UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
OCTEL CORP.
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(Name of Registrant as Specified In Its Charter)
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[LOGO] OCTEL CORP.
220 Continental Drive Dennis J Kerrison
Newark, DE 19713 President and Chief Executive Officer
Dear Stockholder: March 25, 2002
You are cordially invited to attend the Annual Meeting of Stockholders of
Octel Corp. (the "Corporation"), which will be held on Tuesday, May 7, 2002 at
10.00am, local time, at Swissotel, One Avenue de Lafayette, Boston, MA 02111,
USA.
The Notice of Meeting, Proxy Statement, Proxy Form and Annual Report of the
Corporation are included with this letter. The matters listed in the Notice of
Meeting are more fully described in the Proxy Statement.
It is important that your shares are represented and voted at the Annual
Meeting, regardless of the size of your holdings. Accordingly, please mark,
sign and date the enclosed Proxy Form and return it promptly in the enclosed
reply envelope which requires no postage if mailed in the United States of
America.
Sincerely,
/s/ Dennis J Kerrison
Dennis J Kerrison
President and Chief Executive Officer
OCTEL CORP.
220 Continental Drive
Newark, DE 19713
U.S.A.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
May 7, 2002
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Stockholders of
OCTEL CORP. (the "Corporation") will be held at Swissotel, One Avenue de
Lafayette, Boston, MA 02111, USA on Tuesday May 7, 2002 at 10:00am (Local
Time) for the following purposes:
1. To elect a director to serve until the 2005 Annual Meeting;
2. To ratify the appointment of PricewaterhouseCoopers as the Corporation's
independent public accountants for the fiscal year ending December 31,
2002; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed March 12, 2002 as the date of record for
the meeting and only stockholders of record at the close of business on that
date will be entitled to vote at the meeting or any adjournment thereof. A
list of such stockholders will be available for examination by any stockholder
for any purpose germane to the meeting during normal business hours at the
Corporation's offices at 220 Continental Drive, Newark, DE 19713 for a period
of 10 days prior to the meeting.
A proxy statement, form of proxy and a copy of the annual report of the
Corporation for the year ended December 31, 2001 are enclosed.
By Order of the Board of Directors,
/s/ John P Tayler
John P Tayler
Corporate Secretary
March 25, 2002
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON AND
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY FORM AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED TO ENSURE
THAT YOUR SHARES WILL BE REPRESENTED. YOU MAY NEVERTHELESS VOTE IN PERSON IF
YOU ATTEND THE ANNUAL MEETING. IN ADDITION, YOUR PROXY IS REVOCABLE AT ANY
TIME BEFORE IT IS VOTED BY WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY OR
BY DELIVERY OF A LATER-DATED PROXY.
OCTEL CORP.
220 Continental Drive
Newark, DE 19713
U.S.A.
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PROXY STATEMENT
March 25, 2002
For
Annual Meeting of Stockholders
To Be Held on May 7, 2002
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This proxy statement (the "Proxy Statement") is being furnished to the
holders of common stock, par value $0.01 per share (the "Common Stock") of
Octel Corp. (the "Corporation") in connection with the solicitation of proxies
by and on behalf of the Board of Directors of the Corporation (the "Board of
Directors" or the "Board") for use at the annual meeting of stockholders to be
held on May 7, 2002 at 10:00am local time, and at any adjournments or
postponements thereof (the "Annual Meeting"). The purpose of the Annual
Meeting is to elect a director to the Board and ratify the appointment of
PricewaterhouseCoopers as the Corporation's independent public accountants for
the 2002 fiscal year.
This Proxy Statement, the Proxy Form and the Corporation's Annual Report to
Stockholders are being mailed on or about March 25, 2002 to holders of record
of the Common Stock at the close of business on March 12, 2002 (the "Record
Date").
If the enclosed proxy form (the "Proxy Form") is properly signed, dated and
returned to the Corporation, the individuals identified as proxies thereon
will vote the shares represented by the Proxy Form in accordance with the
directions noted thereon. If no direction is indicated, the proxies will vote
FOR the election of the nominee named herein as a director and FOR the
ratification of the appointment of PricewaterhouseCoopers as the Corporation's
independent public accountants for the 2002 fiscal year. The Corporation's
management does not know of any matters other than those discussed in this
Proxy Statement that will be presented at the Annual Meeting. If other matters
are presented, all proxies will be voted in accordance with the
recommendations of the Corporation's management.
Returning your completed Proxy Form will not prevent you from voting in
person at the Annual Meeting if you are present and wish to vote. In addition,
you may revoke your proxy at any time before it is voted by written notice of
revocation or by submission of a later dated proxy to the Secretary of the
Corporation prior to the Annual Meeting at the Corporation's principal
executive offices at the address above.
Each outstanding share of Common Stock entitles the holder thereof to one
vote (or where a part share shall be owned a proportionate part of the vote of
one share) on each matter to come before the Annual Meeting. As of the Record
Date, excluding treasury stock, there were 11,750,574 shares of Common Stock
outstanding. The presence in person or by proxy of a majority of the shares of
Common Stock outstanding will constitute a quorum for the transaction of
business. Pursuant to Delaware law, abstentions are treated as present and
entitled to vote, and therefore are counted in determining the existence of a
quorum and will have the effect of a vote against any matter requiring the
affirmative vote of a majority of the shares present and entitled to vote at
the Annual Meeting. Under Delaware law, broker "non votes" are considered
present but not entitled to vote, and thus will be counted in determining the
existence of a quorum but will not be counted in determining whether a matter
requiring approval of a majority of the shares present and entitled to vote
has been approved or whether a plurality of the vote of the shares present and
entitled to vote has been cast.
1
PROPOSAL ONE
Election of Director
The Certificate of Incorporation of the Corporation provides that the number
of directors shall be not less than three nor more than twelve members, the
exact number of which shall be determined from time to time by resolution
adopted by the Board of Directors, and be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as
nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. The Board is currently comprised
of seven members, two in Class I, two in Class II and three in Class III and
the appointments of the Directors in the said Classes expire at the Annual
Meetings of the Corporation in 2002, 2003 and 2004 respectively.
The Directors in Class I are Mr Thomas M Fulton and Mr Charles M Hale and
their terms expire at the upcoming Annual Meeting. Mr Thomas M Fulton, aged
68, will not stand for re-election and will retire from the Board. We wish to
thank him for his years of loyal service to the Board. The Board has passed a
resolution to reduce the number of Directors from seven to six. Mr Charles M
Hale has been nominated for re-election. See "Management--Nominee for
Director" for information with respect to Mr Hale. The Corporation believes
that the nominee is willing to be elected and to serve. In the event that the
nominee is unable to serve or is otherwise unavailable for election, which is
not now contemplated, the incumbent Board may or may not select a substitute
nominee. If a substituted nominee is selected, all proxies will be voted for
the person selected.
The election of directors at the Annual Meeting requires a plurality of the
votes actually cast by the stockholders present (in person or by proxy) at the
meeting and entitled to vote. There is no cumulative voting as to any matter,
including the election of directors. A withheld vote will have no effect on
the outcome of the election. If no voting instruction is given, the
accompanying proxy will be voted FOR such election. Under the New York Stock
Exchange rules, brokers who hold street name shares can vote in their
discretion in the election of Directors.
The Board of Directors recommends a vote "FOR" the election of the nominee
director.
PROPOSAL TWO
Ratification of Appointment of Independent Public Accountants
PricewaterhouseCoopers have served as independent public accountants for
fiscal year 2001.
The Board of Directors, upon recommendation of its Audit Committee, has
selected the accounting firm of PricewaterhouseCoopers to serve as independent
auditors of the Corporation with respect to the 2002 fiscal year to examine
the financial statements of the Corporation for the fiscal year ending
December 31, 2002 and to perform other appropriate accounting services.
A representative of PricewaterhouseCoopers is expected to be present at the
Annual Meeting to respond to questions and to make a statement if such
representative desires to do so. If the stockholders do not ratify this
appointment by the affirmative vote of a majority of the shares represented in
person or by proxy at the Annual Meeting, other independent public accountants
will be considered by the Board of Directors upon recommendation by the Audit
Committee.
The Board of Directors recommends a vote "FOR" ratification of the
appointment of PricewaterhouseCoopers as the Corporation's independent public
accountants for fiscal year 2002.
2
MANAGEMENT
The following sets forth certain information as of March 12, 2002 with
respect to the Corporation's nominee for director, the Corporation's
continuing directors, the Corporation's discontinuing director, and certain
officers of the Corporation and its subsidiaries (including all executive
officers of the Corporation). Officers of the Corporation serve at the
discretion of the Board of Directors.
A.Nominee for Director
The Class I member who will serve until the 2002 Annual Meeting and is
seeking re-election
Mr Charles M Hale--Director since May 7, 1998. Age: 66
Charles Hale is Executive Chairman of Polar Capital Partners Limited, a London
based asset management company regulated by the FSA. Prior to 2002, he was
Managing Director and Vice Chairman of CSFB Europe Limited, having been
Chairman of Donaldson, Lufkin & Jenrette International, the London based
subsidiary of Donaldson, Lufkin & Jenrette Inc., until its acquisition by
Credit Suisse First Boston in November 2000. Prior to 1984, he was a general
partner of Lehman Brothers Kuhn Loeb and Managing Director of AG Becker
International. Mr Hale is a graduate of Stanford University and Harvard
Business School. Charles Hale is the brother of Martin Hale who is also a
Director of the Corporation.
B.Continuing Directors
Class II Directors who will serve until the 2003 Annual Meeting
Mr James M C Puckridge--Director since May 7, 1998. Age: 66
James Puckridge was Chairman of Elf Atochem UK Ltd. (now Atofina UK Ltd.), a
position he assumed in 1990, until his retirement on December 31, 1998. Prior
to that he was Managing Director of the same organization. He is also Chairman
of Atofina Pension Fund Trustee Co. Ltd. He is a Non-Executive Director of
LINPAC Group Ltd., an international manufacturer and converter of paper and
plastics primarily for the packaging industry and Thomas Swan and Co Ltd., a
UK based specialty chemical corporation and venture capitalist. He is a past
President of the British Plastics Federation and a former Council Member of
the Chemicals Industries Association, where he was Chairman of the General
Purpose and Finance Committee. In addition to serving as a Director, James
Puckridge provides services to the Corporation with regard to UK pension
matters. On October 3, 2000 he was appointed Chairman of the Trustees of The
Associated Octel Company Limited Pension Plan.
Dr Benito Fiore--Director since May 7, 1998. Age: 65
Dr Benito Fiore is a specialist in the chemical industry retained by the
chemical practices division of
A T Kearney Limited, part of a global consultancy organization. Between 1990
and 1995 he was Chairman and Chief Executive Officer of Enichem UK Ltd. Prior
to this he held a number of executive directorships in the Montedison Group
working in Denmark, Canada, Italy and the USA. He is a Member of the Council
of the Italian Chamber of Commerce, an Associate Member of the Council of the
Chemical Industries Association and a Fellow of the Institute of Directors.
Class III Directors who will serve until the 2004 Annual Meeting
Dr Robert E Bew--Director and Chairman since May 7, 1998 Age: 65
Dr Robert Bew serves as Non-Employee Chairman of the Corporation and since
October 1, 1999 has provided additional advice and services to the Corporation
on corporate development matters. Until January 1, 2001 he was Chairman of the
European Process Industries Competitiveness Centre, an organization
specializing in increasing competitiveness in process industries. He spent
over 35 years with ICI, most recently as CEO of ICI's International Chemical &
Polymer division based in Teeside, UK. Previously he served as head of ICI
Corporate Planning and between 1995 and 1997 was also Chairman of Phillips
Imperial Petroleum Ltd., a refinery joint venture between ICI and Phillips
Petroleum.
3
Mr Dennis J Kerrison--Director since February 27, 1998. Age: 57
Dennis Kerrison serves as President and Chief Executive Officer of the
Corporation. He joined the Corporation's wholly owned subsidiary The
Associated Octel Company Limited as Managing Director in May 1996 as well as
serving as a Group Vice President and Officer of that Corporation's then
owners, Great Lakes Chemical Corporation. Between 1992 and 1996 he was a
Director and Officer of Hickson International plc, lastly as Chief Executive
Officer. Prior to this he worked in senior management roles for specialty
chemical companies, in Europe and the United States, notably Rhone Poulenc,
Rohm & Haas and RTZ Chemicals.
Mr Martin M Hale--Director since February 27, 1998. Age: 61
Martin Hale is a Director of Great Lakes Chemical Corporation, having been a
Director since 1978 and from 1995 until May 2000 served as Chairman. Mr Hale
is also a Director of OSCA Corp., a company engaged in the provision of
services to the oil and gas drilling industries, having been appointed to that
position in February 2000. Since December 1, 2000 he has served as the
Executive Vice President of Hellman, Jordan Management Co. Inc., a registered
investment advisor specialising in asset management, a position he also held
from 1983 until December 31, 1999. Prior to 1983 Mr Hale was President and
Chief Executive Officer of Marsh & McClennan Asset Management Company. He also
serves as a Trustee of the Museum of Fine Arts, Boston. Martin Hale is the
brother of Charles Hale who is also a Director of the Corporation.
C.Discontinuing Director
Class I Director who will serve until the 2002 Annual Meeting and is not
seeking re-election.
Mr Thomas M Fulton--Director since February 27, 1998. Age: 68
Thomas Fulton served as President and Chief Executive Officer of Landauer
Inc., a provider of radiation monitoring services until his retirement on
December 31, 1998. He remains a Director of that Company. Prior to joining
Landauer in 1978, his career included various management positions at Union
Carbide Corporation, BASF Corporation and ICN Pharmaceuticals, Inc.. Mr Fulton
has also served on the Board of Great Lakes Chemical Corporation since 1995
and is on the Boards of The Advocate South Suburban Hospital and the Bethel
Community Facility and is a Life Trustee of the Chicago Theological Seminary.
D.Officers (Other than those who are Directors and Listed above)
Dr Philip J Boon (Appointed November 18, 2000) Age: 42
Dr Philip Boon serves as Business Director, Petroleum Specialties, of the
Corporation having joined its subsidiary The Associated Octel Company Limited
in August 1997 as Business Manager, Petroleum Specialties. From May 1995 to
July 1997 he served as Business Manager, Applied Solutions for FMC's Lithium
Division in North Carolina, USA. Prior to that, he had various sales and
marketing roles in the Water Additives and Petroleum Additives businesses of
FMC and Ciba-Geigy.
H Alan Hanslip (Appointed December 22, 1998) Age: 54
Alan Hanslip currently serves as Vice President, Human Resources of the
Corporation having joined its subsidiary The Associated Octel Company Limited
in a similar capacity in November 1996. Previously, Mr Hanslip served as
Director of Human Resources for British Nuclear Fuels plc.
Dr Geoffrey J Hignett (Appointed December 22, 1998) Age: 51
Dr Geoffrey Hignett serves as Director of Corporate Development of the
Corporation having been Vice President, Specialty Chemicals from December 1998
to November 2000. Dr Hignett joined the Corporation's subsidiary The
Associated Octel Company Limited in February 1997 as Business Director,
Petroleum Specialties. From May 1993 to January 1997 he served as Director of
Technology and Business Director of Water Additives for a division of FMC
Corporation, a multinational engineering, manufacturing and chemicals company
and prior to that as Technical Director of the Metals and Electronics Division
of Laporte plc.
Alan G Jarvis (Appointed April 1, 1998) Age: 52
Alan Jarvis serves as Vice President and Chief Financial Officer of the
Corporation having joined its subsidiary The Associated Octel Company Limited
in a similar capacity in October 1997. Prior to this Mr Jarvis served as
4
Group Finance Director of the Power Plant Group of GEC Alsthom, a world-wide
Anglo-French joint venture in the power generation business. From 1987 to
1994, Mr Jarvis served at different times as Property Director, Group Finance
Director and Group Financial Controller for Simon Engineering plc, a British
engineering corporation specializing in hydraulic platforms, process plant
contracting and chemical storage.
John P Tayler (Appointed May 11, 1999) Age: 46
John Tayler serves as Corporate Secretary and General Counsel to the
Corporation having been appointed Corporate Secretary on May 11, 1999 and
Corporate Secretary and General Counsel on February 21, 2000. Prior to this Mr
Tayler was Company Secretary of Creative Publishing plc having joined them in
1997 from Allied Colloids Group plc where he had been Company Secretary from
1988.
Ian Watling (Appointed November 18, 2000) Age: 48
Ian Watling serves as Business Director, Performance Chemicals, of the
Corporation having joined its subsidiary The Associated Octel Company Limited
in that capacity in March 2000. Prior to that, Mr Watling was Managing
Director of the UK and Eire operations of International Specialty Products
(I.S.P.) and Business Director of their European Personal Care operations. He
spent 14 years with I.S.P. (formerly G.A.F.) and has also held positions with
Betz and Albright & Wilson.
E.Family Relationships
Charles Hale who is a Director of the Corporation is the brother of Martin
Hale who is also a Director of the Corporation. There are no other family
relationships between any of the persons referred to in sections (A), (B), (C)
or (D) above.
Information about the Board of Directors
The Board of Directors met four times during fiscal 2001. Each Director
attended all of the meetings of the Board of Directors and any committees on
which such Director served in fiscal 2001 except Tom Fulton who did not attend
the August 2001 Board Meeting.
The Corporation has Executive, Finance, Audit, Safety Health and
Environmental, and Compensation Committees, the members of which are as shown
below.
The Audit Committee operates pursuant to a written Charter (attached hereto
as Appendix A), and is responsible for monitoring and overseeing the
Corporation's internal controls and financial reporting process, as well as
the independent audit of the Corporation's consolidated financial statements
by the Corporation's independent auditors, PricewaterhouseCoopers. Thomas
Fulton retired from this Committee on February 20, 2002, having served as its
Chairman since its formation on May 11, 1998. Dr Benito Fiore and Charles Hale
have served as members of this Committee since its formation. On February 20,
2002 Mr Martin Hale was appointed Chairman of this Committee. Under the rules
of The New York Stock Exchange, each of Messrs.
B Fiore, M M Hale and C M Hale is an "independent director". The Committee met
six times during fiscal 2001.
The Audit Committee Report appears later in this Proxy Statement.
The Executive Committee has all the powers and authority of the Board of
Directors, except those powers specifically reserved to the Board of Directors
by Delaware law, the Certificate of Incorporation or the Bylaws of the
Corporation or otherwise to act for the Board, with certain restrictions, on
behalf of the Corporation.
Dr Robert Bew (Chairman), Dennis Kerrison, Martin Hale and James Puckridge
have served as members of this Committee since its formation on May 11, 1998.
The Committee did not meet during fiscal 2001.
The Finance Committee reviews and assesses the financial affairs of the
Corporation and provides advice to the Board of Directors on financial
policies and the financial condition of the Corporation. Charles Hale
(Chairman), Dr Robert Bew and Dennis Kerrison have served as members of this
Committee since its formation on May 11, 1998. The Committee met three times
during fiscal 2001.
5
The Safety, Health and Environmental Committee assesses the Corporation's
safety, health and environmental policies and performance and makes
recommendations to management regarding the promotion and maintenance of
standards of compliance and performance. James Puckridge (Chairman) and Dr
Benito Fiore have served as members of this Committee since its formation on
May 11, 1998. The Committee met once during fiscal 2001.
The Compensation Committee reviews management compensation programs,
approves compensation terms and agreements for senior executive officers,
reviews changes in compensation for senior executive officers and administers
the Corporation's stock option plans. Martin Hale resigned from this committee
on February 20, 2002 to take up the position of Chairman of the Audit
Committee. Dr Benito Fiore has served as a member of this Committee since its
formation on May 11, 1998 and was appointed Chairman on February 20, 2002.
Thomas Fulton was appointed to the Committee on August 7, 2000 and retired
from the committee on February 20, 2002. Mr James Puckridge was appointed to
the committee on February 20, 2002. The Committee met once during fiscal 2001.
The Corporation does not have a Nominating Committee.
Compensation of Directors
Retainer, Committee and Meetings Fees
Non-employee Directors receive compensation for their services in the form
of an annual retainer, Committee Chairman fees and meeting fees. Corporation
employees are not paid any fees or compensation for being on the Board or on
any Board committee.
The Non-employee Chairman of the Board receives an annual retainer of
$115,000 to recognize his responsibilities to the Corporation. In addition,
the current Non-employee Chairman receives fees in respect of a consultancy
agreement at the rate of $86,400 per annum. All other Non-employee Directors
receive an annual retainer of $23,000. All Non-employee Directors receive an
annual retainer of $5,000 for each committee they chair, $1,650 per day for
attendance at Board Meetings and $825 per day for attendance at Committee
Meetings and for special assignments. They are also reimbursed out of pocket
expenses. In addition to his remuneration as a Non-employee Director, Mr
Puckridge is paid for providing services in connection with UK pension
matters. He receives an annual retainer of $22,000 and $825 per day for
attendance at pensions meetings.
It is the policy of the Board to ask the Compensation Committee to review
the fees paid to Directors each year. The fees paid to the Non-employee
Directors had not increased since the formation of the Board in 1998. In
February 2001 the Compensation Committee considered whether the fees paid to
the Non-employee directors should be increased. In lieu of any increase in
fees the Non-employee Directors were, on May 8, 2001, granted the zero cost
stock options listed below.
The stock options granted to the Non-employee Directors during fiscal 2001
were:
May 8, 2001
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Dr Robert Bew................................................. 2,231
Martin Hale................................................... 376
Thomas Fulton................................................. 342
Charles Hale.................................................. 327
James Puckridge............................................... 669
Dr Benito Fiore............................................... 386
The options granted on May 8, 2001 vest on May 2, 2004 and are exercisable
until May 7, 2011.
Deferred and Long-Term Compensation
None were awarded or in place in the last fiscal year.
6
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act 1934, as amended, requires the
Corporation's directors and officers, and persons who beneficially own more
than ten percent of a registered class of the Corporation's Common Stock and
other equity securities, to file initial reports of ownership and reports of
changes in ownership of the Corporation's Common Stock equity securities with
the Securities and Exchange Commission (the "SEC"). Such persons are required
by SEC regulations to furnish the Corporation with copies of all
Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Corporation, or written representations that no Form 5 filings were required,
the Company believes that, except as stated below, each of its officers,
directors and greater than ten percent beneficial owners complied with all
Section 16(a) filing requirements applicable to them during fiscal 2001.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Corporation's Common Stock as of February 28, 2002
by holders of more than five percent of the Corporation's outstanding Common
Stock, the directors of the Corporation, the executive officers of the
Corporation included in the summary Compensation Table ("Named Executives")
set forth under the caption "Executive Compensation and Other Information" who
were employed by the Corporation as of February 28, 2002, and all current
directors and executive officers of the Corporation as a group. As of February
28, 2002, excluding treasury stock, there were 11,750,574 shares of Common
Stock outstanding. According to the rules adopted by the Securities and
Exchange Commission, a person is the "beneficial owner" of securities if he or
she has or shares the power to vote them or to direct their investment or has
the right to acquire beneficial ownership of such securities within 60 days
through the exercise of an option, warrant, right of conversion of a security
or otherwise. The percentage of the Corporation's Common Stock beneficially
owned by a person assumes that the person has exercised all options and
converted all convertible securities that the person holds which are
exercisable or convertible within 60 days of February 28, 2002. To the
knowledge of the Corporation, each stockholder has sole voting and investment
power with respect to the shares indicated as beneficially owned, unless
otherwise indicated in a footnote. Unless otherwise indicated, the business
address of each person is the Corporation's corporate address.
7
BENEFICIAL OWNERS
Amount and
Nature of Percent
Beneficial of
Name and Address of Beneficial Owner Ownership Class
------------------------------------ ---------- -------
T Rowe Price Associates, Inc. (1)........................... 1,904,975 16.21
100 E. Pratt Street
Baltimore, Maryland 21202
Baupost Group Inc. (2)...................................... 1,755,700 14.94
44 Brattle St., 5th Floor,
Cambridge, MA 02138
FMR Corp. (3)............................................... 1,471,000 12.51
82 Devonshire Street,
Boston, MA 02109
Kestrel Investment Management Corp. (4)..................... 912,700 7.77
411 Borel Avenue, Suite 403,
San Mateo, CA 94402
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Notes:
(1) According to a Schedule 13G dated February 14, 2002 filed jointly by T.
Rowe Price Associates, Inc. ("T. Rowe Price") and T. Rowe Price Capital
Appreciation Fund ("TRP Fund"), the shares of Common Stock shown as
beneficially owned by T. Rowe Price are owned by various individual and
institutional investors including TRP Fund (which owns 990,000 shares of
Common Stock, representing 8.4% of the shares of Common Stock
outstanding), to which T. Rowe Price Associates serves as an investment
advisor with power to direct investments and/or sole power to vote the
securities. For the purposes of the reporting requirements of the
Securities Exchange Act of 1934, T. Rowe Price is deemed to be a
beneficial owner of such securities, which T. Rowe Price expressly
disclaims.
(2) According to a Schedule 13G dated February 14, 2002 filed jointly by The
Baupost Group LLC ("Baupost"), SAK Corporation and Seth A Klarman, Baupost
has sole voting and investment power with respect to 1,755,700 shares of
Common Stock. SAK Corporation as the manager of Baupost and Seth A
Klarman, as the sole director of SAK Corporation and a controlling person
of Baupost, may be deemed to have beneficial ownership of the securities
beneficially owned by Baupost. Securities reported as being beneficially
owned by Baupost include securities purchased on behalf of a registered
investment company and various limited partnerships.
(3) According to a Schedule 13G dated February 14, 2002 filed jointly by FMR
Corp. ("FMR"), Edward C Johnson 3d ("Mr Johnson"), Abigail P Johnson ("Ms
Johnson"), Fidelity Management & Research Company ("FM&R") and Fidelity
Low-Priced Stock Fund ("Fidelity Stock"), various persons have the right
to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the Common Stock shown as beneficially owned by
FMR, including Fidelity Stock (which owns 1,471,000 shares of Common
Stock, representing 12.51% of the shares of Common Stock outstanding).
(4) According to a Schedule 13G dated February 14, 2002 filed jointly by
Kestrel Investment Management Corporation ("Kestrel"), David J Steirman
and Abbot Keller, Kestrel is deemed to be the beneficial owner of 912,700
shares of Common Stock with sole voting power for 842,200 of such shares
and sole dispositive power for all 912,700 of such shares, pursuant to
separate arrangements whereby it acts as investment advisor to certain
persons in which it also holds an ownership interest, which persons have
the right to receive or the power to direct the receipt of dividends from,
or the proceeds from the sale of, such Common Stock. Furthermore, based
solely upon such Schedule 13G, David J Steirman and Abbot J. Keller are
deemed to be the beneficial owners of 912,700 shares of Common Stock
pursuant to their 100% ownership of Kestrel.
8
MANAGEMENT
Shares
Shares Underlying
Owned Options
Directly Exercisable Percent
or Within 60 of
Name Indirectly Days Total Class
---- ---------- ----------- ------- -------
Dr Robert E Bew........................ 6,579 34,986 41,565 *
Dr Benito Fiore........................ 2,500 12,491 14,991 *
Thomas M Fulton........................ 2,825 12,664 15,489 *
Charles M Hale (1)..................... 52,960 12,664 65,624 *
Martin M Hale (1)...................... 54,370 13,001 67,371 *
James M C Puckridge.................... 2,500 12,664 15,164 *
Dennis J Kerrison...................... 54,476 66,457 120,933 1.03
Alan G Jarvis.......................... 26,846 25,077 51,923 *
H Alan Hanslip......................... 18,732 17,052 35,784 *
Dr Geoffrey J Hignett.................. 1,161 11,184 12,345 *
John P Tayler.......................... 0 0 0
Directors and Executive Officers as a
group (11 persons).................... 222,949 218,240 441,189 3.75
--------
Notes:
* Less than 1%.
(1) In the case of Charles Hale and Martin Hale, these figures include 47,960
shares held by them as trustees of family trusts. Charles Hale and Martin
Hale disclaim beneficial ownership of these 47,960 shares held in a
trustee capacity.
9
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth certain information regarding compensation
paid or accrued to Dennis J Kerrison, President and Chief Executive Officer of
the Corporation, and to each of the Corporation's four next most highly
compensated executive officers for services rendered to the Corporation during
fiscal 2001, 2000 and 1999.
Summary Compensation Table (1)
Annual Compensation Long Term
(1) Compensation
---------------------- ------------
Securities, All Other
Fiscal Salary Bonus Underlying Compensation
Name & Principal Position Year ($) ($) Options/SARs ($)
------------------------- ------ ------- ------- ------------ ------------
Dennis J Kerrison............. 2001 480,419 357,077 24,359 177,178(2)
President & Chief Executive 2000 443,638 266,968 93,514 564,469
Officer
1999 410,957 298,030 208,596 363,797
Alan G Jarvis ................ 2001 249,764 119,650 9,444 85,809(3)
Vice President & Chief 2000 242,028 103,832 46,963 276,129
Financial Officer
1999 228,231 114,048 80,845 147,546
Dr Geoffrey J Hignett......... 2001 176,421 105,854 8,232 67,703(4)
Vice President & Director of 2000 191,113 91,734 39,763 235,180
Corporate Development
1999 182,883 103,876 68,450 113,146
H Alan Hanslip................ 2001 178,442 82,210 7,396 55,661(5)
Vice President, Human 2000 173,060 124,325 31,934 195,569
Recources
1999 164,711 69,915 54,947 92,738
John P Tayler (6)............. 2001 126,075 52,200 4,326 49,380(7)
Corporate Secretary & General 2000 122,403 38,556 9,663 45,199
Counsel
1999 76,801 23,519 9,986 27,920
--------
Notes:
(1) All the above Executives are paid in pounds sterling. For the purposes of
the Compensation table an exchange rate of 1.44 is used. The Corporation
does not provide restricted stock awards or LTIP's.
(2) The President and Chief Executive Officer received a pension benefit
valued at $134,744 plus other benefits mainly consisting of a leased
company car valued at $26,761.
(3) Alan Jarvis received a pension benefit valued at $59,375 plus other
benefits mainly consisting of a leased company car valued at $21,974.
(4) Dr Geoffrey Hignett received a pension benefit valued at $49,383 plus
other benefits mainly consisting of a leased company car valued at
$14,976.
(5) Alan Hanslip received a pension benefit valued at $36,197 plus other
benefits mainly consisting of a leased company car valued at $16,583.
(6) John Tayler became an employee of the Corporation effective May 4, 1999.
(7) In fiscal 2001, he also received a pension benefit of $33,660 plus other
benefits mainly consisting of a leased company car valued at $14,008.
10
Stock Option Plans
The Corporation has six stock option plans, the first four of which provide
for grants of options to key employees and Non-employee Directors. Two other
plans provide stock on an equal basis to all employees.
The six plans are:
i) The Octel Corp. Company Share Option Plan;
ii) The Octel Corp. Performance Related Stock Option Plan;
iii) The Octel Corp. Time Restricted Stock Option Plan;
iv) The Octel Corp. Non-Employee Directors' Stock Option Plan;
v) The Octel Corp. Savings Related Share Option Scheme; and
vi) The Octel Corp. Profit Sharing Share Scheme.
Details of the Plans are as follows:
i) The Octel Corp. Company Share Option Plan ("CSOP")
The "CSOP" is divided into Parts A and B and is administered by the
Compensation Committee. Part A is approved by the UK Inland Revenue and stock
options are granted at fair market value at the time of grant up to a
statutory limit of $43,200, or such amount fixed by the UK Income and
Corporations Taxes Act 1988. Part B also provides for the granting of options
at fair market value at the time of grant but is not approved by the Inland
Revenue. It does not contain the statutory limits mentioned above. The rules
do not permit the re-pricing of options granted under either Part A or Part B.
Eligible recipients are executive directors and middle to senior management
and are targeted to encourage performance, recruitment, retention and stock
ownership.
The earliest date of exercise of the options is the latest of the third
anniversary of the grant or the date mentioned in the option certificate at
grant. The options granted may be exercised by payment of an exercise price
per share not less than the market value of the Corporation's share at grant.
If the shares are subscribed, the exercise price would be the greater of the
nominal price or the market price at grant. As of the date hereof, 829,662
options have been issued and are outstanding pursuant to this plan.
ii) The Octel Corp. Performance Related Stock Option Plan ("PRSOP")
The "PRSOP" provides stock options, the number of options granted being
proportionate to salary. They are exercisable subject to the satisfaction of
certain performance measures. Initially "Cliff Edge" options were granted,
which will vest subject to the Corporation meeting specified performance
targets, but the options granted from May 2000 were on terms that a proportion
of the options will vest upon the satisfaction of each of several specific
company and personal performance criteria. The performance targets are set at
the absolute discretion of the Compensation Committee, and may be amended,
relaxed, waived, or substituted as the Compensation Committee sees fit after
the grant of the option. Eligible recipients include members of top management
and directors. The options will, subject to the satisfaction of the
performance criteria, vest in three years from grant and are exercisable up to
ten years from the inception of the plan. The participant may exercise the
options without any payment. As of the date hereof, 305,929 options have been
issued and are outstanding pursuant to this plan.
iii) The Octel Corp. Time Restricted Stock Option Plan ("TRSOP")
The "TRSOP" provided a limited number of Named Executives and senior
managers with stock bonuses in lieu of cash. The bonuses were designed to
reward the management of the Corporation for managing the spin-off program and
continuing to remain in employment through December 31, 1999. These awards
were delivered in the form of options vesting on December 31, 1999 and
exercisable by December 31, 2007. As of the date hereof, all the options
issued pursuant to this plan have been exercised and no further grants will be
made.
11
iv)The Octel Corp. Non-employee Directors Stock Option Plan ("NED's Plan")
The "NED's Plan" was established to encourage Non-employee Directors to
become stockholders and focus on improving stockholder value, and to provide
commitment to the Corporation in the longer term. The Plan provides for stock
options granted at fair market value which vest in three years after grant and
are exercisable up to ten years from the inception of the plan. The plan rules
do not permit the re-pricing of options granted. Multiples of annual fees are
used to determine levels of grant. As of the date hereof, 180,820 options have
been issued and are outstanding pursuant of this plan.
v)The Octel Corp. Savings Related Share Option Scheme ("Savings Related Plan")
Under the "Savings Related Plan", all UK based employees are eligible to
participate. The options are linked to a savings scheme for three years, of up
to $360 per month, which is approved by the Inland Revenue.
The exercise period of the options is the six months subsequent to the Bonus
Date under the relevant Savings Contract. The options granted may be exercised
by payment of an exercise price per share, specified at the date of grant,
being not less than the 80% of the market value of the Corporation's share at
grant (the "Option Price"). If the shares are subscribed, the exercise price
would be the greater of the nominal price or the Option Price. The plan rules
do not permit the re-pricing of options granted.
The total stock options issued and outstanding under this scheme as of the
date hereof is 121,178 shared between 266 employees.
vi)The Octel Profit Sharing Share Scheme ("Profit Sharing Plan")
In order to encourage motivation and commitment to the new Corporation, the
Compensation Committee granted every UK based employee an award of fifteen
shares under the plan. On September 7, 2000 the Trustees made a market
purchase of 7,620 shares which are currently held in trust for 508 employees.
The stock will be held in a trust for three years before being assigned to the
individuals. The trust, approved by the UK Inland Revenue, allows the stock to
be assigned free of any income tax liability. No further awards will be made
pursuant of this plan.
All the plans were approved prior to the Distribution. The Company Share
Option Plan, the Performance Related Stock Option Plan, the Non-employee
Directors Stock Option Plan and the Saving Related Share Option Scheme were
amended and restated at the 2000 Annual Meeting. The Time Restricted Stock
Option Plan and the Profit Sharing Share Scheme were not so amended and
restated and there will be no further grants under those schemes.
Options and the conditions relating thereto, granted under the above plans
are determined by the Compensation Committee. The limit at the time of the
Distribution for the number of shares of Common Stock which can be issued or
awarded under the Plans was 1,175,000 in the aggregate. This was increased to
2,075,000 at the 2000 Annual Meeting.
12
The options granted to the Named Executives during fiscal 2001 pursuant to
the Plans described above are set out in the following table.
Option/SAR Grants in Last Fiscal Year
Potential Realizable
Value at
Assumed Annual Rates
of Stock
Price Appreciation for
Individual Grants (1) Option Term (2)
------------------------------------------------------ ----------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employee in price Vesting Expiration 0% 5% 10%
Name Granted 2001 ($/Sh) Date Date ($) ($) ($)
---- ------------ ------------ -------- -------- ---------- ------ ------- -------
Dennis J Kerrison:......
CSOP................... 16,749 4.61 13.11 03/02/04 03/01/11 0 136,743 347,811
PRSOP (3).............. 6,699 1.84 -- 03/02/04 03/01/11 87,489 142,516 226,936
SAYE................... 911 0.25 15.25 01/01/05 06/01/05 7,361 19,944 23,301
Total................ 24,359
Alan G Jarvis:
CSOP................... 6,771 1.86 13.11 03/02/04 03/01/11 0 55,280 140,607
PRSOP (3).............. 2,673 0.73 -- 03/02/04 03/01/11 34,909 56,866 90,551
Total................ 9,444
Dr Geoffrey J Hignett:
CSOP................... 5,902 1.62 13.11 03/02/04 03/01/11 0 48,185 122,561
PRSOP (3).............. 2,330 0.64 -- 03/02/04 03/01/11 30,430 49,569 78,931
Total................ 8,232
H Alan Hanslip:
CSOP................... 4,650 1.28 13.11 03/02/04 03/01/11 0 37,964 96,562
PRSOP (3).............. 1,835 0.50 -- 03/02/04 03/01/11 23,965 39,038 62,163
SAYE................... 911 0.25 15.25 01/01/05 06/01/05 7,361 19,944 23,301
Total................ 7,396
John P Tayler:
CSOP................... 2,439 0.67 13.11 03/02/04 03/01/11 0 19,913 50,648
PRSOP (3).............. 976 0.27 -- 03/02/04 03/01/11 12,747 20,764 33,063
SAYE................... 911 0.25 15.25 01/01/05 06/01/05 7,361 19,944 23,301
Total................ 4,326
--------
Notes:
(1) In the event of a change of control of the Corporation, all options become
fully vested and exercisable. In order to prevent dilution or enlargement
of rights under the options, in the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares,
merger, consolidation, distribution of assets or other change in the
corporate structure of shares of the Corporation, the type and number of
shares available upon exercise and the exercise price will be adjusted
accordingly. The Compensation Committee may, subject to specified
limitations, advance the date on which an option shall become exercisable.
(2) Amounts reflect assumed rates of appreciation compounded annually from the
fair market value on the date of grant in accordance with the Securities
and Exchange Commission's executive compensation disclosure rules. Actual
gains, if any, on stock option exercises depend on future performance of
the Common Stock and overall stock market conditions. No assurance can be
made that the amounts reflected in these columns will be achieved.
(3) The exercise of these options is dependent on the Corporation and the
individual achieving specific performance related targets over a 3 year
period.
13
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
Number of Securities Value of Unexercised In-
Shares Underlying Unexercised The-Money Options at
Acquired Value Options at December 31, December 31, 2001(3)
On Realized 2001 Exercisable/Unexercisable
Name Exercise ($) Exercisable/Unexercisable ($)
---- -------- -------- ------------------------- -------------------------
Dennis J Kerrison....... 45,158(1) 865,679(1) 66,457/213,901 1,196,226/1,697,341
1,242 6,893
Alan G Jarvis........... 19,171(1) 367,508(1) 25,077/92,644 451,386/766,847
Dr Geoffrey J Hignett... 16,231(2) 294,430(2) 11,184/78,676 201,312/651,307
10,049(2) 182,289(2)
H Alan Hanslip.......... 13,036(1) 249,900(1) 17,052/63,971 306,936/524,483
1,242 6,893
John P Tayler .......... 0 0 0/23,975 0/192,389
--------
Notes:
(1) Messrs. Kerrison, Jarvis and Hanslip were deemed to have exercised options
in respect of such shares. However, as part of the Corporation's plan to
repurchase shares in the open market, instead of issuing shares to Messrs.
Kerrison, Jarvis and Hanslip, the Corporation made a payment to them
equivalent to the market value of the underlying stock at the date that
the options were lapsed. The Corporation's closing common stock price on
October 31, 2001 was $19.17.
(2) Dr Hignett was deemed to have exercised options in respect of such shares.
However, as part of the Corporation's plan to repurchase shares in the
open market, instead of issuing shares to Dr Hignett, the Corporation made
a payment to him equivalent to the market value of the underlying stock at
the date that the options were lapsed. The Corporation's closing common
stock price on May 31, 2001 was $18.14 and the total payment made to Dr
Hignett was $476,719.
(3) The value of the in-the-money options is based on Octel Corp.'s NYSE
closing Common Stock price on December 31, 2001 of $18.00.
Pension Plan
The Corporation operates three separate pension plans for executives which,
together, are designed to provide the equivalent of 1/40 of final salary (or
the average of the last 3 years of service if higher) for each year of service
(1/30 for the CEO) with Octel Corp. The three plans are:
i) The Octel Pension Plan;
ii) The Octel Senior Management Plan; and
iii) The Octel Funded Unapproved Pension Plan.
The reason for having three plans is to make maximum use of UK Inland
Revenue approved pension arrangements to optimize both the Executive's and the
Corporation's tax position.
Normal retirement age is the end of the month following the Executive's 65th
birthday.
Pension Plan Table
5 Years 10 Years 15 Years 20 Years 25 Years
------------- --------------- --------------- --------------- ---------------
Final
Earnings @ 1/30 @ 1/40 @ 1/30 @ 1/40 @ 1/30 @ 1/40 @ 1/30 @ 1/40 @ 1/30 @ 1/40
$ $ $ $ $ $ $ $ $ $ $
-------- ------ ------ ------- ------- ------- ------- ------- ------- ------- -------
150,000 18,750 37,500 56,250 75,000 93,750
250,000 31,250 62,500 93,750 125,000 156,250
350,000 43,750 87,500 131,250 175,000 218,750
450,000 75,000 56,250 150,000 112,500 225,000 168,750 300,000 225,000 375,000 281,250
550,000 91,666 68,750 183,233 137,500 275,000 206,500 366,666 275,000 458,333 343,750
14
As of December 31, 2001, the final base salary of the Named Executives and
eligible credited years under the pension plans were as follows:
Name Base Salary Eligible Years
---- ----------- --------------
Dennis Kerrison...................................... 432,812 5
Alan Jarvis.......................................... 230,234 4
Dr Geoffrey Hignett.................................. 103,680 4
Alan Hanslip......................................... 158,095 5
John Tayler.......................................... 126,075 2
Change in Control and Severance Agreements
The Corporation recognizes that establishing and maintaining a strong
management team is essential in protecting and enhancing the interests of the
Corporation and its stockholders. In order to ensure management stability and
the continuity of key management personnel, the Corporation has entered into
Change-in-Control agreements with each of the Named Executives. The agreements
provide that in the event of a take-over or fundamental restructuring of the
business, which results in the loss of the Executive's position, such
Executive is entitled to compensation of three years pay plus benefits and
further that all stock options and grants to such Executives shall vest
immediately.
Employment Agreements
Each Executive also has an employment agreement which complies with UK
employment law and which provides for, amongst other things, 30 days of annual
vacation, the provision of a car, private health insurance, pension provision,
life insurance, permanent health insurance and a rolling one year term of
employment (2 years for the CEO) which can be terminated by the Corporation
upon twelve months' notice (twenty-four months for the CEO) and six months
(twelve months for the CEO) from the Executive.
Life Insurance Cover
Named Executives are covered by two basic plans. The Corporation's
accidental death plan provides up to six times annual salary in the event of
accidental death for whatever reason. Also, as a component of the Pension
plans, up to four times annual salary is payable for death whilst in service
with the Corporation.
Non-employee Directors have accidental cover while on Corporation business
up to a maximum of $500,000 in the case of death or injury. Cover ceases upon
termination of employment with the Corporation and there are no cash surrender
values.
15
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
Compensation Committee Report on Executive Compensation
The Compensation Committee reviews and makes recommendations to the Board
regarding salaries, compensation and benefits of executive officers and key
employees of the Corporation with the assistance of external advisors and
develops and administers programs providing stock-based incentives. After
consideration of the Compensation Committee's recommendations, the full Board
approves the salaries and bonuses and the stock and benefit programs for the
Corporation's executive officers.
Compensation Philosophy
The compensation philosophy of the Corporation is to link executive
compensation to continuous improvements in corporate performance and increases
in stockholder value. The goals of the Corporation's executive compensation
programs are as follows:
.. To establish pay levels that are necessary to attract and retain highly
qualified executives in light of the overall competitiveness of the market
for high quality executive talent and the Corporation's unique business
profile.
.. To recognize superior individual performance, new responsibilities and new
positions within the Corporation.
.. To balance short-term and long-term compensation to complement the
Corporation's annual and long-term business objectives and strategy and to
encourage executive performance in the fulfillment of those objectives.
.. To provide variable compensation opportunities based on the Corporation's
performance.
.. To encourage stock ownership by executives.
.. To align executive remuneration with the interests of stockholders.
Stock Ownership
The Compensation Committee believes that it can align the interests of
stockholders and executives by providing those persons who have substantial
responsibility over the management and growth of the Corporation with an
opportunity to establish a meaningful ownership position in the Corporation.
Compensation Components
Corporate and individual performances are recognized through both short and
long term incentive compensation plans designed to align the interests of
executives and stockholders. The total compensation program consists of three
components; base salary, which reflects the executive's level of
responsibility and individual performance; annual incentive compensation
awards in the form of cash bonuses, which reflect both corporate and
individual performance; and long term incentive compensation in the form of
stock options. The latter two components provide at risk compensation which is
linked directly to financial results. The Committee considers all elements of
compensation when determining an individual's total compensation.
16
Short-Term Incentive Compensation
Each year the Committee reviews the base salary of the President and Chief
Executive Officer and, in conjunction with the President and Chief Executive
Officer, reviews the base salaries of other corporate officers; however, the
Committee makes the final compensation decisions concerning such Officers. The
median level of the executive market as assessed by external surveys is used
as the main criterion in determining base salary. The levels and scope of
responsibility, experience, and corporate and business unit performances, as
well as individual performance, are also key criteria in base salary
determination.
A Management Incentive Compensation Plan ("MICP") provides incentive
compensation in the form of cash bonuses to executive officers, managers and
other selected key employees who have a broad impact on the Corporation's
performance. The philosophy for incentive compensation is to provide awards
when financial objectives are achieved and provide no or reduced awards when
the objectives are not achieved. The awards granted in 2001 were based on pre-
established targets for corporate net income and cash generation in addition
to individual achievement against personal targets.
Long-Term Incentive Compensation
Long-term incentive compensation is comprised of annual grants of stock
options which are designed to encourage key employees to remain with the
Corporation by providing them with a long-term interest in the Corporation's
overall performance and to motivate them to maximize long-term stockholder
value. The Corporation's stock option grant guidelines were designed with the
assistance of external compensation consultants. The Committee administers the
stock compensation plans. A combination of options at market value at the date
of grant and performance related zero cost stock options with ten year vesting
will generally be granted annually and cannot be exercised for at least three
years from the date of grant.
Chief Executive's Compensation
Dennis Kerrison's compensation includes base salary, incentive compensation
and stock options. Consistent with all other executive officers, the President
and Chief Executive Officer's compensation was determined by the Compensation
Committee in accordance with the salary policy, bonus programs and stock
option guidelines, namely the Corporation and the President and Chief
Executive's overall performance and motivation to maximize the long-term
stockholder value of the Corporation. Stock options, which cannot be exercised
for at least 3 years from the date of grant, with a maximum of ten year
exercise from plan inception, will generally be granted annually. The
Committee has available information as to the level of past awards and
individual stock ownership of the President and Chief Executive Officer.
The Committee determined that in order to better align Mr Kerrison's
compensation with stockholder interests, a greater portion of his compensation
would be at-risk and directly linked to financial results.
Mr Kerrison's base salary effective as of January 2001 was $432,812. A bonus
of $357,077 was granted
to Mr Kerrison in consideration of the Corporation's cash generation and
overall financial performance and
Mr Kerrison's leadership of the Corporation during the fiscal year.
On March 1, 2001 pursuant to the Company Share Option Plan, Mr Kerrison was
granted options in respect of 16,749 shares at an exercise price of $13.11
which will vest on March 2, 2004 and must be exercised by March 1, 2011. On
the same date, Mr Kerrison was also granted 6,699 options pursuant to the
Performance Related Stock Option Plan which will vest on March 2, 2004,
subject to the satisfaction of certain performance criteria specified by the
Compensation Committee. On November 22, 2001 pursuant to the Savings Related
Share Option Scheme, Mr Kerrison was granted options in respect of 911 shares
at an exercise price of $15.25 which will vest on January 1, 2005 and must be
exercised by June 5, 2005.
In line with normal UK practice, Mr Kerrison also receives a fully expensed
company car and pension benefits valued at $161,505.
17
Summary
With a significant portion of the Corporation's executive compensation
linked directly to individual and corporate performance and paid in stock, the
Committee believes that these compensation practices will help ensure
alignment with the interests of the Corporation's stockholders. While
recognizing that fluctuations of the business cycles may negatively impact
financial performance from time to time, the Committee believes that the
strong leadership provided by the Corporation's senior executives and the
infrastructure that they have put in place have positioned the Corporation to
capitalize on the opportunities that lie ahead.
Compensation Committee Interlocks and Insider Participation
This report is submitted by the members of the Compensation Committee listed
below, none of whom is or has been a full-time employee of the Corporation. Dr
Fiore has served as a member of the Committee since the Distribution. Mr
Puckridge was appointed to the Committee on February 20, 2002. The Committee
met once during fiscal 2001.
During the course of the Corporation's last fiscal year, none of the members
of the Compensation Committee served as an officer or employee of the
Corporation or any of its subsidiaries nor had any relationships with the
Corporation or any of its subsidiaries requiring disclosure under any
paragraph of Item 402(j) (Compensation Committee Interlocks and Insider
Participation) or Item 404 (Certain Relationships and Related Transactions) of
Regulation S-K.
COMPENSATION COMMITTEE
Dr Benito Fiore (Chairman)
James M C Puckridge (appointed February 20, 2002)
Martin M Hale (resigned February 20, 2002)
Thomas M Fulton (resigned February 20, 2002)
18
AUDIT COMMITTEE REPORT
The Board has adopted a written Audit Committee Charter, a copy of which is
attached to this Proxy Statement as Appendix A.
As part of fulfilling its responsibilities, the Audit Committee:
(1) reviewed and discussed the audited financial statements for fiscal year
2001 with management;
(2) discussed with the auditors the matters required by Statement of
Auditing Standards No. 61 (Communication with Audit Committees); and
(3) received the written disclosure and the letter from
PricewaterhouseCoopers required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees) and
discussed that firm's independence with representatives of the firm.
Based upon these reviews and discussions, the Audit Committee has
recommended to the Board of Directors, and the Board of Directors has
approved, that the Company's audited financial statements be included in the
Corporation's Annual Report on Form 10-K for the fiscal year ended December
31, 2001 filed with the Securities and Exchange Commission.
Fees paid to PricewaterhouseCoopers
Fees for fiscal year 2001 were:
Audit $584,000
Financial Systems............................................. Nil
Taxation...................................................... $279,000
Other......................................................... $342,000
--------
Total Non-Audit $621,000
The Audit Committee has considered whether the provision of services
included above under Total Non-Audit Fees is compatible with maintaining the
independence of PricewaterhouseCoopers.
THE AUDIT COMMITTEE
Martin M Hale (Chairman) (appointed February 20, 2002)
Dr Benito Fiore
Charles M Hale
Thomas M Fulton (resigned February 20, 2002)
19
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return to stockholders on the
common stock of the Corporation since the date of the spin-off from Great Lakes
Chemical Corporation and S&P Specialty Chemical Indices over the same period.
Octel Corp. vs S&P Equity Indices
Total Return to Shareholders since May 26, 1998
[CHART]
Value of $100 Investment made May 26, 1998*
May 26, December December December December
1998 31, 1998 31, 1999 31, 2000 31, 2001
------- -------- -------- -------- --------
S&P 500 Composite Index............ $100.00 112.36 134.30 120.68 104.94
S&P Chemicals (Specialty) Index.... $100.00 82.95 100.79 98.98 86.00
Octel Corp. (OTL).................. $100.00 60.99 45.60 50.55 79.12
--------
*excludes purchase commissions
20
INFORMATION RESPECTING THE CORPORATION'S INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants of the Corporation, selected by the Board
for 2002, are PricewaterhouseCoopers, 1 London Bridge, London, SE1 9QL,
England. A representative of PricewaterhouseCoopers is expected to be present
at the Annual Meeting and will have the opportunity to make a statement if
such representative desires to do so. The representative is also expected to
be available to respond to appropriate questions.
OTHER MATTERS
As of the date of this Proxy Statement, management is not aware of any
matters to be presented at the meeting other than the matters specifically
stated in the Notice of Meeting and discussed in the Proxy Statement. If any
other matter or matters are properly brought before the meeting, the persons
named in the enclosed proxy have discretionary authority to vote the proxy on
each such matter in accordance with their judgement.
SOLICITATION AND EXPENSES OF SOLICITATION
The solicitation of proxies will be made initially by mail. The
Corporation's directors, officers and employees may also solicit proxies in
person or by telephone without additional compensation. In addition, proxies
may be solicited by certain banking institutions, brokerage firms, custodians,
trustees, nominees and fiduciaries who will mail material to or otherwise
communicate with the beneficial owners of shares of the Corporation's Common
Stock. All expenses of solicitation of proxies will be paid by the
Corporation.
ANNUAL REPORT AND FORM 10-K
Copies of the Corporation's Annual Report to Stockholders, which includes
portions of the Corporation's Annual Report on Form 10-K for the Fiscal Year
ended December 31, 2001 are being mailed with this Proxy Statement to each
stockholder entitled to vote at the Annual Meeting. Stockholders not receiving
a copy of the Annual Report and Form 10-K may obtain one by writing or calling
Ms Heather Ashworth, Investor Relations Director, Octel Corp., European
Headquarters, Global House, Bailey Lane, Manchester M90 4AA, England,
telephone 011 44 161 498 8889.
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
The Corporation anticipates holding its 2003 Annual Meeting of Stockholders
on Tuesday May 6, 2003.
Under the regulations of the Securities and Exchange Commission, any
stockholder desiring to make a proposal to be acted upon at the 2003 Annual
Meeting of Stockholders must present such proposals to the Secretary of the
Corporation at its principal office at 220 Continental Drive, Newark, DE
19713, U.S.A., not later than December 4, 2002, in order for the proposal to
be considered for inclusion in the Corporation's Proxy Statement.
21
Stockholder proposals or director nominations not included in a Proxy
Statement for an Annual Meeting must comply with the advance notice procedures
and information requirements set forth in the Bylaws of the Corporation in
order to be properly brought before that Annual meeting of Stockholders.
By order of the Board of Directors
/s/ John P Tayler
John P Tayler
Corporate Secretary
March 25, 2002
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD
22
Appendix A
AUDIT COMMITTEE CHARTER
Purpose
The primary purpose of the Audit Committee (the "Committee") is to assist
the Board of Directors (the "Board") in fulfilling their responsibility
relating to the Company's corporate accounting, reporting practices and the
quality and integrity of the financial reports. The Audit Committee's primary
duties and responsibilities are to:
. oversee that management has maintained the reliability and integrity of
the accounting policies, financial reporting and disclosure practices of
the Company.
. oversee that management has established and maintained processes to
assure that an adequate system of internal control is functioning within
the Company.
. oversee that management has established and maintained processes to
ensure compliance by the Company with all applicable laws, regulations
and corporate policy.
In discharging the role described above, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and the power to retain
external counsel, auditors or other experts for this purpose. The Board and
the Committee are in place to represent the interests of the Company's
shareholders; accordingly, the external auditor is ultimately accountable to
the Board and the Committee.
The Committee shall review the adequacy of this Charter on an annual basis.
Membership
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet the requirements of the Audit
Committee Policy of the New York Stock Exchange.
Accordingly, all of the members will be directors:
. who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
. who are financially literate or who become financially literate within a
reasonable period of time after appointment to the Committee. In
addition, at least one member of the Committee will have accounting or
related financial management expertise.
Meetings
The Committee shall meet at least twice annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, with the person
responsible for the internal auditing function and the external auditor
separately to discuss any matters that the Committee or each of these groups
believes should be discussed privately. In addition, the Committee or at least
its Chairperson should meet with the external auditor and management quarterly
to review the Company's financial statements.
Key Responsibilities
The Committee's job is one of overseeing and it recognises that the
Company's management is responsible for preparing the Company's financial
statements and that the external auditors are responsible for auditing those
financial statements. Additionally, the Committee recognises that financial
management, including the internal audit staff, as well as the external
auditors, have more time, knowledge and more detailed information on the
Company than do Committee members. Consequently, in carrying out its
responsibilities, the Committee is not providing any expert or special
assurance as to the Company's financial statements or any professional
certification as to the external auditor's work.
1
The following functions shall be the common recurring activities of the
Committee in carrying out its overseeing function. These functions are set
forth as a guide with the understanding that the Committee may diverge from
this guide as appropriate given the circumstances.
The Committee shall review with management and the external auditors the
audited financial statements to be included in the Company's Annual Report on
Form 10-K and review and consider with the external auditors the matters
required to be discussed by Statement of Auditing Standards ("SAS") No. 61 (as
amended from time to time).
As a whole, or through the Committee Chair, the Committee shall review with
the external auditors the Company's interim financial results to be included
in the Company's quarterly reports to be filed with Securities and Exchange
Commission and the matters required to be discussed by SAS No. 61 (as amended
from time to time). This review will occur prior to the Company's filing of
the Form 10-Q.
The Committee shall discuss with management and the external and internal
auditors the quality and adequacy of the Company's internal controls.
The Committee shall oversee the independence of the external auditors by:
. requesting from the external auditors annually, a formal written
statement delineating all relationships between the auditor and the
Company consistent with Independence Standards Board Standard Number 1;
. discussing with the external auditors any such disclosed relationships
and their impact on the external auditor's independence; and
. recommending that the Board take appropriate action in response to the
external auditor's report to satisfy itself of the auditor's
independence.
The Committee shall review the performance of the external auditor and make
recommendations to the Board regarding the appointment, re-appointment or
termination of the external auditor.
The Committee and the Board shall have the ultimate authority and
responsibility to select (or nominate for shareholder approval), evaluate and,
where appropriate, replace the external auditor.
The Committee shall, in conjunction with the external auditor and the
internal auditors, review the integrity of the Company's financial reporting
processes, both internal and external.
The Committee shall consider and approve, if appropriate, major changes to
the Company's accounting principles and practices proposed by management,
discuss with the independent accountants any significant changes in auditing
standards or their audit scope and consider and approve, if appropriate, any
significant changes to the auditing practices of the internal auditors.
The Committee shall establish regular systems of reporting to the Committee
by each of management, the external auditor and the internal auditors
regarding any significant judgments made in management's preparation of the
financial statements and any significant difficulties encountered during the
course of the review or audit, including any restrictions on the scope of the
work or access to required information.
The Committee shall review any disagreement among management and the
external auditor or the internal auditors in connection with the preparation
of the financial statements.
The Committee shall periodically review, with management, external and
internal auditors, the Company's major financial risk exposures and the steps
that management has taken to monitor and control such exposures.
2
The Committee shall approve the fees to be paid to the external auditor.
The Committee shall review the management letter prepared by the external
auditor and oversee the Company's response to any issues raised in that
letter.
The Committee shall:
.report through its Chairperson to the Board following meetings of the
Committee.
.maintain minutes or other records of meetings and activities of the
Committee.
3
PROXY
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PROXY PROXY
2002 2002
OCTEL CORP.
This Proxy is Solicited on behalf of the Board of Directors
The undersigned hereby appoints DENNIS J. KERRISON, ALAN G. JARVIS AND JOHN
P. TAYLER, and each of them with full power of substitution, as the proxies of
the undersigned, to attend the Annual Meeting of Stockholders to be held on
Tuesday, May 7, 2002, at 10:00 a.m. and any adjournment or postponement thereof,
and to vote the stock the undersigned would be entitled to vote, if present, on
the items listed on the reverse side of this proxy card.
THIS PROXY WILL BE VOTED AS SPECIFIED; OR IF NO CHOICE IS SPECIFIED, IT WILL BE
VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEE, AND THE ELECTION OF
PRICEWATERHOUSECOOPERS AS INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL 2002.
ELIMINATE DUPLICATE MAILINGS
SEC rules require the Corporation to mail an annual report to every
stockholder even if there are multiple stockholders in the same household. If
you are a stockholder of record and have the same address as other stockholders
of record, you may authorize the Corporation to discontinue mailings of multiple
annual reports. To do so, mark the box (see over) on each proxy card for which
you do not wish to receive an annual report.
Applicable law requires the Corporation to send separate proxy statements
and proxy cards for all of your accounts.
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New Address
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(Please sign on the reverse side) SIDE
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[x] Please mark your 3177
votes as in this
example.
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The Board of Directors recommends a vote "FOR" items 1 and 2.
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FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [_] [_] Nominee: 2. Election of [_] [_] [_]
Director Charles M. Hale PricewaterhouseCoopers
as independent public
For, except vote withheld from the following nominee(s): accountants for fiscal
2002.
Address change [_]
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3. In their discretion, the Proxies are authorized to vote
upon any other matter which may properly come before
the meeting.
Please check here to discontinue the annual [_]
report mailing for this account
Please sign exactly as name appears hereon.
Joint owners should each sign personally. Where applicable,
indicate your official position or representation capacity.
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SIGNATURE (S) DATE
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