. In each such matter, the Company anticipates, although there can be no assurance, that liability, if any, will eventually be equitably apportioned among the companies found to be responsible. In most of these matters, the Company believes that its responsibility is small relative to other parties and that it may have meritorious defenses to or claims against these other parties. Based upon current regulation and the information available, management believes that adequate provisions have been made in the Company's financial statements and future costs will not have a material adverse impact on the Company's consolidated financial condition. Inflation Inflation has not been a significant factor for the Company over the last several years. Management believes that inflation will continue to be moderate over the next several years. Year 2000 The Company is in the process of upgrading much of its information systems and computer hardware. The Company is also in the process of evaluating all other computer-based systems. The upgrading activities which encompass the key business processes such as sales, order entry, financial and procurement, for approximately two-thirds of the Company began in 1996 and are expected to be completed in early 1999. The evaluation of the remaining business processes and computer control systems were begun in 1997 and are expected to be completed by mid 1998. Based on progress to date, the Company does not expect the cost of its Year 2000 compliance program will be material to its business, results of operations or financial condition. The Company believes that it will be able to achieve compliance prior to the end of 1999 and does not currently anticipate any material disruption of its operations as the result of any failure by the Company to be in compliance. Although the Company is in the process of determining the degree of Year 2000 compliance of significant suppliers and customers, it does not believe that their failure to be fully compliant will materially adversely affect its business or operating results. Future Accounting Changes In June 1997 SFAS No. 130, "Reporting Comprehensive Income," was issued. The statement must be adopted in the first quarter of 1998. Under provisions of this statement, the Company will be required to change the financial statement presentation of comprehensive income and its components to conform to these new requirements. As a consequence of this change, certain reclassifications will be necessary for previously reported amounts to achieve the required presentation of comprehensive income. In June 1997 SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," was issued. Under provisions of this statement, the Company will be required to provide financial statement disclosures for operating segments, products and services and geographic areas, beginning in 1998. In December 1997 SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," was issued and is effective for the Company's 1998 fiscal year. The statement revises current disclosure requirements for employers' pensions and other retiree benefits. Implementation of these disclosure standards will not affect the Company's financial position or results of operations. 24 Great Lakes Chemical Corporation 18 MANAGEMENT'S STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS The management of Great Lakes Chemical Corporation is responsible for the preparation and presentation of the accompanying consolidated financial statements and all other information in this Annual Report. The financial statements are prepared in accordance with generally accepted accounting principles and include amounts that are based on management's informed judgements and estimates. The Company maintains accounting systems and internal accounting controls which management believes provide reasonable assurance that the Company's financial reporting is reliable, that assets are safeguarded, and that transactions are executed in accordance with proper authorization. This internal control structure is supported by the selection and training of qualified personnel and an organizational structure which permits the delegation of authority and responsibility. The systems are monitored worldwide by an internal audit function that reports its findings to management. The Company's financial statements have been audited by Ernst & Young LLP, independent auditors, in accordance with generally accepted auditing standards. These standards provide for the review of internal accounting control systems to plan the audit and determine auditing procedures and tests of transactions to the extent they deem appropriate. The Audit Committee of the Board of Directors, which consists solely of non-employee directors, is responsible for overseeing the functioning of the accounting systems and related internal controls and the preparation of annual financial statements. The Audit Committee periodically meets with management and the independent auditors to review and evaluate their accounting, auditing and financial reporting activities and responsibilities. The independent auditors and internal auditors have full and free access to the Audit Committee without management's presence to discuss internal accounting controls, results of their audits and financial reporting matters. /s/ Robert T. Jeffares Robert T. Jeffares Executive Vice President and Chief Financial Officer REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We have audited the accompanying consolidated balance sheets of Great Lakes Chemical Corporation and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income and retained earnings and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Great Lakes Chemical Corporation and subsidiaries at December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Indianapolis, Indiana February 3, 1998 Great Lakes Chemical Corporation 25 19 CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
- - ------------------------------------------------------------------------------------------------------------------- (in thousands of dollars, except per share data) YEAR ENDED DECEMBER 31 1997 1996 1995 - - ------------------------------------------------------------------------------------------------------------------- NET SALES $1,311,227 $1,352,279 $1,291,552 OPERATING EXPENSES Cost of products sold 937,523 969,030 897,309 Selling, administrative and research expenses 182,084 199,386 195,899 Special charge 49,800 -- -- - - ------------------------------------------------------------------------------------------------------------------- 1,169,407 1,168,416 1,093,208 - - ------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 141,820 183,863 198,344 INTEREST AND OTHER INCOME 31,668 56,660 27,097 INTEREST AND OTHER EXPENSES 56,318 56,508 25,219 - - ------------------------------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 117,170 184,015 200,222 INCOME TAXES 45,400 63,400 68,000 - - ------------------------------------------------------------------------------------------------------------------- NET INCOME FROM CONTINUING OPERATIONS 71,770 120,615 132,222 NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS (14,825) 129,681 163,351 - - ------------------------------------------------------------------------------------------------------------------- NET INCOME 56,945 250,296 295,573 - - ------------------------------------------------------------------------------------------------------------------- RETAINED EARNINGS AT BEGINNING OF YEAR 1,893,104 1,678,834 1,411,890 CASH DIVIDENDS DECLARED 37,581 36,026 28,629 - - ------------------------------------------------------------------------------------------------------------------- RETAINED EARNINGS AT END OF YEAR $1,912,468 $1,893,104 $1,678,834 =================================================================================================================== EARNINGS (LOSS) PER SHARE: BASIC Continuing Operations $ 1.20 $ 1.90 $ 2.02 Discontinued Operations (0.25) 2.04 2.50 - - ------------------------------------------------------------------------------------------------------------------- $ 0.95 $ 3.94 $ 4.52 - - ------------------------------------------------------------------------------------------------------------------- DILUTED Continuing Operations $ 1.19 $ 1.89 $ 2.00 Discontinued Operations (0.25) 2.02 2.48 - - ------------------------------------------------------------------------------------------------------------------- $ 0.94 $ 3.91 $ 4.48 - - ------------------------------------------------------------------------------------------------------------------- CASH DIVIDENDS DECLARED PER SHARE $ 0.63 $ 0.57 $ 0.44 - - -------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 26 Great Lakes Chemical Corporation 20 CONSOLIDATED BALANCE SHEETS
- - --------------------------------------------------------------------------------------------------------------------- (in thousands of dollars) DECEMBER 31 1997 1996 - - --------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 73,673 $ 141,439 Accounts and notes receivable, less allowance of $5,803 and $7,321, respectively 256,892 253,368 Inventories 298,175 276,787 Prepaid expenses 39,806 32,356 - - --------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 668,546 703,950 - - --------------------------------------------------------------------------------------------------------------------- PLANT AND EQUIPMENT 658,635 636,560 GOODWILL 114,902 79,055 INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES 72,716 66,307 OTHER ASSETS 29,052 32,008 NET ASSETS OF DISCONTINUED OPERATIONS 726,540 834,818 - - --------------------------------------------------------------------------------------------------------------------- $2,270,391 $2,352,698 ===================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 140,310 $ 117,579 Accrued expenses 134,547 108,529 Income taxes payable 13,511 38,230 Dividends payable 9,431 9,242 Notes payable and current portion of long-term debt 6,557 6,284 - - --------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 304,356 279,864 - - --------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT, LESS CURRENT PORTION 561,455 496,246 OTHER NONCURRENT LIABILITIES 28,692 27,642 DEFERRED INCOME TAXES 68,445 62,047 STOCKHOLDERS' EQUITY Common stock, $1 par value, authorized 200,000,000 shares, issued 72,572,602 and 72,455,051 shares, respectively 72,573 72,455 Additional paid-in capital 123,379 121,224 Retained earnings 1,912,468 1,893,104 Minimum pension liability adjustment (2,543) -- Cumulative translation adjustment (52,855) 17,064 Less treasury stock, at cost, 13,628,300 and 10,842,200 shares, respectively (745,579) (616,948) - - --------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 1,307,443 1,486,899 - - --------------------------------------------------------------------------------------------------------------------- $2,270,391 $2,352,698 =====================================================================================================================
See notes to consolidated financial statements. Great Lakes Chemical Corporation 27 21 CONSOLIDATED STATEMENTS OF CASH FLOWS
- - -------------------------------------------------------------------------------------------------------------------- (in thousands of dollars) YEAR ENDED DECEMBER 31 1997 1996 1995 - - -------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income from continuing operations $71,770 $120,615 $132,222 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and depletion 69,918 61,180 57,452 Amortization of intangible assets 3,770 4,164 4,799 Deferred income taxes (500) 859 7,003 Net (unremitted) remitted earnings of affiliates (1,892) (1,085) 42 Loss on disposition of assets 313 7,577 182 Special charge 49,800 -- -- Other (6,847) (11,179) (510) Change in operating assets and liabilities, net of effects from business combinations: Accounts receivable 1,873 962 (40,559) Inventories (22,297) 4,469 (63,868) Other current assets (7,885) (3,575) (7,913) Accounts payable and accrued expenses 40,524 18,810 33,724 Income taxes and other current liabilities (15,896) 5,016 9,127 Other noncurrent liabilities 10,342 962 2,598 - - -------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS 192,993 208,775 134,299 DISCONTINUED OPERATIONS: Net (loss) income (14,825) 129,681 163,351 Change in net assets 78,688 (98,076) (52,769) - - -------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 256,856 240,380 244,881 INVESTING ACTIVITIES Plant and equipment additions (132,981) (168,661) (182,947) Business combinations, net of cash acquired (91,142) (6,341) (4,399) Proceeds from sale of assets 1,177 2,755 334 Other (2,052) 23,254 (21,342) - - -------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (224,998) (148,993) (208,354) FINANCING ACTIVITIES Net borrowings and (repayments) under short-term credit lines 3,644 (15,013) 1,011 Net proceeds from and (payments) of long-term borrowings 6,556 (8,036) (2,399) Net increase in commercial paper and other long-term obligations 58,132 175,159 209,644 Proceeds from stock options exercised 2,272 7,923 1,065 Cash dividends (37,581) (36,026) (28,629) Repurchase of common stock (128,631) (191,720) (164,816) - - -------------------------------------------------------------------------------------------------------------------- NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (95,608) (67,713) 15,876 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (4,016) 1,331 (1,527) - - -------------------------------------------------------------------------------------------------------------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (67,766) 25,005 50,876 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 141,439 116,434 65,558 - - -------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $73,673 $141,439 $116,434 ====================================================================================================================
See notes to consolidated financial statements. Parentheses indicate decrease in cash and cash equivalents. 28 Great Lakes Chemical Corporation 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands of dollars, except as indicated) ACCOUNTING POLICIES Basis of Presentation In 1997 the Company took a number of actions that will enable it to focus on core specialty chemical operations. These include the announced spin-off of the petroleum additives business (Octel) to shareholders and the decision to exit the furfural and derivatives, Eastern European trading (Chemol) and environmental services businesses. The net assets and results of operations of these businesses are reflected in the accompanying financial statements as discontinued operations. Consolidated results of continuing operations, financial position and cash flows in the accompanying financial statements refer to the continuing specialty chemical operations of the Company. Nature of Operations The Company is a diversified specialty chemical company. Primary manufacturing operations are located in the United States and Europe. Principal product lines ranked in order of sales are: Water Treatment, Flame Retardants, Polymer Stabilizers, Intermediates and Fine Chemicals and Specialized Services and Manufacturing. The Company's products are sold globally. The principal markets include: Computer and Business Equipment, Consumer Electronics, Data Processing, Construction Materials, Telecommunications, Pharmaceuticals, and Pool and Spa Dealers and Distributors. Principles of Consolidation The consolidated financial statements include all subsidiaries of the Company after elimination of significant intercompany accounts and transactions. Investments in less than majority-owned companies in which the Company has the ability to exercise significant influence over operating and financial policies of the investees are recorded at cost, plus equity in their undistributed earnings since acquisition. Use of Estimates The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amount reported in the financial statements and accompanying notes. Significant estimates are used in the accounting for restructuring, asset impairments and losses on discontinued operations. Actual results could differ from those estimates. Revenue Recognition Revenue from sales of products is recognized at the time products are shipped to the customer. Revenue from services is recognized when the services are provided to the customer. Cash Equivalents Investment securities with maturities of three months or less when purchased are considered to be cash equivalents. Inventories The Company values its inventories at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Plant and Equipment Plant and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. Goodwill Goodwill, the excess of investment over net assets of subsidiaries acquired is amortized over periods of eight to 40 years. The Company regularly evaluates the realizability of goodwill based on projected undiscounted cash flows and operating income for each business having material goodwill balances. Based on its most recent analysis, the Company believes that no impairment of goodwill exists. As of December 31, 1997, and 1996, accumulated amortization was $13 million and $11 million, respectively. Environmental Compliance and Remediation Environmental compliance costs include ongoing maintenance, monitoring and similar costs. Such costs are expensed as incurred. Environmental remediation costs are accrued, except to the extent costs can be capitalized, when environmental assessments or remedial efforts are probable, and the cost can be reasonably estimated. Environmental costs which improve the condition of a property as compared to the condition when constructed or acquired are capitalized. Income Taxes Income taxes are provided on the portion of the income of foreign affiliates that is expected to be remitted to the parent company and be taxable. Earnings per Share In 1997 the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires the calculation of both basic and diluted earnings per share. Basic earnings per share is based on the weighted-average number of common shares outstanding during the period, while diluted earnings per share includes the effect of options and restricted stock that were dilutive and outstanding during the period. All earnings per share amounts for all periods have been presented, and where appropriate, restated to conform to SFAS 128 requirements. Stock-Based Compensation In 1996 the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." As allowed under SFAS No. 123, the Company has chosen to continue to account for stock-based compensation cost in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under this opinion, compensation cost is recorded when the fair market value of the Company's stock Great Lakes Chemical Corporation 29 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS at the date of grant for fixed options exceeds the exercise price of the stock option. The Company's policy is to grant stock options at a value equal to its common stock's fair market value on the date of grant. Compensation cost for restricted stock awards is accrued over the life of the award based on the quoted market price of the Company's stock at the date of the award. Derivative Financial Instruments The Company uses various derivative instruments including swaps, forward contracts and options to manage certain foreign currency exposures. These instruments are entered into under the Company's corporate risk management policy to minimize exposure and are not for speculative trading purposes. Management periodically reviews the effectiveness of the use of derivative instruments. Derivatives used for hedging purposes must be designated as, and effective as, a hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in the market value of the derivative contract must be highly correlated with changes in the market value of the underlying hedged item at inception of the hedge and over the life of the hedge contract. Any derivative instrument designated but no longer effective as a hedge would be reported at market value and the related gains and losses would be recognized in earnings. Derivatives that are designated as, and effective as, a hedge of firm foreign currency commitments are accounted for using the deferral method. Gains and losses from instruments that hedge firm commitments are deferred and recognized as part of the economic basis of the transactions underlying the commitments when the associated hedged transaction occurs. Gains and losses from instruments that hedge foreign-currency-denominated receivables, payables and debt instruments are reported in earnings and offset the effects of foreign exchange gains and losses from the associated hedged items. ACQUISITIONS On November 3, 1997, the Company completed the acquisition of Cookson Group plc's global antimony products business, Anzon, for $90 million including approximately $46 million of goodwill which will be amortized over a period of 40 years. Anzon is a global producer of antimony-based compounds for use as flame retardants. In 1995 the Company completed acquisitions in the Water Treatment and Intermediates and Fine Chemicals business units at a cost of $11 million, including $6 million excess purchase price over the book value of net assets acquired. All acquisitions have been accounted for as purchases and the results of operations of the acquired businesses are included in the consolidated financial statements from the dates of acquisition. The following represents the unaudited pro forma results of operations as if the above-noted business combinations had occurred at the beginning of the respective year in which the companies were acquired as well as at the beginning of the immediately preceding year:
Year Ended December 31 1997 1996 1995 Net sales $1,376,927 $1,430,126 $1,384,624 Net income 73,915 123,215 139,422 Earnings per share $ 1.23 $ 1.93 $ 2.11
The pro forma results do not represent the Company's actual operating results had the acquisitions been made at the beginning of the respective years, or the results which may be expected in the future. DISPOSITIONS During 1996 the Company sold its pool equipment distribution business and its engineered surface treatment business. On an annual basis, these operations accounted for approximately $150 million in sales. These transactions did not have a material impact on the Company's results of operations. DISCONTINUED OPERATIONS During 1997 the Board of Directors approved a plan to spin off the Company's petroleum additives business to the shareholders and to exit furfural and derivatives, Eastern European trading (Chemol) and environmental services businesses. These operations are included in discontinued operations along with a special provision of $137 million net of income tax benefits of $49 million related to the estimated losses on divestitures and an income tax provision of $38 million related to the anticipated repatriation of Octel earnings. The Octel spin-off will be affected through a tax-free distribution of shares in the new company to Great Lakes' shareholders. The transaction is subject to the receipt of a favorable tax ruling from the Internal Revenue Service and the final approval by the Great Lakes Board of Directors. Prior to the spin-off, it is anticipated that Octel will borrow approximately $450 million and use part of the proceeds to repay Great Lakes $117 million for the November 1997 acquisition of Chevron Chemical Company's interest in Octel. The remainder of the borrowing, plus available cash from Octel, less taxes and transaction costs, will be distributed to Great Lakes in the form of a special dividend of approximately $300 million. Great Lakes will contribute Octel's remaining net assets to Octel reducing Great Lakes shareholders' equity. The Company expects the other businesses included in discontinued operations to be sold during 1998. 30 Great Lakes Chemical Corporation 24 Summary statements of income and financial position for the discontinued operations as a whole and Octel alone are set forth below (in millions): Summary Statements of Income
- - ------------------------------------------------------------------- Year Ended December 31 1997 1996 1995 - - ------------------------------------------------------------------- Total Discontinued Operations: Net Sales $769 $866 $1,065 Income before Income Taxes 181 196 237 Income Taxes 59 66 74 - - ------------------------------------------------------------------- Income from Operations (Net of Taxes) 122 130 163 Special Provision (Net of Taxes) 137 -- -- - - ------------------------------------------------------------------- Net (Loss) Income from Discontinued Operations $(15) $130 $ 163 =================================================================== Petroleum Additives (Octel): Net Sales $531 $590 $ 622 Income before Income Taxes 177 195 221 Income Taxes 58 64 72 - - ------------------------------------------------------------------- Income from Operations (Net of Taxes) 119 131 149 Special Provision (Net of Taxes) 41 -- -- - - ------------------------------------------------------------------- Net Income $ 78 $131 $ 149 ===================================================================
Summary Statements of Net Assets
- - ------------------------------------------------------------------- December 31 1997 1996 - - ------------------------------------------------------------------- Total Discontinued Operations: Current Assets $ 434 $ 473 Net Plant & Equipment 205 222 Goodwill and Other Assets 480 438 - - ------------------------------------------------------------------- Total Assets 1,119 1,133 Current Liabilities 306 151 Other Liabilities 86 147 - - ------------------------------------------------------------------- Net Assets $ 727 $ 835 =================================================================== Petroleum Additives (Octel): Current Assets $ 283 $ 340 Net Plant & Equipment 109 115 Goodwill and Other Assets 434 383 - - ------------------------------------------------------------------- Total Assets 826 838 Current Liabilities 138 125 Other Liabilities 78 131 - - ------------------------------------------------------------------- Net Assets $ 610 $ 582 ===================================================================
SPECIAL CHARGE In December 1997 the Board of Directors approved a series of measures designed to improve operating efficiency, responsiveness to customers and return on assets. These measures include restructuring the Company's European water treatment business, closing its BCDMH manufacturing facility in Louisiana and a pharmaceutical intermediates production plant in Arkansas, and withdrawing from a bromine production joint venture in Europe. The consolidated statement of income for 1997 includes pre-tax charges of $50 million ($39 million after income taxes, or $0.64 per share) related to these initiatives. The components of the pre-tax charges were $2 million for employee severance costs, $2 million for facility closure costs, $5 million for joint venture withdrawal expenses and $41 million for asset write-offs. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of the following:
- - ------------------------------------------------------------------------------------ December 31 1997 1996 - - ------------------------------------------------------------------------------------ Cash $38,705 $ 49,651 Time deposits 34,968 91,788 - - ------------------------------------------------------------------------------------ $73,673 $141,439 ====================================================================================
INVENTORIES The major components of inventories are as follows:
- - ------------------------------------------------------------------------------------ December 31 1997 1996 - - ------------------------------------------------------------------------------------ Finished products $217,398 $205,812 Raw materials 51,984 43,498 Supplies 28,793 27,477 - - ------------------------------------------------------------------------------------ $298,175 $276,787 ====================================================================================
PLANT AND EQUIPMENT Plant and equipment consist of the following:
- - ------------------------------------------------------------------------------------ December 31 1997 1996 - - ------------------------------------------------------------------------------------ Land $ 19,861 $ 20,552 Buildings and land improvements 122,520 116,810 Equipment and leasehold improvements 871,734 848,751 Construction in progress (estimated additional cost to complete at December 31, 1997, $78,000) 126,502 101,502 - - ------------------------------------------------------------------------------------ 1,140,617 1,087,615 Less allowances for depreciation, depletion and amortization 481,982 451,055 - - ------------------------------------------------------------------------------------ $658,635 $636,560 ====================================================================================
Great Lakes Chemical Corporation 31 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The estimated useful lives for purposes of computing depreciation are: buildings and land improvements, 7-40 years and equipment and leasehold improvements, 2-17 years. Maintenance and repairs charged to costs and expenses were $60 million, $63 million and $63 million for 1997, 1996 and 1995, respectively. Rent expense for all operating leases amounted to $16 million, $19 million and $20 million for 1997, 1996 and 1995, respectively. Under long-term operating leases, minimum annual rentals are $13 million in 1998, $10 million in 1999, $9 million in 2000, $5 million in 2001 and $4 million in 2002. DEBT Long-term debt is summarized as follows:
- - ---------------------------------------------------------------------- December 31 1997 1996 - - ---------------------------------------------------------------------- Commercial paper, 1997 year-end average interest rate of 6.0% $529,665 $467,283 Industrial development bonds, at fixed and variable interest rates from 4.0% to 7.0% at December 31, 1997 (weighted average 4.4%) with maturities to May 2025 14,185 14,185 Other 22,775 20,774 - - ---------------------------------------------------------------------- 566,625 502,242 Less current portion 5,170 5,996 - - ---------------------------------------------------------------------- $561,455 $496,246 ======================================================================
The Company has a $600 million revolving credit agreement with nine banks which serves as a backup for the Company's commercial paper program that expires in 2001. The agreement provides various interest rate options, including the banks' prime interest rate, and contains restrictive financial covenants, including an interest coverage ratio. The Company's commercial paper is rated A1 by Standard and Poor's and P1 by Moody's. Long-term debt matures as follows: 1998, $5 million; 1999, $3 million; 2000, $12 million; 2001, $532 million; and 2002, $3 million. At December 31, 1997, the Company had notes payable of approximately $1 million at an interest rate of 5.9 percent. The Company has no confirmed short-term credit lines, but has available for its use substantial non-confirmed credit lines. During 1997, 1996 and 1995, interest costs were $34 million, $24 million and $20 million, respectively, of which $6 million per year was capitalized as additional costs of equipment and leasehold improvements in connection with the expansion of physical facilities. In these years, interest payments were $34 million, $25 million and $20 million, respectively. INCOME TAXES The following is a summary of domestic and foreign income before income taxes, the components of the provisions for income taxes, a reconciliation of the U.S. statutory income tax rate to the effective income tax rate, and the components of deferred tax assets and liabilities. Income Before Income Taxes:
- - --------------------------------------------------------------------------- Year Ended December 31 1997 1996 1995 - - --------------------------------------------------------------------------- Domestic $ 79,917 $145,523 $143,583 Foreign 37,253 38,492 56,639 - - --------------------------------------------------------------------------- $117,170 $184,015 $200,222 ===========================================================================
Provisions for Income Taxes:
- - --------------------------------------------------------------------------- Year Ended December 31 1997 1996 1995 - - --------------------------------------------------------------------------- Current: Federal $32,800 $42,500 $37,100 State 4,400 6,900 5,100 Foreign 8,700 13,141 18,797 - - --------------------------------------------------------------------------- 45,900 62,541 60,997 - - --------------------------------------------------------------------------- Deferred: Domestic (2,800) (2,600) 6,300 Foreign 2,300 3,459 703 - - --------------------------------------------------------------------------- (500) 859 7,003 - - --------------------------------------------------------------------------- $45,400 $63,400 $68,000 ===========================================================================
Effective Income Tax Rate Reconciliation:
- - --------------------------------------------------------------------------- Year Ended December 31 1997 1996 1995 - - --------------------------------------------------------------------------- U.S. statutory income tax rate 35.0% 35.0% 35.0% Decrease resulting from: State income tax 2.4 2.5 1.7 Depletion (2.2) (1.3) (1.2) Foreign Sales Corp. (3.5) (1.4) (1.2) Statutory tax rate changes (2.1) -- -- Special charge rate differential 4.8 -- -- Other 4.3 (0.3) (0.3) - - --------------------------------------------------------------------------- Effective income tax rate 38.7% 34.5% 34.0% ===========================================================================
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. 32 Great Lakes Chemical Corporation 26 Components of Deferred Tax Assets and Liabilities:
- - --------------------------------------------------------------------- December 31 1997 1996 - - --------------------------------------------------------------------- Deferred tax assets Accrued expenses $13,400 $10,500 Other 15,400 19,000 - - --------------------------------------------------------------------- $28,800 $29,500 - - --------------------------------------------------------------------- Deferred tax liabilities Depreciation $46,200 $44,000 Foreign liabilities pending settlements 20,000 20,000 Other 20,079 18,561 - - --------------------------------------------------------------------- $86,279 $82,561 =====================================================================
Cash payments for income taxes were $36 million, $73 million and $49 million in 1997, 1996 and 1995, respectively. Statutory tax rate decreases resulted in a tax benefit in 1997 of $3 million. STOCKHOLDERS' EQUITY Changes in common stock and additional paid-in capital accounts are summarized as follows:
- - ------------------------------------------------------------------------ Additional Common Stock Paid-In Shares Amount Capital - - ------------------------------------------------------------------------ Balance at December 31, 1994 72,024,520 $72,025 $112,667 Exercise of stock options, net of shares exchanged 84,957 84 400 Tax benefit from early disposition of stock by optionees -- -- 580 - - ------------------------------------------------------------------------ Balance at December 31, 1995 72,109,477 72,109 113,647 Exercise of stock options, net of shares exchanged 345,574 346 1,357 Tax benefit from early disposition of stock by optionees -- -- 6,220 - - ------------------------------------------------------------------------ Balance at December 31, 1996 72,455,051 72,455 121,224 Exercise of stock options, net of shares exchanged 117,551 118 1,175 Tax benefit from early disposition of stock by optionees -- -- 980 - - ------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1997 72,572,602 $72,573 $123,379 ========================================================================
The Company has a Stockholder Rights Plan. Under the Plan, the stockholders have received a right (the "Right") for each outstanding share of common stock of the Company. Each Right entitles the holder under certain circumstances to purchase from the Company at an exercise price of $92.50 per Right (after adjustment pursuant to the Plan) one unit consisting initially of one-tenth of a share of the Company's common stock and a note in a principal amount equal to nine-tenths of the market price of a share of the Company's common stock on the date of exercise. The Rights become exercisable and transferable apart from the common stock if a person acquires 15 percent or more of the Company's outstanding common stock or the Company declares a 10 percent-or-more stockholder an "adverse person" because such stockholder meets certain criteria set forth in the Plan. In such event, each Right entitles the holder, except the acquiring person or adverse person, to purchase, at the Right's then-current exercise price, the number of Great Lakes common shares having a market value equal to twice the Right's exercise price. If after one of the triggering events described above, the Company is acquired in a merger or other business combination, and the Rights have not been redeemed, the holder of each Right is entitled to purchase, at the Right's then-current exercise price, that number of the acquiring company's common shares having a market value equal to twice the Right's exercise price. Under certain conditions, the Rights may be redeemed by the Company at a price of $.0025 per Right (after adjustment pursuant to the Plan) prior to their expiration on September 22, 1999. The Company has repurchased shares of its common stock as follows:
- - --------------------------------------------------------------- Number of Shares Cost - - --------------------------------------------------------------- 1997 2,786,100 $128,631 1996 3,337,100 $191,720 1995 2,778,000 $164,816 - - ---------------------------------------------------------------
Changes in the cumulative translation adjustment account are as follows:
- - ---------------------------------------------------------------------- Year Ended December 31 1997 1996 1995 - - ---------------------------------------------------------------------- Balance at beginning of year $ 17,064 $(23,179) $(25,222) Translation adjustments and gains and losses from hedging transactions (69,919) 40,243 2,043 - - ---------------------------------------------------------------------- Balance at end of year $(52,855) $ 17,064 $(23,179) ======================================================================
The 1997 change in the cumulative translation adjustment is due to the approximate 17 percent weakening of European currencies and the approximate 4 percent weakening of the British pound sterling against the U.S. dollar. The 1996 and 1995 increase in the cumulative translation adjustment account was principally due to the effect of the weakening U.S. dollar in relation to the currencies of the various foreign countries in which the Company operates. Great Lakes Chemical Corporation 33 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS EARNINGS PER SHARE The computation of basic and diluted earnings per share is determined by dividing net income or loss as reported as the numerator, by the number of shares included in the denominator as follows:
- - ------------------------------------------------------------------------- Year Ended December 31 1997 1996 1995 - - ------------------------------------------------------------------------- Denominator for basic earnings per share - weighted-average shares 60,041,081 63,538,759 65,364,066 Effect of dilutive securities: Employee stock options 248,511 433,317 626,736 Restricted stock 8,045 -- -- - - ------------------------------------------------------------------------- Dilutive potential common shares 256,556 433,317 626,736 Denominator for diluted earnings per share 60,297,637 63,972,076 65,990,802 =========================================================================
Options to purchase shares of common stock of 1,070,422 in 1997, 836,308 in 1996 and 564,656 in 1995 were outstanding, but were excluded from the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common shares during those years, and therefore the effect would have been antidilutive. STOCK OPTIONS In May 1993 the stockholders adopted the 1993 Employee Stock Compensation Plan for officers and other key employees, authorizing the issuance of 2 million shares of the Company's common stock upon exercise of incentive stock options, non-qualified stock options or other stock-based awards. The Plan replaced the 1984 Plan which expired in May 1994. Under the Plan, options are granted at the market value at date of grant, become exercisable over periods of one to five years after grant and expire 10 years from the date of grant. The following summarizes the changes in options under the Plans:
- - ----------------------------------------------------------------------- Weighted- Shares Average Under Option Exercise Price - - ----------------------------------------------------------------------- Outstanding at December 31, 1994 1,850,637 $39.47 Granted 309,030 59.71 Exercised (98,280) 15.29 Terminated (14,319) 61.94 - - ----------------------------------------------------------------------- Outstanding at December 31, 1995 2,047,068 43.53 Granted 260,610 74.94 Exercised (529,039) 26.26 Terminated (77,883) 67.64 - - ----------------------------------------------------------------------- Outstanding at December 31, 1996 1,700,756 52.61 GRANTED 458,130 43.05 EXERCISED (141,170) 16.82 TERMINATED (98,822) 55.89 - - ----------------------------------------------------------------------- OUTSTANDING AT DECEMBER 31, 1997 1,918,894 $52.79 ======================================================================= CURRENTLY EXERCISABLE 1,258,619 $52.72 =======================================================================
Options outstanding at December 31, 1997, expire from March 7, 1998, to October 27, 2007. A total of 1 million shares are reserved for future grants as of December 31, 1997. The following table summarizes information concerning outstanding and exercisable options at December 31, 1997:
- - -------------------------------------------------------------------- Range of Exercise Prices $10 - $25 $26 - $50 $51 - $80 - - -------------------------------------------------------------------- Options Outstanding: Weighted-Average Remaining Contractual Life 2.1 yrs. 8.1 yrs. 7.3 yrs. Weighted-Average Exercise Price $18.98 $42.23 $69.41 Number 312,025 594,547 1,012,322 Options Exercisable: Weighted-Average Exercise Price $18.98 $40.79 $69.44 Number 312,025 185,067 761,527 - - --------------------------------------------------------------------
The weighted-average fair value of options granted during 1997, 1996 and 1995 is estimated at $13.14, $24.61 and $22.34 per share, respectively, on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
- - --------------------------------------------------------------------- 1997 1996 1995 - - --------------------------------------------------------------------- Expected volatility 21.0% 22.8% 26.5% Expected life in years 6.5 6.0 5.5 Risk-free interest rate 6.15% 5.27% 7.34% Dividend yield 1.40% 0.60% 0.64% - - ---------------------------------------------------------------------
Had compensation cost for the Company's 1997, 1996 and 1995 grants for stock-based compensation plans been recognized consistent with SFAS 123, the Company's net income and earnings per share for 1997, 1996 and 1995 would approximate the pro forma amounts below:
- - ------------------------------------------------------------------- Year Ended December 31 1997 1996 1995 - - ------------------------------------------------------------------- Net income from Continuing Operations - as reported $71,770 $120,615 $132,222 Net income from Continuing Operations - pro forma $69,017 $116,107 $129,356 Diluted earnings per share - as reported $1.19 $1.89 $2.00 Diluted earnings per share - pro forma $1.15 $1.82 $1.96 - - -------------------------------------------------------------------
34 Great Lakes Chemical Corporation 28 For the purpose of pro forma disclosure, the estimated compensation costs are amortized to expense over the options' vesting period, primarily three years. Therefore, because SFAS 123 is applicable only to options granted subsequent to December 31, 1994, its pro forma effect will not be fully reflected until 1998. RETIREMENT PLANS The Company maintains several noncontributory defined benefit pension plans covering substantially all U.S. employees. Benefits are based on total compensation, as defined, and years of credited service reduced by social security benefits according to a plan formula. Normal retirement age is 65, but provisions are made for early retirement. The Company's funding policy is to contribute amounts to the plans to meet the funding requirements of federal laws and regulations, as determined by the Company's actuary. The plans' assets are invested by an insurance company, one bank and nine investment management companies in various commingled and segregated funds holding equities, bonds, guaranteed income contracts and cash or cash equivalents. The Company maintains three contributory defined benefit pension plans covering substantially all United Kingdom employees. Benefits are based on final salary and years of credited service, reduced by social security benefits according to a plan formula. Normal retirement age is 65, but provisions are made for early retirement. The Company's funding policy is to contribute amounts to the plans to cover service costs to date as recommended by the Company's actuary. The plans' assets are invested by three investment management companies in funds holding U.K. and overseas equities, U.K. and overseas fixed interest securities, index linked securities, property unit trusts and cash or cash equivalents. The Company provides no significant postretirement benefits other than pensions. A summary of the components of net periodic pension cost for U.S. and U.K. pension plans is as follows:
- - -------------------------------------------------------------------------------------------------------- Year Ended December 31 1997 1996 1995 - - -------------------------------------------------------------------------------------------------------- Service cost $ 7,172 $ 5,340 $ 4,351 Interest cost on projected benefit obligation 9,942 7,598 7,099 Actual return on plan assets (31,681) (12,241) (14,296) Net amortization and deferral 20,869 4,910 7,865 - - -------------------------------------------------------------------------------------------------------- Net pension cost $ 6,302 $ 5,607 $ 5,019 ========================================================================================================
The funded status and accrued pension cost for the U.S. and U.K. pension plans are as follows:
- - -------------------------------------------------------------------------------------------------------- December 31 1997 1996 1995 - - -------------------------------------------------------------------------------------------------------- Actual present value of accumulated plan benefits: Vested $94,513 $80,869 $72,066 Non-vested 3,168 2,712 1,540 - - -------------------------------------------------------------------------------------------------------- Total accumulated benefit obligation 97,681 83,581 73,606 Additional amounts related to projected salary increases 24,189 25,059 21,814 - - -------------------------------------------------------------------------------------------------------- Total projected benefit obligation 121,870 108,640 95,420 Plan assets at fair value 130,642 108,007 88,547 - - -------------------------------------------------------------------------------------------------------- Plan assets (over) under projected benefit obligation (8,772) 633 6,873 Unrecognized net gain 20,145 9,756 4,400 Unrecognized prior service cost (177) (459) 527 Unrecognized net transition obligation (1,070) (1,261) (1,452) Additional minimum liability 5,456 3,046 819 - - -------------------------------------------------------------------------------------------------------- Accrued pension cost 15,582 11,715 11,167 Estimated transfers from discontinued operations (7,064) (7,500) (5,800) - - -------------------------------------------------------------------------------------------------------- Net accrued pension cost $8,518 $4,215 $5,367 ========================================================================================================
The estimated transfer represents prepaid pension cost attributable to employees who participate in the Octel retirement plans that will remain with the Company. Ultimate determination of the transfer is subject to, among other things, a final actuarial evaluation and election of the employee. Assumptions used in determining the actuarial present value of the projected benefit obligations are set forth below. Assumptions used in 1997 are consistent with the prior year.
- - ----------------------------------------------------------------------- Weighted-average discount rates 7.7% to 7.75% Rates of increase in compensation levels 4.8% to 5.5% Expected long-term return on assets 8.5% to 9.0% - - -----------------------------------------------------------------------
RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses were approximately $42 million, $43 million and $41 million in 1997, 1996 and 1995, respectively. Great Lakes Chemical Corporation 35 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INDUSTRY SEGMENTS AND FOREIGN OPERATIONS The Company's operations consist of one dominant industry segment, chemicals and allied products. Net sales, income before income taxes and identifiable assets by geographic areas follows:
- - ------------------------------------------------------------------- Year Ended December 31 1997 1996 1995 - - ------------------------------------------------------------------- Net sales to unaffiliated customers: United States $ 920,778 $ 954,287 $ 907,460 Foreign 390,449 397,992 384,092 - - ------------------------------------------------------------------- $1,311,227 $1,352,279 $1,291,552 =================================================================== Intercompany sales between geographic areas: United States $ 82,940 $ 72,962 $ 61,758 Foreign 59,536 37,841 31,934 - - ------------------------------------------------------------------- $ 142,476 $ 110,803 $93,692 =================================================================== Income before income taxes: United States $ 129,093 $ 178,613 $ 170,723 Foreign 13,397 22,089 41,724 Earnings of affiliates 2,410 788 (43) Corporate interest expense (27,730) (17,475) (12,182) - - ------------------------------------------------------------------- $ 117,170 $ 184,015 $ 200,222 =================================================================== Identifiable assets at year-end: United States $ 988,830 $ 906,573 $ 904,976 Foreign 482,305 545,000 498,421 Affiliates 72,716 66,307 53,882 Discontinued operations 726,540 834,818 722,653 - - ------------------------------------------------------------------- $2,270,391 $2,352,698 $2,179,932 ===================================================================
Most of the Company's foreign operations are conducted by European subsidiaries or U.S. branch offices. Sales between the United States and its foreign operations are generally priced to recover cost plus an appropriate markup for profit and are eliminated in the consolidated financial statements. Identifiable assets include assets directly identified with the operations, principally: accounts receivable, inventories and plant and equipment, plus an allocation of goodwill. Export sales for 1997, 1996 and 1995 were approximately $214 million, $226 million and $194 million, respectively, of which 89 percent, 88 percent and 86 percent, respectively, were outside the Western Hemisphere. INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES As of December 31, 1997, the Company's investment in unconsolidated affiliates consists mainly of a 50 percent interest in Tetrabrom Technologies, Ltd., an Israeli manufacturer of tetrabromobisphenol-A, and a preferred stock interest in Huntsman Chemical Corporation (HCC) consisting of 58,700 shares of series A cumulative preferred stock with an annual dividend rate of 14 percent. Beginning in the year 2000, the annual dividend rate will increase 1 percent per year to a maximum rate of 25 percent. The preferred shares have a face value of $59 million. The Company is a limited partner in certain low income housing investments that generate benefits in the form of tax credits. The Company's equity in earnings of unconsolidated affiliates was $2 million and $1 million for 1997 and 1996, respectively. Preferred dividends from HCC amounted to $8 million in 1997 and 1996. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK The carrying amounts reported in the balance sheet of cash and cash equivalents, notes payable and long-term debt do not materially differ from their fair value at December 31, 1997. The fair value of the Company's debt was estimated using a discounted cash flow analysis based upon the Company's current incremental borrowing rates for similar borrowing arrangements. The Company sells a broad range of products to a diverse group of customers operating throughout the world. These industries generally are not significantly affected by changes in economic or other factors. Credit limits, ongoing credit evaluation and account monitoring procedures are utilized to minimize the risk of loss. Collateral is generally not required. The Company hedges certain portions of its exposure to foreign currency fluctuations in revenues and net foreign investments through the use of options and forward exchange contracts. Gains and losses arising from the use of such instruments are recorded in the income statement concurrently with gains and losses arising from the underlying hedged transactions. The Company enters into currency option contracts to hedge anticipated foreign currency transactions during the next 12 months. At December 31, 1997, the Company had outstanding option contracts with a notional value of approximately $6 million. The cost to acquire the contracts that hedge 1998 net foreign currency transactions was approximately $1 million, and that amount was deferred as of December 31, 1997. Had these contracts been acquired at December 31, 1997, their cost to acquire would have been approximately $1 million. The Company had outstanding option contracts in place at December 31, 1996, with a notional value of approximately $37 million. The Company uses currency swap contracts to hedge long-term intercompany loans and the related interest. The terms of the swap contracts match the loan payment terms. Swap contracts in existence at December 31, 1997, were for French francs, German marks and Italian lira against the British pound sterling. The U.S. dollar equivalent of the notional amount of the contracts outstanding as of December 31, 1997, was approximately $118 million. Liquidating the position at December 31, 1997, would have generated gains of approximately $11 million. It is the Company's intention to hold the swap contracts to maturity. Counterparties to the currency swap agreements are major financial institutions. Credit losses from counterparty nonperformance are not anticipated. 36 Great Lakes Chemical Corporation 30 QUARTERLY RESULTS OF OPERATIONS
- - --------------------------------------------------------------------------------------------------------------- (in thousands of dollars, except per share data) 1997 - THREE MONTHS ENDED Mar. 31 Jun. 30 Sept. 30 Dec. 31 - - --------------------------------------------------------------------------------------------------------------- Net Sales $319,618 $356,373 $309,570 $ 325,666 Operating Expenses Cost of products sold 230,753 253,794 220,508 232,468 Selling, administrative and research expenses 44,647 45,658 42,210 49,569 Special charge -- -- -- 49,800 - - --------------------------------------------------------------------------------------------------------------- 275,400 299,452 262,718 331,837 - - --------------------------------------------------------------------------------------------------------------- Operating Income (Loss) 44,218 56,921 46,852 (6,171) Interest and Other Income 5,915 6,501 8,368 10,884 Interest and Other Expenses 9,104 11,488 10,170 25,556 - - --------------------------------------------------------------------------------------------------------------- Income (Loss) from Continuing Operations before Income Taxes 41,029 51,934 45,050 (20,843) Income Taxes 14,700 18,800 16,000 (4,100) - - --------------------------------------------------------------------------------------------------------------- Net Income (Loss) from Continuing Operations 26,329 33,134 29,050 (16,743) Net Income (Loss) from Discontinued Operations 26,539 29,257 29,768 (100,389) - - --------------------------------------------------------------------------------------------------------------- Net Income (Loss) $ 52,868 $ 62,391 $ 58,818 $(117,132) =============================================================================================================== Earnings (Loss) per Share: Basic Continuing Operations $ 0.43 $ 0.55 $ 0.48 $ (0.28) Discontinued Operations 0.44 0.49 0.50 (1.68) - - --------------------------------------------------------------------------------------------------------------- $ 0.87 $ 1.04 $ 0.98 $ (1.96) - - --------------------------------------------------------------------------------------------------------------- Diluted Continuing Operations $ 0.43 $ 0.55 $ 0.48 $ (0.28) Discontinued Operations 0.43 0.49 0.50 (1.68) - - --------------------------------------------------------------------------------------------------------------- $ 0.86 $ 1.04 $ 0.98 $ (1.96) - - --------------------------------------------------------------------------------------------------------------- Cash Dividends Paid per Share $ .15 $ .15 $ .16 $ .16 =============================================================================================================== Stock Price Data High 50 3/4 52 7/8 54 7/8 53 Low 41 5/8 41 1/2 45 9/16 42 1/16 Year-End Close 44 7/8 - - --------------------------------------------------------------------------------------------------------------- 1996 - THREE MONTHS ENDED Mar. 31 Jun. 30 Sept. 30 Dec. 31 - - --------------------------------------------------------------------------------------------------------------- Net Sales $324,459 $394,033 $347,498 $ 286,289 Operating Expenses Cost of products sold 225,514 277,779 251,123 214,614 Selling, administrative and research expenses 48,685 52,656 50,668 47,377 - - --------------------------------------------------------------------------------------------------------------- 274,199 330,435 301,791 261,991 - - --------------------------------------------------------------------------------------------------------------- Operating Income 50,260 63,598 45,707 24,298 Interest and Other Income 6,905 25,706 5,437 18,612 Interest and Other Expenses 9,052 19,994 7,299 20,163 - - --------------------------------------------------------------------------------------------------------------- Income from Continuing Operations before Income Taxes 48,113 69,310 43,845 22,747 Income Taxes 16,600 24,200 14,400 8,200 - - --------------------------------------------------------------------------------------------------------------- Net Income from Continuing Operations 31,513 45,110 29,445 14,547 Net Income from Discontinued Operations 34,709 32,848 38,900 23,224 - - --------------------------------------------------------------------------------------------------------------- Net Income $ 66,222 $ 77,958 $ 68,345 $ 37,771 =============================================================================================================== Earnings per Share: Basic Continuing Operations $ 0.49 $ 0.71 $ 0.46 $ 0.23 Discontinued Operations 0.54 0.51 0.62 0.38 - - --------------------------------------------------------------------------------------------------------------- $ 1.03 $ 1.22 $ 1.08 $ 0.61 - - --------------------------------------------------------------------------------------------------------------- Diluted Continuing Operations $ 0.48 $ 0.70 $ 0.46 $ 0.23 Discontinued Operations 0.54 0.51 0.61 0.37 - - --------------------------------------------------------------------------------------------------------------- $ 1.02 $ 1.21 $ 1.07 $ 0.60 - - --------------------------------------------------------------------------------------------------------------- Cash Dividends Paid per Share $ .115 $ .12 $ .15 $ .15 =============================================================================================================== Stock Price Data High 78 5/8 69 3/8 62 7/8 57 1/2 Low 65 61 46 1/2 44 1/4 Year-End Close 46 3/4 - - ---------------------------------------------------------------------------------------------------------------
Great Lakes Chemical Corporation 37 31 CORPORATE OFFICERS Robert B. McDonald Chief Executive Officer and President Robert T. Jeffares Executive Vice President and Chief Financial Officer L. Donald Simpson Executive Vice President Dennis J. Kerrison Group Vice President Marshall E. Bloom Vice President, Water Treatment David R. Bouchard Vice President, Bromine and Bromine Derivatives Stephen D. Clark Vice President, Corporate R&D Mark S. Esselman Vice President, Human Resources Richard R. Ferguson Vice President, Treasurer and Asst. Secretary Otto K. Furuta Vice President, Purchasing and Logistics Robert L. Hollier Vice President, and President of OSCA, Inc. John V. Lacci Vice President, General Counsel J. Larry Robertson Vice President, LINX Robert J. Smith Vice President, Controller John B. Talpas Vice President, Manufacturing David C. Sanders Associate Vice President, New Product Development Mary P. McClanahan Corporate Secretary Stephen E. Brewer Asst. Treasurer DIRECTORS Evan Bayh 3, 5 Partner, Baker & Daniels Attorneys-at-law Director since 1997 William H. Congleton 1, 6 General Partner, Palmer Partners L.P. Private investment partnership Director since 1973 John S. Day 1, 2, 4 Vice President and Dean Emeritus, Purdue University Director since 1975 Thomas M. Fulton 2, 3 President and Chief Executive Officer Landauer, Inc. Director since 1995 Martin M. Hale, 1, 4, 5, 6 Chairman of the Board of Great Lakes; Executive Vice President Hellman Jordan Management Company, Inc. Investment advisors Director since 1978 Louis E. Lataif 1, 2 Dean of the School of Management, Boston University Director since 1995 Richard H. Leet 2, 3, 4 Retired Vice Chairman and Director Amoco Corporation Director since 1994 Robert B. McDonald 4, 5, 6 Chief Executive Officer and President Director since 1994 Mack G. Nichols President and Chief Operating Officer Mallinckrodt Inc. Director since February 1998 Jay D. Proops 4, 5, 6 Former Vice Chairman The Vigoro Corporation Director since 1996 1 Audit Committee 2 Compensation and Incentive Committee 3 Environmental, Safety and Health Committee 4 Executive Committee 5 Finance Committee 6 Succession Planning Committee [LOGO] [LOGO] Economic Value Added(R) is a Registered trademark of Stern Stewart & Co. Responsible Care(R) is a registered trademark of Chemical Manufacturers Association. 38 Great Lakes Chemical Corporation 32 WHOLLY OWNED SUBSIDIARIES AND AFFILIATES Bayrol Chemische Fabrik GmbH Swimming Pool and Spa Products Bio-Lab, Inc. Swimming Pool and Spa Products Great Lakes Chemical (Europe), Ltd. Specialty Chemicals Great Lakes Chemical France S.A. Specialty Chemicals Great Lakes Chemical International, Inc. Export Sales-FSC Great Lakes Chemical Italia S.r.l. Specialty Chemicals Great Lakes Fine Chemicals, Ltd. Manufacturer of Fine and Specialty Chemicals and Intermediates LOWI Polymer Stabilizers GmbH Specialty Chemicals Octel Associates and The Associated Octel Company, Limited Petroleum Additives OSCA, Inc. Oil Field Services WIL Research Laboratories, Inc. Toxicological Testing SHAREHOLDER INFORMATION TRANSFER AGENT AND REGISTRAR The stock transfer agent and registrar for Great Lakes' stock is Harris Trust and Savings Bank. Stockholders who wish to transfer their stock, or change the name in which the shares are registered, should contact: Harris Trust and Savings Bank Attn: Shareholder Services 311 West Monroe Street, 11th Floor Chicago, Illinois 60606-4607 (312) 461-6001 hearing impaired: (312) 461-5633 www.harrisbank.com AUDITORS Ernst & Young LLP Indianapolis, Indiana LISTINGS New York Stock Exchange New York, New York Pacific Stock Exchange Los Angeles and San Francisco, California Ticker Symbol: GLK ANNUAL MEETING The Annual Meeting of the Stockholders will be held at 11:00 a.m., Thursday, May 7, 1998, at the Harris Trust and Savings Bank, 111 West Monroe Street, 8th Floor Auditorium, Chicago, Illinois. FORM 10-K AND OTHER INFORMATION A complimentary copy of the company's 1997 Annual Report to the Securities and Exchange Commission on Form 10-K is available upon request. For this, or for other information concerning the company, please contact: Jeffrey Potrzebowski Director, Investor Relations or Gregory J. Griffith Director, Public Affairs and Administration Great Lakes Chemical Corporation One Great Lakes Boulevard West Lafayette, Indiana 47996-2200 Phone: (765) 497-6100 www.greatlakeschem.com EX-23 16 CONSENT 1 Exhibit 23 Great Lakes Chemical Corporation and Subsidiaries CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Great Lakes Chemical Corporation of our report dated February 3, 1998, included in the 1997 Annual Report to Stockholders of Great Lakes Chemical Corporation. Our audits also included the financial statement schedule of Great Lakes Chemical Corporation listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in Registration Statement Number 33-02069 on Form S-3, dated December 11, 1985, in Post-Effective Amendment Number 1 to the Registration Statement Number 33-02074 on Form S-8, dated February 3, 1995, in Registration Statement Number 33-02075 on Form S-8, dated December 11, 1985, in Registration Statement Number 33-42477 on Form S-3, dated August 28, 1991, in Registration Statement Number 33-57589 on Form S-8, dated February 3, 1995, and in Registration Statement Number 33-300543 on Form S-8, dated January 30, 1996, of our report dated February 3, 1998, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of Great Lakes Chemical Corporation for the year ended December 31, 1997. ERNST & YOUNG LLP Indianapolis, Indiana March 25, 1998 EX-27.1 17 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME, AND STATEMENT OF CASHFLOW AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS 6-MOS 9-MOS 12-MOS DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997 JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1997 MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997 141,310 186,952 247,158 73,673 0 0 0 0 303,088 298,962 235,891 262,695 6,890 7,013 6,833 5,803 275,756 273,912 281,941 298,175 744,608 782,307 786,791 668,546 1,098,282 1,126,288 1,151,775 1,140,617 459,214 474,127 489,301 481,982 2,366,011 2,385,905 2,370,758 2,270,391 298,609 295,194 308,200 304,356 580,726 562,354 498,147 561,455 0 0 0 0 0 0 0 0 72,472 72,491 72,525 72,573 1,328,274 1,370,100 1,405,462 1,234,870 2,366,011 2,385,905 2,370,758 2,270,391 320,526 675,991 985,561 1,311,227 326,441 688,407 1,006,345 1,342,895 231,661 484,547 705,055 937,523 276,086 574,620 837,134 1,169,759 2,624 6,532 10,314 27,910 222 232 436 (352) 6,480 14,060 20,448 28,408 41,029 92,963 138,013 117,170 14,700 33,500 49,500 45,400 26,329 59,463 88,513 71,770 26,539 55,796 85,564 (14,825) 0 0 0 0 0 0 0 0 52,868 115,259 174,077 56,945 0.87 1.91 2.89 0.95 0.86 1.90 2.88 0.94 RESTATED BALANCE AT 03/31/1997. RESTATED BALANCE AT 06/30/1997. RESTATED BALANCE AT 09/30/1997.
EX-27.2 18 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME, AND STATEMENT OF CASHFLOW AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS 6-MOS 9-MOS 12-MOS DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996 MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996 190,446 116,051 141,249 141,439 0 0 0 0 547,168 555,896 524,789 260,689 7,520 8,001 9,159 7,321 423,052 437,979 407,764 276,787 1,186,002 1,134,538 1,096,377 703,950 1,304,317 1,312,005 1,376,915 1,087,615 522,662 535,281 553,685 451,055 2,557,320 2,499,384 2,499,758 2,352,698 483,835 468,581 470,618 279,864 379,126 387,543 346,883 496,246 0 0 0 0 0 0 0 0 72,189 72,423 72,442 72,455 1,378,657 1,381,588 1,418,209 1,414,444 2,557,320 2,499,384 2,499,758 2,352,698 324,459 718,492 1,065,990 1,352,279 331,364 751,103 1,104,038 1,408,939 225,514 503,293 754,416 969,030 273,934 603,741 904,455 1,166,485 4,690 20,173 23,215 38,012 265 893 1,970 1,931 4,362 8,873 13,130 18,496 48,113 117,423 161,268 184,015 16,600 40,800 55,200 63,400 31,513 76,623 106,068 120,615 34,709 67,557 106,457 129,681 0 0 0 0 0 0 0 0 66,222 144,180 212,525 250,296 1.03 2.24 3.32 3.94 1.02 2.22 3.30 3.91 RESTATED BALANCE AT 03/31/1996 RESTATED BALANCE AT 06/30/1996. RESTATED BALANCE AT 09/30/1996. RESTATED BALANCE AT 12/31/1996
EX-27.3 19 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME, AND STATEMENT OF CASHFLOW AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 116,434 0 264,512 5,998 278,665 682,038 993,308 407,405 2,179,932 282,293 331,228 0 0 72,109 1,344,074 2,179,932 1,291,552 1,318,649 897,309 1,092,560 11,681 648 13,538 200,222 68,000 132,222 163,351 0 0 295,573 4.52 4.48 RESTATED BALANCE AT 12/31/1995.
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