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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[_] 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
OCTEL CORP.
220 Continental Drive DENNIS J KERRISON
Newark, DE 19713 President and Chief Executive Officer
Dear Stockholder: March 24, 2003
You are cordially invited to attend the Annual Meeting of Stockholders of
Octel Corp. (the "Corporation"), which will be held on Tuesday, May 6, 2003 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 6, 2003
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 6, 2003 at 10.00am (Local Time)
for the following purposes:
1. To elect two directors to serve until the 2006 Annual Meeting;
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
Corporation's independent public accountants for the fiscal year ending
December 31, 2003; 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 10, 2003 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, 2002 are enclosed.
By Order of the Board of Directors,
/s/ John P. Tayler
John P Tayler
Corporate Secretary
March 24, 2003
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 24, 2003
For
Annual Meeting of Stockholders
To Be Held on May 6, 2003
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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 6, 2003 at 10.00am local time, and at any adjournments or
postponements thereof (the "Annual Meeting"). The purpose of the Annual Meeting
is to elect two directors to the Board and ratify the appointment of
PricewaterhouseCoopers LLP as the Corporation's independent public accountants
for the 2003 fiscal year.
This Proxy Statement, the Proxy Form and the Corporation's Annual Report to
Stockholders are being mailed on or about March 24, 2003 to holders of record
of the Common Stock at the close of business on March 10, 2003 (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 nominees named herein as directors and FOR the ratification of
the appointment of PricewaterhouseCoopers LLP as the Corporation's independent
public accountants for the 2003 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 11,861,208 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 Directors
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 2005, 2003 and 2004 respectively.
Directors in Class II, Mr James Puckridge and Dr Benito Fiore whose terms
expire at the upcoming Annual Meeting, have been nominated for re-election. See
"Management--Nominee for Directors" for information with respect to Messrs.
Puckridge and Fiore. The Corporation believes that the nominees are willing to
be elected and to serve. In the event that the nominees are unable to serve or
are 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
directors.
PROPOSAL TWO
Ratification of Appointment of Independent Public Accountants
PricewaterhouseCoopers have served as independent public accountants for
fiscal year 2002. On January 1, 2003 PricewaterhouseCoopers became the limited
liability partnership, PricewaterhouseCoopers LLP.
The Board of Directors, upon recommendation of its Audit Committee, has
selected the accounting firm of PricewaterhouseCoopers LLP to serve as
independent auditors of the Corporation with respect to the 2003 fiscal year to
examine the financial statements of the Corporation for the fiscal year ending
December 31, 2003 and to perform other appropriate accounting services.
A representative of PricewaterhouseCoopers LLP 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 LLP as the Corporation's independent
public accountants for fiscal year 2003.
2
MANAGEMENT
The following sets forth certain information as of March 10, 2003 with
respect to the Corporation's nominees for directors, the Corporation's
continuing directors 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. Nominees for Director
The Class II members who will serve until the 2003 Annual Meeting and are
seeking re-election
Mr James M C Puckridge--Director since May 7, 1998. Age: 67
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 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 Chemical 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. He has been Chairman of the Trustees of The Associated
Octel Company Limited Pension Plan since October 3, 2000.
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.
B. Continuing Directors
Class I Directors who will serve until the 2005 Annual Meeting
Mr Charles M Hale--Director since May 7, 1998. Age: 67
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 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.
Mr Samuel A Haubold--Director since November 19, 2002 Age: 64
Samuel A Haubold is a partner in the law firm of Kirkland & Ellis and has been
the Senior Partner in the London Office of that firm since 1995. In his
practice he specializes in representing multi-national corporations in
connection with a wide range of commercial transactions and dispute resolution
issues. He also regularly serves as an arbitrator and mediator of international
commercial disputes. Mr Haubold is a graduate of the Harvard Law School and is
a member of the Advisory Council of the Institute of United States Studies,
University of London.
3
Class III Directors who will serve until the 2004 Annual Meeting
Dr Robert E Bew--Director and Chairman since May 7, 1998 Age: 66
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 Center, 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.
Mr Dennis J Kerrison--Director since February 27, 1998. Age: 58
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: 62
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. 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. Officers (Other than those who are Directors and Listed above)
Dr Alexander A Dobbie (Appointed March 1, 2003) Age: 51
Sandy Dobbie serves as Managing Director, Petroleum Specialties of the
Corporation having joined it in January 2003. He was Chief Operating Officer of
Brent International plc (latterly Chemetall plc) from 1994 until December 2000.
Before joining Brent, he was Vice President of the Kelco Division of Merck and
Co., Inc and had been Managing Director of its international business since
1990. Prior to that he held several other management positions in Kelco mainly
in manufacturing and research. He is Chairman of a biotechnology company, Gyre
Limited, and Director of a chemicals consulting business, Cogency Chemical
Consultants Limited, which advises on Private Equity transactions.
H Alan Hanslip (Appointed December 22, 1998) Age: 55
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: 52
Geoffrey Hignett serves as Director of Corporate Leadership 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.
4
Alan G Jarvis (Appointed April 1, 1998) Age: 53
Alan Jarvis serves as Business Director, Lead Alkyls of the Corporation having
been Vice President and Chief Financial Officer from April 1998 to November
2002. Mr Jarvis joined the Corporation's subsidiary, The Associated Octel
Company Limited in October 1997 as Group Finance Director. Prior to this Mr
Jarvis served as 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.
Paul W Jennings (Appointed November 19, 2002) Age: 45
Paul Jennings serves as Vice President and Chief Financial Officer of the
Corporation having joined the Corporation in November 2002. Prior to joining,
Mr Jennings served as CFO for Griffin LLC, a joint venture between Griffin
Corporation and Dupont in the crop protection chemical industry based in the
USA. From 1986 to 1999, Mr Jennings held the positions of Chief Financial
Officer and Vice President--Finance for various divisions and regions of
Courtaulds plc working in Europe, USA and Singapore spanning the fibre,
chemical, film and coating industries.
Ian McRobbie (Appointed May 7, 2002) Age: 54
Ian McRobbie serves as Chief Technology Officer having joined the Corporation
in January 2002. Between 1989 and 2002 he was Technical Director of A H Marks
and Company Ltd., a privately owned British chemical company operating in
agrochemical and speciality chemical markets. Prior to this, he worked in
senior research and manufacturing roles for Seal Sands Chemical Co. Ltd. (a
wholly owned subsidiary of the Hexcel Corporation based in California) and BTP
plc (now part of Clariant).
John P Tayler (Appointed May 11, 1999) Age: 47
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.
Richard T Shone (Appointed May 7, 2002) Age: 55
Richard Shone currently serves as Director, Safety Health and Environment of
the Corporation having joined its subsidiary, The Associated Octel Company
Limited in a similar capacity in May 1997. Prior to that, from 1986, he served
as General Manager, Group Safety Hazards and Environment, Laporte plc, having
previously worked for the UK's Health and Safety Executive.
Sharon E Todd (Appointed May 7, 2002) Age: 36
Sharon Todd currently serves as Corporate Development Director of the
Corporation, having joined its subsidiary, The Associated Octel Company Limited
in October 2001. From 1997, she served as Strategic Planning Director at ICI
Acrylics in Belgium. Prior to that she held various management positions with
Albright & Wilson, her last position being Business Manager of one of the
specialty chemical businesses.
D. 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) or
(C) above.
5
Information about the Board of Directors
The Board of Directors met four times during fiscal 2002. Each Director
attended all of the meetings of the Board of Directors and any committees on
which such Director served in fiscal 2002 except Tom Fulton who attended the
February 2002 meeting but retired at the May 2002 meeting and Sam Haubold who
joined the Board at the November 2002 meeting.
The Corporation has Executive, Finance, Audit, Safety Health and
Environmental, Compensation and Nominating and Corporate Governance 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 LLP. 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 seven times during fiscal 2002.
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 2002.
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 twice during fiscal 2002.
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 twice during fiscal 2002.
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 and Mr Charles Hale were
appointed to the Committee on February 20, 2002. The Committee met four times
during fiscal 2002.
On November 19, 2002, the Corporation formed a Nominating and Corporate
Governance Committee and appointed Mr Samuel A Haubold as its Chairman and Mr
James M C Puckridge as a member. It did not meet during fiscal 2002. The
Committee held its first meeting on February 11, 2003.
6
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 annual retainer and per diem fees
paid to the Non-employee Directors, as described above, have not increased
since the formation of the Board in 1998. In lieu of an increase in those fees
the Non-employee Directors were given the choice of stock options or cash
equivalent to 12% of their 2001 fees. Messrs. Puckridge and Martin Hale elected
to be paid cash and the remainder were, on May 6, 2002 and June 17, 2002
granted the zero cost stock options listed below.
The stock options granted to the Non-employee Directors during fiscal 2002
were:
May 6, 2002 June 17, 2002
----------- -------------
Dr Robert Bew.. 1,008 600
Charles Hale... 309 0
Dr Benito Fiore 311 0
The options granted on May 6, 2002 vest on May 6, 2005 and are
exercisable until May 6, 2012. The options granted on June 17, 2002 vest on
June 17, 2005 and are exercisable until June 17, 2012.
Deferred and Long-Term Compensation
None were awarded or in place in the last fiscal year.
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 2002.
7
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, 2003
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, 2003, and all current directors
and executive officers of the Corporation as a group. As of February 28, 2003,
excluding treasury stock, there were 11,861,208 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, 2003. 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.
8
BENEFICIAL OWNERS
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percent of Class
------------------------------------ -------------------- ----------------
T Rowe Price Associates, Inc. (1)....... 1,879,525 15.85
100 E. Pratt Street
Baltimore, Maryland 21202
FMR Corp. (2)........................... 1,431,800 12.07
82 Devonshire Street,
Boston, MA 02109
White Mountains Insurance Group, Ltd (3) 1,320,000 11.13
80 South Main Street
Hanover, NH 03755
Kestrel Investment Management Corp. (4). 861,900 7.26
411 Borel Avenue, Suite 403,
San Mateo, CA 94402
--------
(1) According to a Schedule 13G dated February 14, 2003 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 8.3% 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, 2003 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 1,431,800 shares of Common Stock,
representing 12.07% of the shares of Common Stock outstanding).
(3) According to a Schedule 13G dated February 5, 2003 filed jointly by White
Mountains Insurance Group Ltd., a Bermuda corporation ("WMIG") and
OneBeacon Asset Management Company, a Delaware corporation ("OBAM"),
through an investment advisory agreement, OBAM has sole voting and
dispositive power over 1,320,000 shares which are beneficially owned by
OneBeacon Insurance Group (802,500 shares (6.76%)), The Camden Fire
Insurance Association (97,500 shares), Folksamerica Reinsurance Company
(15,000 shares) and certain employee benefit plans sponsored by
Folksamerica Reinsurance Company (25,000) and OneBeacon Insurance Company
(380,000 shares).
(4) According to a Schedule 13G dated February 14, 2003 filed jointly by
Kestrel Investment Management Corporation ("Kestrel"), David J Steirman and
Abbot Keller, Kestrel is deemed to be the beneficial owner of 861,900
shares of Common Stock with sole voting power for 808,300 of such shares
and sole dispositive power for all 861,900 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 Steirman and Abbot J. Keller are
deemed to be the beneficial owners of 861,900 shares of Common Stock
pursuant to their 100% ownership of Kestrel.
9
MANAGEMENT
Shares Owned Shares Underlying Percent
Directly or Options Exercisable of
Name Indirectly Within 60 Days Total Class
---- ------------ ------------------- ------- -------
Dr Robert E Bew...................... 6,579 45,264 51,843 *
Dr Benito Fiore...................... 2,500 16,216 18,716 *
Charles M Hale (1)................... 42,960 16,389 59,349 *
Martin M Hale (1).................... 44,370 16,726 61,096 *
James M C Puckridge.................. 2,500 16,389 18,889 *
Samuel A Haubold..................... 0 0 0 *
Dennis J Kerrison.................... 54,476 165,984 220,460 1.86
Alan G Jarvis........................ 15 52,505 52,520 *
H Alan Hanslip....................... 18,732 52,754 71,486 *
I M McRobbie......................... 0 0 0 *
S E Todd............................. 0 0 0 *
Directors and Executive Officers as a
group (11 persons)................... 172,132 382,227 554,359 4.67
--------
Notes:
(*) Less than 1%.
(1) In the case of Charles Hale and Martin Hale, these figures include 37,960
shares held by them as trustees of family trusts. Charles Hale and Martin
Hale disclaim beneficial ownership of these 37,960 shares held in a trustee
capacity.
10
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 2002, 2001 and 2000.
Summary Compensation Table (1)
Long Term
Annual Compensation Compensation
------------------------ ------------
Securities, All Other
Fiscal Salary Bonus Underlying Compensation
Name & Principal Position Year ($) ($) Options/SARs ($)
------------------------- ------ ------- ------- ------------ ------------
Dennis J Kerrison.................... 2002 526,100 271,103 17,545 263,540(2)
President & Chief Executive Officer 2001 499,001 370,889 24,359 184,031
2000 460,798 277,295 93,514 586,303
Alan G Jarvis........................ 2002 277,810 44,886 5,841 94,380(3)
Business Director, Lead Alkyls 2001 259,425 124,278 9,444 89,128
2000 251,390 107,847 46,963 286,811
H Alan Hanslip....................... 2002 203,687 56,765 4,849 45,677(4)
Vice President, Human Resources 2001 185,344 85,390 7,396 57,815
2000 179,753 129,134 31,934 203,134
Sharon E Todd........................ 2002 174,270 83,873 4,509 0
Corporate Development Director 2001(5) 25,851 0 6,000 0
2000(5) 0 0 0 0
Ian McRobbie......................... 2002 148,914 73,388 4,172 58,808(7)
Chief Technology Officer 2001(6) 0 0 0 0
2000(6) 0 0 0 0
--------
Notes:
(1) All the above Executives are paid in pounds sterling. For the purposes of
the Compensation table an exchange rate of 1.4957 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 $217,506 plus other benefits mainly consisting of a leased company car
valued at $22,574.
(3) Alan Jarvis received a pension benefit valued at $65,637 plus other
benefits mainly consisting of a leased company car valued at $16,770.
(4) Alan Hanslip received a pension benefit valued at $38,167 plus other
benefits mainly consisting of a leased company car valued at $3,288.
(5) Sharon Todd joined the Corporation on October 22, 2001.
(6) Ian McRobbie joined the Corporation on January 1, 2002.
(7) Ian McRobbie received a pension benefit valued at $41,632 plus other
benefits mainly consisting of a leased company car valued at $5,302.
11
Stock Option Plans
The Corporation has five stock option plans, the first three 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 UK employees.
The five plans are:
i) The Octel Corp. Company Share Option Plan;
ii) The Octel Corp. Performance Related Stock Option Plan;
iii) The Octel Corp. Non-Employee Directors' Stock Option Plan;
iv) The Octel Corp. Savings Related Share Option Scheme; and
v) 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 $44,871, 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, 939,492
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. Options granted are 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, 219,528 options have been issued
and are outstanding pursuant to this plan.
iii) The Octel Corp. Non-employee Director 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, 183,048 options have
been issued and are outstanding pursuant to this plan.
12
iv) 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 $374 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 115,896 shared between 255 employees.
v) The Octel Profit Sharing Share Scheme ("Profit Sharing Plan")
In order to encourage motivation and commitment to the new Corporation at
the time of the Distribution, 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 to this plan.
All the plans were approved prior to the Distribution and all except the
Profit Sharing Plan were amended and restated at the 2000 Annual Meeting.
Options and the conditions relating thereto, granted under the above plans
are determined by the Compensation Committee. The limit for the number of
shares of Common Stock which can be issued or awarded under the Plans is
2,075,000.
The options granted to the Named Executives during fiscal 2002 pursuant to
the Plans described above are set out in the following table.
13
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 Employees in price Vesting Expiration 0% 5% 10%
Name Granted 2002 ($/Sh) Date Date ($) ($) ($)
---- ------------ ------------ -------- -------- ---------- ------ ------- -------
Dennis J Kerrison:
CSOP.................... 12,532 8.81 17.13 02/20/05 02/20/12 0 134,438 341,247
PRSOP (3)............... 5,013 3.52 0 02/20/05 02/20/12 85,722 139,650 222,377
Total................. 17,545
Alan G Jarvis:
CSOP.................... 4,067 2.86 17.13 02/20/05 02/20/12 0 43,629 110,744
PRSOP (3)............... 1,774 1.25 0 02/20/05 02/20/12 30,335 49,419 78,695
Total................. 5,841
H Alan Hanslip:
CSOP.................... 3,479 2.45 17.13 02/20/05 02/20/12 0 37,321 94,733
PRSOP (3)............... 1,370 0.96 0 02/20/05 02/20/12 23,427 38,165 60,773
Total................. 4,849
S E Todd:
CSOP.................... 3,233 2.27 17.13 02/20/05 02/20/12 0 34,682 88,035
PRSOP (3)............... 1,276 0.90 0 02/20/05 02/20/12 21,820 35,546 56,603
Total................. 4,509
I M McRobbie:
CSOP.................... 2,991 2.10 17.13 02/20/05 02/20/12 0 32,086 81,445
PRSOP (3)............... 1,181 0.83 0 02/20/05 02/20/12 20,195 32,900 52,389
Total................. 4,172
--------
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.
14
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Options at December 31, The-Money Options at
Acquired Value 2002 December 31, 2002(2)
On Realized Exercisable/Unexercisable Exercisable/Unexercisable
Name Exercise ($) $ $
---- -------- -------- ------------------------- -------------------------
Dennis J Kerrison........ 35,006 776,770 31,451/231,446 496,926/1,305,965
Alan G Jarvis (1)........ 25,007 542,165 0/98,485 0/591,061
H Alan Hanslip........... 0 0 8,070/77,802 269,422/405,393
Sharon Todd.............. 0 0 0/10,512 0/114,961
Ian McRobbie............. 0 0 0/4,172 0/18,660
--------
Notes:
(1) Mr. Jarvis 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 Mr Jarvis, the Corporation made a
payment to him equivalent to the average closing price over the three
previous days.
(2) The value of the in-the-money options is based on Octel Corp.'s NYSE
closing Common Stock price on December 31, 2002 of $15.80.
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
15
As of December 31, 2002, 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.......... 526,100 6
Alan Jarvis.............. 277,810 5
Alan Hanslip............. 203,687 6
Ian McRobbie............. 148,914 1
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.
16
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.
17
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 2002 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 long-term stockholder value.
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 2002 was $501,873. A bonus
of $271,103 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 February 20, 2002 pursuant to the Company Share Option Plan, Mr Kerrison
was granted options in respect of 12,532 shares at an exercise price of $17.13
which will vest on February 20, 2005 and must be exercised by February 20,
2012. On the same date, Mr Kerrison was also granted 5,013 options pursuant to
the Performance Related Stock Option Plan which will vest on February 20, 2005,
subject to the satisfaction of certain performance criteria specified by the
Compensation Committee.
In line with normal UK practice, Mr Kerrison also receives a fully expensed
company car and pension benefits valued at $240,080.
18
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 and Mr Hale were appointed to the Committee on February 20, 2002. The
Committee met four times during fiscal 2002.
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)
Charles M Hale (appointed February 20, 2002)
19
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
2002 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 LLP 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,
2002 filed with the Securities and Exchange Commission.
Principal accountant fees and services
Aggregate fees for professional services rendered for the Corporation by
PricewaterhouseCoopers LLP as of or for (Note 1) the years ended December 31,
2002 and 2001, were:
2002 2001
---------- ----------
Audit......... 699,000 672,000
Audit related. 130,000 137,000
Tax........... 736,000 365,000
Other......... 340,000 156,000
---------- ----------
Total (Note 2) $1,905,000 $1,330,000
========== ==========
The Audit fees for the years ended December 31, 2002 and 2001, respectively,
were for professional services rendered for the audits of the consolidated
financial statements of the Corporation, statutory and subsidiary audits, and
review of documents filed with the SEC.
The Audit Related fees as of the years ended December 31, 2002 and 2001,
respectively, were for assurance and related services related to due diligence
in respect of acquisitions, and consultations concerning financial accounting
and reporting standards.
Tax fees as of the years ended December 31, 2002 and 2001, respectively,
were for services related to tax compliance, including the preparation of tax
returns and claims for refund, and tax planning and tax advice and advice
related to mergers and acquisitions.
All Other fees as of the years ended December 31, 2002 and 2001,
respectively, were for services rendered for risk management advisory services,
treasury advisory services and non-information technology consulting.
Note 1: The aggregate fees included in Audit are fees billed for the fiscal
years for the audits of the consolidated financial statements of the
Corporation, statutory and subsidiary audits, and review of documents filed
with the SEC. The aggregate fees included in each of the other categories are
fees billed in the fiscal years.
20
Note 2: A substantial proportion of the fees billed in all of the categories
as of or for the years ended December 31, 2002 and 2001 are denominated in a
currency other than US dollars. Accordingly, fees billed as of or for both
periods have been translated at consistent exchange rates.
Audit Committee pre-approval policies and procedures
The Corporation's Audit Committee adopted pre-approval policies and
procedures for audit and non-audit services on February 24, 2003. Consequently,
as of or for the years ended December 31, 2002 and 2001 no fees were paid to
the principal accountant for which the de minimus exception was used.
The Audit Committee has considered whether the provision of services other
than Audit is compatible with maintaining the independence of
PricewaterhouseCoopers LLP.
THE AUDIT COMMITTEE
Martin M Hale (Chairman)
Dr Benito Fiore
Charles M Hale
21
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]
S&P 500 S&P 500 Octel
Composite Specialty Corp.
Index Chemicals Index (OTL)
5/26/98 $100.00 $100.00 $100.00
12/31/98 112.36 83.28 60.99
12/31/99 134.30 92.25 45.60
12/31/00 120.68 74.64 50.55
12/31/01 104.94 77.99 79.12
12/31/02 80.42 86.22 69.45
Value of $100 Investment made May 26, 1998*
5/26/98 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
------- -------- -------- -------- -------- --------
S&P 500 Composite Index.......... $100.00 112.36 134.30 120.68 104.94 80.42
S&P 500 Specialty Chemicals Index $100.00 83.28 92.25 74.64 77.99 86.22
Octel Corp. (OTL)................ $100.00 60.99 45.60 50.55 79.12 69.45
--------
*excludes purchase commissions
22
INFORMATION RESPECTING THE CORPORATION'S
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants of the Corporation, selected by the Board
for 2003, are PricewaterhouseCoopers LLP, 1 London Bridge, London, SE1 9QL,
England. A representative of PricewaterhouseCoopers LLP 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, 2002 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 2004 ANNUAL MEETING
The Corporation anticipates holding its 2004 Annual Meeting of Stockholders
on Tuesday May 4, 2004.
Under the regulations of the Securities and Exchange Commission, any
stockholder desiring to make a proposal to be acted upon at the 2004 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, 2003, in order for the proposal to be
considered for inclusion in the Corporation's Proxy Statement.
23
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 24, 2003
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD
24
Appendix A
AUDIT COMMITTEE CHARTER (the "Charter")
Purpose
The Committee's role is one of overseeing but it recognises that Octel
Corp.'s (the "Company") 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.
The primary purpose of the Audit Committee (the "Committee") is to provide
assistance to 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 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 responsibilities 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 Committee and the Board.
The Committee shall review and reassess the adequacy of this Charter on at
least an annual basis and will obtain Board approval for the Charter.
Membership
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet all requirements of the New
York Stock Exchange ("NYSE") and the Securities Exchange Commission ("SEC")
including the requirements of independence established by those institutions.
At least one of the members of the Committee shall be an audit committee
financial expert who shall possess each of the following attributes:
(i) An understanding of generally accepted accounting principles and
financial statements;
(ii) The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals and reserves;
1
(iii) Experience preparing, auditing, analyzing or evaluating financial
statements that present a breadth and level of complexity of accounting
issues that are generally comparable to the breadth and complexity of
issues that can reasonably be expected to be raised by the registrant's
financial statements, or experience actively supervising one or more
persons engaged in such activities;
(iv) An understanding of internal controls and procedures for financial
reporting; and
(v) An understanding of audit committee functions.
Committee members shall continue to act until their successors are appointed by
the Board and shall be subject to removal at any time by the Board.
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 twice 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 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.
In carrying out its duties and responsibilities, the Committee may develop
policies and procedures, reacting as appropriate to changing conditions, which
are intended to help assure the directors and shareholders that the accounting
and reporting practices of the Company are in accordance with all requirements
and are of the highest quality.
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).
The Committee shall be responsible for reporting to shareholders in the
Company's annual proxy statement as required by applicable law and regulations.
The Committee shall develop with management general guidelines for earnings
press releases, as well as financial information and earnings guidance provided
to analysts and rating agencies, and monitor, review and discuss with
management and the independent auditors compliance with such guidelines.
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.
2
The Committee shall discuss with management and the external and internal
auditors the quality and adequacy of the Company's internal controls, including
controls for ensuring financial and operational effectiveness and efficiency,
and compliance with laws and regulations and guidance on appropriate risk
management procedures.
The Committee shall be informed by management, external and internal
auditors, of the Company's major financial risk exposures and the steps that
management has taken to monitor and control such exposures.
The Committee shall through discussion with management and the external and
internal auditors ensure that:
. all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data are reported to the
Committee;
. the Company's external auditors have been notified of any material
weaknesses; and
. any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls
is reported to the Committee.
The Committee shall oversee the independence of the external auditors by:
. approving all non-audit services by the external auditors;
. 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 at least annually, obtain and review a report by the
independent auditor describing: the firm's internal quality-control procedures;
any material issues raised by the most recent internal quality-control review,
or peer review, of the firm, or by any inquiry or investigation by governmental
or professional authorities, within the preceding five years, respecting one or
more independent audits carried out by the firm, and any steps taken to deal
with any such issues; and (to assess the auditor's independence) all
relationships between the independent auditor and the company.
The Committee shall discuss the annual audited financial statements and
quarterly financial statements with management and the independent auditor,
including the company's disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
The Committee shall discuss earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating agencies.
The Committee and the Board shall have the authority and responsibility to
retain and terminate the Company's independent auditors.
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.
3
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 obtain periodic reports from the Company's auditor
relating to critical accounting policies and practices to be used; alternative
treatments of financial information within generally accepted accounting
principles that have been discussed with management; the ramifications of such
alternative treatments; a summary of the treatment preferred by the Company's
auditor; and other material written communications between the Company's
auditor and management, such as any management letter of schedule of audit
differences.
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, particularly with reference to accruals, reserves
or other estimates that have a significant impact on the financial
statements;
. 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; and
. any unusual or complex items and their accounting treatment.
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 the scope of work and audit plans of
the external and internal auditors.
The Committee shall approve the fees to be paid to the external auditor, and
pre-approve all non-audit services to be performed by the auditor.
The Committee shall establish hiring policies for employees or former
employees of the Company's auditor.
The Committee shall:
. as appropriate, obtain advice and assistance from outside legal,
accounting or other advisors;
. discuss policies with respect to risk assessment and risk management;
. meet separately, periodically, with management, with internal auditors
(or other personnel responsible for the internal audit function) and with
independent auditors;
. review with the independent auditor any audit problems or difficulties
and management's response;
. set clear hiring policies for employees or former employees of the
independent auditors;
. report regularly to the board of directors;
4
. review with the Company's counsel any legal matter that could have a
significant impact on the financial statements;
. maintain minutes or other records of meetings and activities of the
Committee; and
. perform such other duties and responsibilities as may be assigned from
time to time by the Board.
The Committee shall establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and monitor the resolution of such
complaints.
The Committee shall establish procedures for the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters and monitor compliance with such procedures.
5
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PROXY
2003
OCTEL CORP.
This Proxy is Solicited on behalf of the Board of Directors
The undersigned hereby appoints DENNIS J. KERRISON, PAUL W. JENNINGS 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 6, 2003, 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 NOMINEES, AND THE ELECTION OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL 2003.
Election of Directors, Nominees: (1) James M.C. Puckeridge, (2) Benito Fiore
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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PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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OCTEL CORP.
C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 8643
EDISON, NJ 08818-8643
Voter Control Number
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DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
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[x] Please mark votes 3177
as in this example.
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OCTEL CORP.
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FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES FOR AGAINST ABSTAIN
1. Election of [_] [_] 2. Election of [_] [_] [_]
Directors. PricewaterhouseCoopers LLP
(Please see reverse) as independent public
For, except vote withheld from the following nominee(s): accountants for fiscal
2003.
3. In their discretion, the Proxies are authorized to vote
upon any other matter which may properly come before
the meeting.
Mark box at right if you have address change/ [_]
comment on the reverse side
Mark box at right if you plan to attend the [_]
Annual Meeting
Please sign this proxy exactly as name appears hereon.
When shares are held by Joint tenants, both should sign. When
signing as attorney, administrator, trustee or guardian,
please give full title as such.
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Signature: Date: Signature: Date:
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