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Innospec DEF 14A 2008 Documents found in this filing:Table of ContentsUNITED 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
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
INNOSPEC INC. (Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
x No fee required.
¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
¨ Fee paid previously with preliminary materials.
Table of ContentsINNOSPEC INC.
You are cordially invited to attend the Annual Meeting of Stockholders of Innospec Inc. (the “Corporation”), which will be held on Tuesday, May 6, 2008 at 10:00 a.m. local time, in the Boardroom, the NASDAQ Stock Market, One Liberty Plaza, 165 Broadway, New York, USA. Stockholders are advised to arrive at the reception area at 9.30 a.m. to allow sufficient time for security clearance.
The Notice of Meeting, Proxy Statement, Proxy Card 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 Card and return it promptly in the enclosed reply envelope which requires no postage if mailed in the United States of America. If you sign and return your Proxy Card without specifying your choices, it will be understood that you wish to have your shares voted in accordance with the directors’ recommendations as set forth in the attached Proxy Statement.
Sincerely,
PAUL W. JENNINGS President and Chief Executive Officer
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Table of ContentsINNOSPEC INC.
220 Continental Drive Newark, DE 19713 USA
Notice of Annual Meeting of Stockholders
May 6, 2008
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Innospec Inc. (the “Corporation”) will be held at 10:00 a.m. local time on Tuesday, May 6, 2008 in the Boardroom, the NASDAQ Stock Market, One Liberty Plaza, 165 Broadway, New York, USA for the following purposes:
The Board of Directors has fixed March 12, 2008 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 postponement or adjournment thereof. A list of such stockholders will be available for examination by any stockholder for any purpose germane to the meeting both at the meeting and during normal business hours at the Corporation’s offices at 220 Continental Drive, Newark, DE 19713, USA for a period of 10 days prior to the meeting.
A Proxy Statement, Proxy Card and a copy of the Annual Report on Form 10-K of the Corporation for the year ended December 31, 2007 are enclosed.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on May 6, 2008. The Proxy Statement and Annual Report on Form 10-K are available on Innospec’s website at www.innospecinc.com
By Order of the Board of Directors,
Andrew Hartley Vice President and General Counsel
March 31, 2008
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 CARD 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 CORPORATION OR BY DELIVERY OF A LATER DATED PROXY.
Table of ContentsINNOSPEC INC.
220 Continental Drive Newark, DE 19713 USA
PROXY STATEMENT March 31, 2008 for Annual Meeting of Stockholders To Be Held On May 6, 2008
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 Innospec Inc., a Delaware corporation (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 Tuesday, May 6, 2008 at 10:00 a.m. local time, and at any adjournments or postponements thereof (the “Annual Meeting”). The purpose of the Annual Meeting is:
Record Date and Quorum
This Proxy Statement, the Proxy Card and the Corporation’s Annual Report to Stockholders on Form 10-K are being mailed on or about April 4, 2008 to holders of record of the Common Stock at the close of business on March 12, 2008 (the “Record Date”). Each outstanding share of Common Stock entitles the holder thereof as of the record date 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 23,643,438 shares of Common Stock outstanding. There are no other outstanding voting securities of the Corporation other than the Common Stock.
The presence at the Annual Meeting in person or by proxy of the holders of a majority of the shares of Common Stock outstanding and entitled to vote will constitute a quorum for the transaction of business. Abstentions and broker “non-votes” are treated as present and entitled to vote, and therefore are counted in determining the existence of a quorum. At the Annual Meeting, election inspectors will determine whether or not a quorum is present.
A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner with respect to such item.
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Table of ContentsProxies
If the enclosed proxy card (the “Proxy Card”) is properly signed, dated and returned to the Corporation, the individuals identified as proxies thereon will vote the shares represented by the Proxy Card in accordance with the directions noted thereon. If you do not indicate how your shares should be voted on a matter, the shares represented by your properly completed Proxy Card will be voted as the Board of Directors recommends. 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 Board of Directors unless the stockholder otherwise specifies in the Proxy Card.
Returning your completed Proxy Card 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 sending written notice of revocation or by submission of a properly executed proxy bearing a later date to the Secretary of the Corporation prior to the Annual Meeting at the Corporation’s principal executive offices at the address above.
Required Votes
Proposal One (Election of Directors): The election of directors is decided by the affirmative vote of a plurality of the votes duly cast by holders of all shares entitled to vote in the election. Abstentions and broker “non-votes” are not counted as votes cast for the purpose of electing directors. Accordingly, abstentions and broker “non-votes” will not be taken into account and, therefore, will not affect the outcome of the election of directors.
Proposal Two (Re-Election of a Director): The election of directors is decided by the affirmative vote of a plurality of the votes duly cast by holders of all shares entitled to vote in the election. Abstentions and broker “non-votes” are not counted as votes cast for the purpose of electing directors. Accordingly, abstentions and broker “non-votes” will not be taken into account and, therefore, will not affect the outcome of the election of directors.
Proposal Three (Ratification of Appointment of Independent Registered Public Accounting Firm): The affirmative vote of the majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to ratify the appointment of PricewaterhouseCoopers LLP as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2008. A broker or nominee has discretion to vote on this matter. Accordingly, both abstentions and broker “non-votes” will be treated as present and entitled to vote and, therefore, will have the effect of votes against this proposal.
Proposal Four (Adoption of The Innospec Inc. Performance Related Stock Option Plan 2008 (“2008 PRSOP”)): The affirmative vote of the majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to adopt the 2008 PRSOP. Abstentions will be treated as being present and entitled to vote on this matter and, therefore, will have the effect of votes against this proposal. A broker “non-vote” is treated as not being entitled to vote on this matter, and therefore, is not counted for purposes of determining whether this proposal has been approved.
Proposal Five (Adoption of The Innospec Inc. Company Share Option Plan 2008 (“2008 CSOP”)): The affirmative vote of the majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to adopt the 2008 CSOP. Abstentions will be treated as being present and entitled to vote on this matter and, therefore, will have the effect of votes against this proposal. A broker “non-vote” is treated as not being entitled to vote on this matter, and therefore, is not counted for purposes of determining whether this proposal has been approved.
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Table of ContentsProposal Six (Adoption of The Innospec Inc. Non-Employee Directors’ Stock Option Plan 2008 (“2008 NEDs’ Stock Option Plan”)): The affirmative vote of the majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to adopt the 2008 NEDs’ Stock Option Plan. Abstentions will be treated as being present and entitled to vote on this matter and, therefore, will have the effect of votes against this proposal. A broker “non-vote” is treated as not being entitled to vote on this matter, and therefore, is not counted for purposes of determining whether this proposal has been approved.
Proposal Seven (Adoption of The Innospec Inc. Sharesave Plan 2008 (“2008 Sharesave Plan”)): The affirmative vote of the majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to adopt the 2008 Sharesave Plan. Abstentions will be treated as being present and entitled to vote on this matter and, therefore, will have the effect of votes against this proposal. A broker “non-vote” is treated as not being entitled to vote on this matter, and therefore, is not counted for purposes of determining whether this proposal has been approved.
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Table of Contents(Item 1 on the Proxy Card)
Election of Directors
The Bylaws of the Corporation provide 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 that the Board shall 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. By resolution of the Board of Directors dated November 20, 2007, the Board of Directors increased the number of members on the Board of Directors from seven to nine effective January 1, 2008; five in Class I, two in Class II and two in Class III and the appointments of the directors in such Classes expire at the Annual Meetings of the Corporation in 2011, 2009 and 2010, respectively.
Mr. Peter Fearn and Mr. Joachim Roeser were elected to the Board in accordance with Article III of the Bylaws to fill the vacancy on the Board created as a result of the retirement of Mr. Charles M. Hale and Mr. Samuel A. Haubold on May 6, 2008. Mr. Fearn and Mr. Roeser have been nominated for election as Class I Directors to the Board of Directors to serve until the Corporation’s 2011 Annual Meeting. See “Management—Nominees for Director” for information with respect to Mr. Fearn and Mr. Roeser. The Corporation believes that Mr. Fearn and Mr. Roeser are willing to be elected and to serve. In the event Mr. Fearn and Mr. Roeser are unable to serve or are otherwise unavailable for election 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.
The Board of Directors recommends a vote “FOR” the election of the nominee directors.
(Item 2 on the Proxy Card)
Re-election of a Current Director
The Bylaws of the Corporation provide 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 that the Board shall 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. By resolution of the Board of Directors dated November 20, 2007, the Board of Directors increased the number of members on the Board of Directors from seven to nine effective January 1, 2008; five in Class I, two in Class II and two in Class III and the appointments of the directors in such Classes expire at the Annual Meetings of the Corporation in 2011, 2009 and 2010, respectively.
One director in Class I, Mr. Hugh G. C. Aldous, whose term expires at the upcoming Annual Meeting, has been nominated for re-election to serve until the Corporation’s 2011 Annual Meeting. See “Management—Nominees for Director” for information with respect to Mr. Aldous. The Corporation believes that Mr. Aldous is willing to be elected and to serve. In the event that the nominee is unable to serve or is otherwise unavailable for election 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.
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Table of ContentsThe 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.
The Board of Directors recommends a vote “FOR” the re-election of the nominee current director.
(Item 3 on the Proxy Card)
Ratification of Appointment of Independent Registered Public Accounting Firm
The Audit Committee has appointed the accounting firm of PricewaterhouseCoopers LLP to serve as independent registered public accounting firm of the Corporation with respect to the 2008 fiscal year to examine the financial statements of the Corporation for the fiscal year ending December 31, 2008 and to perform other appropriate accounting services. PricewaterhouseCoopers LLP served as the Corporation’s independent registered public accounting firm for fiscal year 2007.
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, the Audit Committee will consider other independent registered public accounting firms.
The Board of Directors recommends a vote “FOR” ratification of the appointment of PricewaterhouseCoopers LLP as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2008.
BACKGROUND TO PROPOSALS FOUR, FIVE, SIX AND SEVEN
Adoption of New Stock Option Plans
The Board of Directors initially adopted in May 1998, and the stockholders initially approved in May 1998 (and amended and re-approved in May 2000 and May 2004), the following stock option plans: The Octel Corp. Performance Related Stock Option Plan (“PRSOP”), The Octel Corp. Company Share Option Plan (“CSOP”), The Octel Corp. Non-Employee Directors’ Stock Option Plan (“NEDs’ Stock Option Plan”), and The Octel Corp. Savings-Related Share Option Scheme (“Savings Related Plan”) (collectively, the “Plans”). These Plans, which were registered in the name of Innospec in July 2006, have provided successfully for the issuance of stock options for shares of Common Stock to directors, officers, and certain employees of the Corporation and are due to terminate at the end of their term in May 2008.
On February 19, 2008 the Board approved for submission to the Corporation’s stockholders new versions of each of these plans (the “New Stock Option Plans”) which are more fully described in each of the proposals below.
The Board approved the New Stock Option Plans to increase the number of stock options available for equity based incentive grants to enable the Corporation to continue to attract, motivate, and retain qualified directors, officers, employees, and other individuals. More specifically, the goals of the New Stock Option Plans are:
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Summary of Common Provisions of the New Stock Option Plans
The following is a summary of the common provisions of the New Stock Option Plans. A summary of the unique provisions of each plan is contained in the proposal relating to the approval of each plan. Both summaries are qualified in their entirety by reference to each of the New Stock Option Plans, copies of which are attached hereto as Appendices A through D.
Administration
The New Stock Option Plans are administered by the Compensation Committee (the “Committee”), which is a committee of the Board consisting of three or more non-employee directors. Under the terms of the 2008 CSOP and 2008 Sharesave Plan, the powers of administration are entrusted to the Board or a duly authorized committee thereof, and the Compensation Committee has been entrusted with the powers of administration. The Board or Compensation Committee may administer the New Stock Option Plans as it deems fit so long as it acts within the rules of the relevant stock plan. All Board or Compensation Committee decisions are final and conclusive.
The Corporation is required at all times to keep available either sufficient unissued shares of Common Stock or sufficient treasury shares to satisfy the exercise of all of the options granted under the New Stock Option Plans which have neither lapsed nor been exercised or to ensure that sufficient issued shares of Common Stock will be available to satisfy the exercise of granted options.
The cost of introducing and administering the New Stock Option Plans shall be borne by the Corporation.
Take-Over, Reconstruction and Amalgamation and Liquidation
In the event any company becomes a parent of the Corporation as a result of a tender offer for all of the shares of the Corporation or all of the shares of the same class as the shares underlying the options, options may be exercised within six months of the acquiring company becoming the parent provided conditions attached to the options have been satisfied, or the option holder may enter into an agreement with the new parent of the Corporation whereby options in a different company are exchanged for the current options.
In the event of a voluntary winding-up of the Corporation, options may be exercised during the period of six months starting on commencement of such winding-up, provided that the issuance of shares upon such exercise shall first be authorized by the liquidator or the court, if appropriate, at the sole cost and expense of the option holder.
Adjustments
In the event the Corporation undergoes a capitalization issue, subdivision, consolidation, or reduction of share capital, the Committee shall proportionately adjust the number of shares over which an option is granted and the share price (provided that no adjustment shall have the effect of reducing the share price below nominal value and that where an option is intended to take effect as an ISO (as defined below), the share price shall not be reduced below the fair market value of a share as at the date of grant). Where a New Stock Option Plan is subject to the approval of HMRC (as defined below), such adjustment will require the prior approval of HMRC.
Restrictions on Options
Options granted under the New Stock Option Plans may not be transferred, assigned, or charged.
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Table of ContentsGoverning Law
The New Stock Option Plans and all options granted under such plans shall be governed by and construed in accordance with the laws of England and Wales, except for Part B of the 2008 Sharesave Plan (as defined below), which is governed by and determined in accordance with the laws of the State of Delaware.
US Securities Law
Options granted under the New Stock Option Plans have not been and will not be registered under the Securities Act of 1933, as amended. Any shares issued pursuant to the exercise of an option will be registered on a registration statement on Form S-8.
New Plan Benefits
The benefits or amounts that may be received by or allocated to each of the following persons or groups under the New Stock Option Plans for the upcoming fiscal year cannot be determined as they are dependent upon a number of factors, including the discretion of the Board, the fair market value of the Common Stock at various future dates, the performance of the individuals, and, in the case of the 2008 PRSOP, the attainment of certain demanding business performance conditions.
Certain US Federal Income Tax Consequences
The following is a brief summary of certain US federal income tax consequences to recipients of option awards under the New Stock Option Plans (the “Recipients”) and such summary does not purport to be a complete enumeration or analysis of all potential relevant tax effects. This summary is based upon the current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Department regulations promulgated thereunder, and administrative and judicial interpretations thereof, all of which are subject to change, possibly on a retroactive basis. This discussion is limited to the US federal income tax consequences to individuals who are citizens or residents of the US, other than those individuals who are taxed on a residence basis in a foreign country. The US federal income tax law is technical and complex and the discussion below represents only a general brief summary. Each Recipient of an option award is urged to consult his or her own tax advisor as to the specific tax consequences to such recipient of the grant and the disposition of Common Stock.
Nonqualified Stock Options. A Recipient who is granted a nonqualified stock option (“NQO”), which generally is a stock option that is not an ISO (as defined below), generally does not recognize any taxable income upon the grant of the option, and the company that is deemed to grant such NQO is generally not entitled to a corresponding deduction. Upon exercising such NQO, the Recipient generally recognizes ordinary income (subject to wage and employment tax withholding) equal to the excess of the fair market value of the stock acquired over the option price of such NQO. The amount of such excess is generally determined by reference to the fair market value of the applicable stock on the date of exercise. The Recipient’s basis in the stock received is generally equal to such stock’s fair market value on the date of exercise. Generally, the company that is deemed to grant such NQO is entitled to a deduction equal to the ordinary compensation taxable to the Recipient.
Section 409A. Recipients participating in nonqualified deferred compensation plans may be subject to Code Section 409A (“409A”). 409A provides that all amounts deferred under a nonqualified deferred compensation plan are included in income when deferred (or, if later, when the amounts are no longer subject to a substantial risk of forfeiture), unless certain requirements established by 409A are satisfied. These requirements include rules regarding the timing of the deferral and distribution elections as well as permissible distribution events. If an amount of deferred compensation is required to be included in income under 409A, that amount is subject to ordinary income tax, plus an additional twenty-percent (20%) income tax, and in certain circumstances, interest may be assessed on tax underpayments. Elections to defer compensation to a later date must be made before the close of the tax year preceding the year during which the compensation is earned. There are also several specified exceptions in the regulations that permit elections to be made at a later date under certain circumstances.
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Table of ContentsGenerally, nonqualified deferred compensation plans include plans and arrangements that provide for the deferral of compensation, but do not include tax-qualified plans and plans that provide vacation leave, sick leave, compensatory time, disability pay or death benefits. A plan provides for deferral of an employee’s compensation if, under the plan, and the relevant facts and circumstances, the employee has a legally binding right during a taxable year to compensation that is or may be payable to the employee in a later taxable year. The categories of plans that are aggregated for certain purposes under 409A are : (i) account balance plans where deferrals of compensation are at the election of the employee, (ii) account balance plans where deferrals of compensation are not at the election of the employee, (iii) non-account balance plans, (iv) separation pay arrangements providing benefits under a “window program” or upon involuntary separation from service, (v) in-kind benefits or reimbursements of expenses that do not constitute a substantial portion of the employee’s compensation for services or separation, (vi) split-dollar life insurance arrangements, (vii) certain amounts deferred under foreign plans, (viii) stock rights and (ix) all other plans.
Incentive Stock Options. A Recipient who is granted, or exercises, an incentive stock option within the meaning of Code Section 422 (an “ISO”) generally does not recognize taxable income. However, when a Recipient exercises an ISO, the excess of the corresponding stock’s fair market value on the exercise date over the option price of such ISO will be included in the Recipient’s alternative minimum taxable income and thereby may subject the Recipient to an alternative minimum tax. Such alternative minimum tax may be payable even though the Recipient receives no cash upon the exercise of such ISO with which to pay such tax. Upon a Recipient’s disposition of stock acquired pursuant to the exercise of an ISO (i) more than one year after the date of exercise of the ISO, and (ii) more than two years after the date of grant of the ISO (collectively, the “Required Holding Periods”), the Recipient generally recognizes long-term capital gain or loss, as the case may be, measured by the excess of the amount realized by the Recipient from such disposition over the exercise price of such ISO. The company that is deemed to grant such ISO is not entitled to any tax deduction by reason of the grant of exercise of such ISO, or a disposition of stock acquired upon the exercise of such ISO after the Required Holding Periods have been satisfied.
Generally, if a Recipient disposes of stock acquired pursuant to the exercise of an ISO before the expiration of the Required Holding Periods (a “Disqualifying Disposition”), the difference between the exercise price of such ISO and the lesser of (i) the fair market value of the corresponding stock upon the date of exercise, and (ii) the selling price of the corresponding stock, will constitute compensation taxable to the Recipient as ordinary income. The company that is deemed to grant such ISO generally is allowed a corresponding tax deduction equal to the amount of ordinary compensation taxable to the Recipient. Any such deduction may be subject to the limitations of section 162(m) of the Code. The excess, if any, of such selling price over such fair market value should be taxable to the Recipient as a capital gain (long-term or short-term, depending upon whether the Recipient held the stock for more than one year). The company that is deemed to grant the ISO is not allowed a deduction with respect to any such capital gain recognized by the Recipient.
Section 423. Part B of the 2008 Sharesave Plan (“Part B”) is intended to qualify as an “employee stock purchase plan” as defined in Code Section 423. A qualified 423 employee stock purchase plan allows employees under US tax law to purchase stock at a discount from fair market value without any taxes owed on the discount at the time of purchase. A holding period will be required for the purchased stock in order to receive favorable long-term capital gains tax treatment on a portion of a participant’s gains when the shares are sold. With qualified Section 423 employee stock purchase plans, participants are not taxed at the time the shares are purchased, only at the time of sale. Depending on whether the shares were held for the required holding period, a portion of the participant’s gains may be taxed as capital gains or as ordinary income. A participant will not recognize any taxable income as a result of participating in Part B, exercising options granted pursuant to Part B, or receiving shares purchased pursuant to said options.
General. The foregoing discussion deals only with certain US federal income tax consequences to Recipients and the Corporation. The laws of any other jurisdiction that could be relevant either to the Corporation, a subsidiary of the Corporation, or a Recipient are not discussed herein. In particular, the tax
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Table of Contentsconsequences under the laws of the United Kingdom (“UK”), where a substantial number of the Recipients will reside and a substantial portion of the Corporation’s operations occur, are not addressed herein. Moreover, the discussion above is relevant to the Corporation only to the extent option awards are made with respect to services performed in the United States, and is relevant to a Recipient only to the extent the Recipient either performs services for the Corporation in the United States or is a citizen or resident of the United States.
Approval by the United Kingdom Revenue and Customs
It is intended that Part A of the 2008 CSOP and Part A of the 2008 Sharesave Plan should have approved status for tax purposes in the UK, which is valuable to both the group and the employee beneficiaries. Approved status could be lost if amendments are made to an approved plan and Her Majesty’s Revenue and Customs (“HMRC”) subsequently asserts that a key feature of the plan has been changed without its approval or conditions for the plan qualifying for approval are no longer met. Therefore, in accordance with best practice, Parts A of these proposed plans will be submitted to HMRC for approval at the earliest opportunity. The Compensation Committee will be permitted under the rules of these plans to make such amendments as may be required by HMRC in order to obtain approved status, subject to stockholder approval to the extent required by applicable rules of the Securities Exchange Act of 1934 or (where relevant) Section 422 of the Code.
(Item 4 on the Proxy Card)
Adoption of The Innospec Inc. Performance Related Stock Option Plan 2008
Under this proposal, the Corporation seeks stockholder approval of the Performance Related Stock Option Plan (the “2008 PRSOP”).
Summary of the 2008 PRSOP
The description of the 2008 PRSOP below is a summary of the principal provisions which are not common to the New Stock Option Plans and should be read in conjunction with “Summary of Common Provisions of the New Stock Option Plans” above, and is qualified in its entirety by reference to the 2008 PRSOP, a copy of which is annexed hereto as Appendix A.
Term
The 2008 PRSOP shall terminate on the tenth anniversary of the date of its approval, or at any earlier time as may be determined by the Compensation Committee. Termination of the 2008 PRSOP will not affect grants made prior to termination. No further grants will be made after termination.
Grant of Options
The Committee, in its absolute discretion, may grant the stock options at such exercise price as it shall determine under the 2008 PRSOP, provided however, if an option is granted as an ISO, such option must be issued at an exercise price not less than the fair market value of the underlying share (based on the reported closing price of shares on NASDAQ) on the date of grant. The maximum number of shares which may be issued under the 2008 PRSOP is 575,000. For these purposes, any shares subject to an option or other rights under the 2008 PRSOP which have lapsed, been renounced or otherwise become incapable of being exercised or vesting shall not be treated as issued. Each Eligible Employee to whom a stock option is granted has the right to disclaim in whole or in part his or her rights under such a stock option. The aggregate fair market value of shares with respect to which all ISOs are exercisable for the first time by any individual during any calendar year under all plans of the Corporation and its subsidiaries shall not exceed $100,000.
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Table of ContentsConditions Relating to the Grant of Options
Stock options granted under the 2008 PRSOP are exercisable subject to meeting certain performance targets. The performance targets are set at the absolute discretion of the Committee, and may be amended, relaxed, waived, or substituted after the grant of the option by the Committee if existing constraints or conditions have become unfair or impractical. The targets that are set will generally be “stretch targets” that focus on delivery of high performance and enhance stockholder value.
The Committee may also modify the terms and conditions of any stock option in order to comply with or take into account any securities, exchange control, or taxation laws, regulations, or practice of any jurisdiction as may be applicable. A holder of a stock option may be required by the Compensation Committee to make certain declarations or take such other actions as may be required to comply with or take into account such laws, regulations, or practice. When granting an option intended to take effect as an ISO, the Committee may not impose a condition or limitation if it would result in the option failing to qualify as an ISO. Further, the Committee may not amend such an option if this would result in it failing to qualify as an ISO. Further, notwithstanding any provision of the rules of the 2008 PRSOP to the contrary, in the event that the Committee determines that any option may be subject to Section 409A of the Code, the Committee may adopt such amendments to the 2008 PRSOP and the option or take any other actions that it determines are necessary or appropriate to (i) exempt the option from Section 409A of the Code or (ii) comply with the requirements of Section 409A of the Code.
Rights of Exercise
Stock options that have vested may only be exercised by a holder while he or she remains employed by the Corporation or its subsidiaries, and may not (subject to certain exceptions) be exercised before the later of: (a) the second anniversary of the date of the grant, (b) any date or dates determined by the Committee and set forth on the option certificate, and (c) the date upon which the relevant performance targets have been satisfied. The foregoing does not apply if the holder ceases to be employed as a result of injury, ill-health, disability, redundancy, the transfer of the business by which the holder is employed to a firm that is not affiliated with the Corporation, the transfer of the holder’s employing company to a firm outside the control of the Corporation, retirement at normal retirement age including late retirement, early retirement by agreement with his or her employer or any other reason in the absolute discretion of the Committee. In such cases, the Committee has absolute discretion in determining whether such holder’s options shall lapse or become exercisable within a one year period following such holder’s termination. In the event of a holder’s death, his or her options may be exercised by a personal representative within one year following the date of death. Provided that any relevant performance target has been satisfied, vested options may also be exercised within one year of cessation of employment on account of retirement at normal retirement age including late retirement, early retirement by agreement with his or her employer or any other reason in the absolute discretion of the Committee.
Notwithstanding the provisions described in the foregoing paragraph, an option granted as an ISO may only be exercised within three months following the date on which the holder ceases employment with the Corporation or its subsidiaries, except where such cessation is by reason of permanent and total disability in which case it can be exercised within twelve months of such date. Subject to the satisfaction of any relevant performance target, an option may also be exercised if the holder, whilst remaining an employee of the Corporation or any subsidiary, is transferred to work in another country and as a result will become subject to tax on his or her remuneration in that other country and will therefore suffer a tax disadvantage upon exercise of his or her option or become subject to restrictions on his or her ability to exercise his or her option or hold or deal in the shares or proceeds of sale by reason of the securities or exchange control laws of that country. In such a case the option may be exercised in the period commencing three months before and ending three months after the transfer takes place.
Notwithstanding the foregoing, if an option is granted to someone who is or would otherwise be subject to Section 409A of the Code with a share price less than the fair market value of the shares on the date of grant, it must be exercised (if at all) no later than March 15 of the calendar year immediately following the calendar year in which it is first capable of exercise under the 2008 PRSOP.
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Table of ContentsStock options granted under the 2008 PRSOP shall lapse upon the occurrence of: (a) the tenth anniversary of the date the options were granted; (b) the expiration of the period allowed for the satisfaction of performance targets; (c) the compulsory winding-up of the Corporation; (d) when the holder of such options becomes bankrupt; (e) termination of employment of the option holder (subject to the provisions described above); (f) the end of the time periods during which exercise is permitted under the provisions governing takeover, reconstruction, amalgamation or liquidation; or (g) in the case of an option which is subject to Section 409A of the Code, at the end of the period for exercise specified above for such options.
Discretion to Pay Cash on Exercise of an Option
When an option holder exercises his or her option, the Committee may, in lieu of transferring shares to the option holder, pay such option holder a cash sum equal to the value of the shares over which the option would be exercisable. If the Committee exercises its discretion to pay cash instead of transferring shares to the option holder, then the option holder shall have no further rights to the shares for which notice of exercise was given.
Alterations
The Committee may alter the rules in any way it deems fit so long as the subsisting rights of option holders are neither abrogated nor adversely affected, provided that no such alteration shall be made without stockholder approval to the extent such approval is required by applicable rules of the Securities Exchange Act of 1934 or (where relevant) Section 422 of the Code.
The Board of Directors recommends a vote “FOR” the approval of the 2008 PRSOP.
(Item 5 on the Proxy Card)
Adoption of The Innospec Inc. Company Share Option Plan 2008
Under this proposal, the Corporation seeks stockholder approval of The Innospec Inc. Company Share Option Plan (the “2008 CSOP”).
Summary of the 2008 CSOP
The description of the 2008 CSOP below is a summary of the principal provisions which are not common to the New Stock Option Plans and should be read in conjunction with “Summary of Common Provisions of the New Stock Option Plans” above, and is qualified in its entirety by reference to the 2008 CSOP, a copy of which is annexed hereto as Appendix B.
Term
The 2008 CSOP shall terminate on the tenth anniversary of the date of its approval, or at any earlier time as may be determined by the Board of Directors of the Corporation or a duly authorized committee. Termination of the 2008 CSOP will not affect grants made prior to termination. No further grants will be made after termination.
Grant of Options
The 2008 CSOP is divided into Part A and Part B and provides stock options to certain directors or employees (as used in this Proposal, each an “Eligible Employee”) of the Corporation or certain designated subsidiaries. In general, an Eligible Employee is either a director of a participating company who is required to work for at least 25 hours per week or an employee of a participating company who is required to work for at least 20 hours per week.
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Table of ContentsThe Compensation Committee, in its absolute discretion, may grant the stock options under the 2008 CSOP and the Committee may adopt any procedure it thinks fit for granting such options. Each Eligible Employee to whom a stock option is granted has the right to disclaim in whole or in part his or her rights under such a stock option.
Conditions Relating to the Grant of Options
An application will be made for Part A of the 2008 CSOP to be approved by HMRC in the United Kingdom and stock options granted to an Eligible Employee under Part A shall be limited so that the aggregate market value of all the shares into which the options may be exercised, at the date of granting the options, shall not exceed the statutory limit imposed by the relevant UK legislation (currently GBP 30,000). Options will be granted at market value, being a price which represents the reported closing price of a share on NASDAQ on the date of grant (or the previous dealing day if the date of grant is not a dealing day) or where an option is to be granted pursuant to an invitation, the date of the invitation (being not more than twenty nine days prior to the date of grant). Where an option is to subscribe for new shares the price cannot be less than the nominal value. Options granted under Part B of the 2008 CSOP will be granted at the market value as described above on the date of grant and will not be approved by HMRC. If the Committee so determines, options intended to qualify as ISOs may be granted under Part B, in which case the aggregate market value, determined at the date of granting the options, of shares with respect to which ISOs become exercisable for the first time by an individual option holder in any calendar year shall not exceed $100,000. The maximum number of shares which may be issued under the 2008 CSOP is 190,000. For those purposes, any shares subject to an option or other rights under the 2008 CSOP which have lapsed, been renounced or otherwise become incapable of being exercised or vesting shall not be treated as issued.
The Committee, on the date of granting an option, may in its absolute discretion impose any conditions and limitations upon the exercise of the option, provided that such conditions and limitations are objective and set out in full on, or details are given with, the option certificate. They may be amended, varied or waived only where the Committee considers that a waived, varied or amended condition would be a fairer measure of performance and would be no more difficult to satisfy. When granting an option under Part B intended to take effect as an ISO, the Committee may not impose a condition or limitation if it would result in the option failing to qualify as an ISO. Further, the Committee may not adjust such an option if this would reduce the aggregate price at which such option may be exercised below the market value per share as at the date of grant.
The Committee may make determinations as to performance targets and all other applicable provisions of Part B as necessary in order for Part B and options granted thereunder to qualify for the exception from Section 162(m) of the Code for “qualified performance based compensation”, if the Committee determines that such qualification is necessary for an option grant. Further, notwithstanding any provision of Part B to the contrary, in the event that the Committee determines that any option may be subject to Section 409A of the Code, the Committee may adopt such amendments to Part B of the 2008 CSOP and the option or take any other actions that it determines are necessary or appropriate to (i) exempt the option from Section 409A of the Code or (ii) comply with the requirements of Section 409A of the Code.
Rights of Exercise
Stock options may only be exercised by a holder (a) while he or she remains employed by the Corporation or certain designated subsidiaries and (b) after the latest of: (i) the third anniversary of the date the options were granted, or (ii) any date or dates imposed by the Committee upon the grant of the options, or (iii) the date on which the relevant performance targets have been satisfied. The previous sentence does not apply if the holder ceases to be employed as a result of injury, ill-health, disability, redundancy, the transfer of the business by which the holder is employed to a firm that is not affiliated with the Corporation, the transfer of the holder’s employing company to a firm outside the control of the Corporation, retirement at normal retirement age including late retirement, early retirement by agreement with his or her employer or any other reason in the absolute discretion of the Committee. In such cases, irrespective of whether additional conditions imposed by the
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Table of ContentsCommittee have been satisfied, the option holder may exercise his or her options within the period of one year, in each case following the date on which he or she ceases to be a director or employee. In the event of a holder’s death, his or her options may be exercised by a personal representative within one year following the date of death.
Notwithstanding the foregoing where options granted under Part B are intended to qualify as ISOs, such options may only be exercised within three months following the date on which the holder ceases employment with the Corporation or its subsidiaries, except where such cessation is by reason of permanent and total disability in which case they can be exercised within twelve months of such date.
Subject to the satisfaction of any relevant performance target, an option may be exercised if the holder, whilst remaining an employee of the Corporation or any subsidiary, is transferred to work in another country and as a result will become subject to tax on his or her remuneration in that other country and will therefore suffer a tax disadvantage upon exercise of his or her option or become subject to restrictions on his or her ability to exercise his or her option or hold or deal in the shares or proceeds of sale by reason of the securities or exchange control laws of that country. In such a case the option may be exercised in the period commencing three months before and ending three months after the transfer takes place.
Stock options granted under the 2008 CSOP shall lapse upon the occurrence of: (a) the tenth anniversary of the date the options were granted; (b) the expiration of the period allowed for additional conditions or limitations; (c) the compulsory winding-up of the Corporation; (d) when the holder of such options becomes bankrupt; (e) termination of employment of the holder (subject to the good leaver provisions described above); or (f) the end of the time periods during which exercise is permitted under the provisions governing takeover, reconstruction, amalgamation or liquidation.
The issuance of all shares pursuant to the exercise of an option shall comply with the applicable securities law of the United States.
Discretion to Pay Cash on Exercise of an Option
When an option holder exercises his or her option granted under Part B of the 2008 CSOP, the Committee may, in lieu of transferring shares to the option holder, pay such option holder a cash sum equal to the value of the shares into which the option would be exercisable. If the Committee exercises its discretion to pay cash instead of transferring shares to the option holder, then the option holder shall have no further rights to the shares for which notice of exercise was given.
Take-Over, Reconstruction and Amalgamation and Liquidation
In addition to the circumstances described in the summary of the New Stock Option Plans, options granted under the 2008 CSOP may be exercised within six months if the court sanctions a scheme of arrangement which HMRC has agreed is equivalent to section 899 of the Companies Act 2006 (UK legislation). Additionally, if a person becomes bound or entitled to acquire shares in the Corporation under legislation which HMRC has agreed is equivalent to section 899 of the Companies Act 2006 (UK legislation) then an option may be exercised during any period such person remains so bound or entitled.
Alterations
Prior to the approval of Part A by HMRC, the Committee may alter the rules as may be necessary in order to obtain such approval. Following approval of Part A by HMRC, the Committee may alter the rules in any way it deems fit so long as the subsisting rights of option holders are neither abrogated nor adversely affected and the share price is not adjusted (except as otherwise permitted in the rules), save that the Committee may alter certain of the provisions permitting exercise in leaver situations to take account of legal developments or advice or
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Table of Contentschanges in market practice. In any case, no alterations to a key feature of Part A shall be effective until approved by HMRC. Further, no alteration shall be made without shareholder approval to the extent that such approval is required by applicable rules of the Securities Exchange Act of 1934 or (where relevant) Section 422 of the Code.
The Board of Directors recommends a vote “FOR” the approval of the 2008 CSOP.
(Item 6 on the Proxy Card)
Adoption of The Innospec Inc. Non-Employee Directors’ Stock Option Plan 2008
Under this proposal, the Corporation seeks stockholder approval of The Innospec Inc. Non-Employee Directors’ Stock Option Plan (the “2008 NEDs’ Stock Option Plan”).
Summary of the 2008 NEDs’ Stock Option Plan
The description of the 2008 NEDs’ Stock Option Plan below is a summary of the principal provisions which are not common to the New Stock Option Plans and should be read in conjunction with “Summary of Common Provisions of the New Stock Option Plans” above, and is qualified in its entirety by reference to the 2008 NEDs’ Stock Option Plan, a copy of which is annexed hereto as Appendix C.
Term
The 2008 NEDs’ Stock Option Plan shall terminate on the tenth anniversary of the date of its approval, or at any earlier time as may be determined by the Compensation Committee. Termination of the 2008 NEDs’ Stock Option Plan will not affect grants made prior to termination. No further grants will be made after termination.
Grant of Options
The 2008 NEDs’ Stock Option Plan provides stock options to certain non-employee directors of the Corporation (each a “Participant”). The Committee, in its absolute discretion, may grant the stock options at such exercise price as it shall determine under the 2008 NEDs’ Stock Option Plan (provided that where an option is to subscribe for new shares that price cannot be less than the nominal value).
Each Participant to whom a stock option is granted has the right to disclaim in whole or in part his or her rights under such a stock option.
The aggregate number of shares which may be issued under the 2008 NEDs’ Stock Option Plan is 85,000. For these purposes, any shares subject to an option or other rights under the 2008 NEDs’ Stock Option Plan which have lapsed, been renounced or otherwise become incapable of being exercised or vesting shall not be treated as issued.
Further, notwithstanding any provision of the rules of the 2008 NEDs’ Stock Option Plan to the contrary, in the event that the Committee determines that any option may be subject to Section 409A of the Code, the Committee may adopt such amendments to the 2008 NEDs’ Stock Option Plan and the option or take any other actions that it determines are necessary or appropriate to (i) exempt the option from Section 409A of the Code or (ii) comply with the requirements of Section 409A of the Code.
Rights of Exercise
Stock options may only be exercised by a holder (a) while he or she remains a non-employee director of the Corporation and (b) after any date or dates determined by the Committee and set forth on the option certificate.
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Table of ContentsIn the event an option holder ceases to be a director, the Committee has absolute discretion in determining whether such holder’s options shall lapse or become exercisable within a one year period following such holder’s termination. In the event of a holder’s death, his or her options may be exercised by a personal representative within one year following the date of death.
Notwithstanding the foregoing, if an option is granted to someone who is or would otherwise be subject to Section 409A of the Code with a share price less than the fair market value of the shares on the date of grant, it must be exercised (if at all) no later than 15 March of the calendar year immediately following the calendar year in which it is first capable of exercise under the 2008 NEDs’ Stock Option Plan.
Stock options granted under the 2008 NEDs’ Stock Option Plan shall lapse upon the occurrence of: (a) the tenth anniversary of the date the options were granted; (b) the compulsory winding-up of the Corporation; (c) when the holder of such options becomes bankrupt; (d) the date on which the holder ceases to be a director, (subject to the provisions described above); (e) the end of the time periods during which exercise is permitted under the provisions governing takeover, reconstruction, amalgamation or liquidation; or (f) in the case of an option which is subject to Section 409A of the Code, at the end of the period for exercise specified above for such options.
Discretion to Pay Cash on Exercise of an Option
When an option holder exercises his or her option, the Committee may, in lieu of transferring shares to the option holder, pay such option holder a cash sum equal to the value of the shares into which the option would be exercisable. If the Committee exercises its discretion to pay cash instead of transferring shares to the option holder, then the option holder shall have no further rights to the shares for which notice of exercise was given.
Alterations
The Committee may alter the rules in any way it deems fit so long as the subsisting rights of option holders are neither abrogated nor adversely affected and the share price is not adjusted (except as otherwise provided in the rules), provided that no such alteration shall be made without stockholder approval to the extent such approval is required by applicable rules of the Securities Exchange Act of 1934 or (where relevant) Section 422 of the Code.
The Board of Directors recommends a vote “FOR” the approval of the 2008 NEDs’ Stock Option Plan.
(Item 7 on the Proxy Card)
Adoption of The Innospec Inc. Sharesave Plan 2008
Under this proposal, the Corporation seeks stockholder approval of The Innospec Inc. Sharesave Plan (the “2008 Sharesave Plan”).
Summary of the 2008 Sharesave Plan
The description of the 2008 Sharesave Plan below is a summary of the principal provisions which are not common to the New Stock Option Plans and should be read in conjunction with “Summary of Common Provisions of the New Stock Option Plans” above, and is qualified in its entirety by reference to the 2008 Sharesave Plan, a copy of which is annexed hereto as Appendix D.
The purpose of the 2008 Sharesave Plan is to provide a means through which the Corporation and its Group Members (as defined in the 2008 Sharesave Plan) may attract able persons to enter and remain in the employ of
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Table of Contentsthe Group (as defined in the 2008 Sharesave Plan) and to provide a means whereby employees and directors of the Group can acquire common stock, thereby strengthening their commitment to the welfare of the Corporation and the Group and promoting an identity of interest between stockholders and these employees and directors.
Term
The 2008 Sharesave Plan shall terminate on the tenth anniversary of the date of its approval, or at any earlier time as may be determined by the Board of Directors of the Corporation or a duly authorized committee (as used in this Proposal 7, the “Committee”). Termination of the 2008 Sharesave Plan will not affect grants made prior to termination. No further grants will be made after termination.
Award Grants, Approvals and Maximum Number of Shares
The 2008 Sharesave Plan is comprised of three parts: Part A which provides for the grant of options to eligible employees under a savings-related share option plan approved by HMRC; Part B which provides for the making of awards to eligible employees under an employee stock purchase plan established in accordance with Code Section 423; and Part C which provides for the grant of options to eligible employees under a savings-related share option plan which is neither approved by HMRC nor qualifies for favored tax status in the US, and references to a specific Part of the 2008 Sharesave Plan shall be construed accordingly. No awards shall be made under the 2008 Sharesave Plan unless it has been approved by the stockholders in a general meeting. No awards shall be made under Part A unless approved by HMRC.
The present maximum aggregate number of shares which may be issued under the 2008 Sharesave Plan (including for the avoidance of doubt Parts A, B and C) is 750,000 subject to any future increases which may be substituted at the discretion of the Board upon approval by the stockholders of the Corporation. Any shares subject to an option or other rights granted under the 2008 Sharesave Plan which have lapsed, been renounced or have otherwise become incapable of being exercised or vesting shall not be treated as issued for this purpose.
PART A
Plan Provisions
Part A is for the purpose of granting sharesave options to UK employees and executive directors which have tax benefits due to their tax-approved status under UK law. Under the terms of Part A of the 2008 Sharesave Plan, Eligible Employees (as defined in the 2008 Sharesave Plan) will be provided the opportunity to receive options for Innospec Common Stock as determined by the Board. The terms of the options will permit Eligible Employees to purchase stock at a discounted price of not less than 80% of the Fair Market Value at the time they are invited to participate. Eligible Employees who are granted options will be required to enter into a savings contract for either three or five years pursuant to which they will make voluntary payroll deductions to cover the cost of the stock purchase at the end of the savings contract period. Each Eligible Employee will be entitled to purchase a certain number of shares at the end of the savings contract period as determined by dividing the total amount of payroll deductions (plus a bonus payable at the end of the savings contract) by the discounted price of the stock.
The Corporation will be required to transfer or issue the relevant Shares to the participant not later than 30 days after exercise of the option.
Either authorized and unissued shares or issued shares reacquired by the company may be made subject to options under the 2008 Sharesave Plan. Any Shares not purchased prior to the termination of an option may be again subjected to an option under the 2008 Sharesave Plan.
All Shares purchased under an option will be paid for in full at the time the option is exercised by transfer of the purchase price from the employee’s payroll deduction account.
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Table of ContentsInvitations of Applications and Scaling Down
The Committee may decide in its discretion when to issue invitations under the 2008 Sharesave Plan, in which case invitations must be issued to all Eligible Employees. In general terms, an Eligible Employee is either a UK-resident executive director of a participating company who is required to work for at least 25 hours per week or a UK-resident employee of a participating company. The Committee may, in its sole discretion, approve any other employee or executive director of a participating company as an Eligible Employee. Monthly contributions to be made by each applicant cannot exceed the lesser of GBP 250 per month (or such other amount permitted by the relevant legislation from time to time) and such other maximum contribution as may be determined from time to time by the Committee. If valid applications are received for an aggregate number of shares that exceed a maximum number as set by the Committee, then the Committee may scale down applications to the extent necessary using a method stated in the 2008 Sharesave Plan or otherwise agreed with HMRC.
Rights of Exercise
Generally stock options may only be exercised by a holder while he or she remains employed by the Corporation or certain designated subsidiaries and (a) within six months starting on the bonus date under the relevant savings contract (i.e. the end of the savings contract period) or (b) within six months following the date on which he or she reaches the age of 65. The previous sentence does not apply if the holder ceases to be employed by the Corporation as a result of injury, disability, redundancy, retirement after reaching 65 or any other age at which he or she is bound to retire under his or her employment contract, employment with a company or business that ceases to be within the Corporation’s group, or, after holding options for at least three years, for any other reason. In such cases, the option holder may exercise his or her options within the six month period following the date on which he or she ceases to be a director or employee of the Corporation or the designated subsidiaries. In the event of a holder’s death, his or her options may be exercised by a personal representative within one year following the date of death or the date of the bonus date, whichever is shorter.
Stock options granted under the Part A shall lapse upon the occurrence of: (a) six months after the bonus date; (b) when an option holder ceases to be employed by the Corporation or the designated subsidiaries (subject to the exceptions set out in the previous paragraph); (c) the compulsory winding-up of the Corporation; (d) when the holder of such options becomes bankrupt; or (e) the participant choosing to stop making monthly contributions under the savings contract before the end of that contract.
Alterations
The Committee may alter the rules in any way it deems fit, provided that no such alteration shall be made without stockholder approval to the extent such approval is required by any applicable law, regulatory authority or the rules of any relevant exchange and amendments to certain key features of Part A require the prior approval of HMRC.
PART B
Plan Provisions
During the term of Part B of the 2008 Sharesave Plan, Innospec may make one or more offers through a series of offering periods as determined by the Committee, to offer to each Eligible Employee (as defined in the 2008 Sharesave Plan) to purchase options for Innospec common stock through voluntary payroll deductions. Each Eligible Employee will be entitled to purchase a certain amount of shares determined by dividing the total amount of deductions made from an Employee’s payroll by the Purchase Price of the stock on the Purchase Date (but not exceeding the amount specified in Section 423(b) of the Internal Revenue Code) for any offering. The option price for each offering will be at least 85% of the Fair Market Value on the date the option is received by the participant. The Purchase Date will be as determined by the Committee. The Fair Market Value of Innospec stock shall mean the average of the high and low price per share as reported in the Wall Street Journal (or other reporting service approved by the Board or Committee) on the next trading day.
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Table of ContentsThe options will be exercised on the Exercise Date of each Offering Period and the maximum number of Shares subject to the option will be purchased at the applicable Purchase Price with the accumulated Contributions in his or her account. The Shares purchased upon exercise of an option hereunder shall be deemed to be transferred to the participant on the Exercise Date. The beginning and ending dates of each Offering Period and each Purchase Date will be determined by the Committee. Part B may allow participants to cancel or reduce (or both) their payroll deduction authorizations and participants will be asked to confirm their election to purchase.
In accordance with the overall cap described above, no more than 750,000 shares of Innospec common stock may be sold pursuant to the Part B. In the event that the Committee determines that an adjustment is appropriate by reason of any dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares or other securities of the company, issuance of warrants or other rights to purchase shares or other securities of the company, or other similar corporate transaction or event, it shall adjust any or all of (1) the number and type of shares that may be made subject to options, (2) the number and type of shares subject to outstanding options, and (3) the grant, purchase or exercise price with respect to any option.
Either authorized and unissued shares or issued shares reacquired by the company may be made subject to options under Part B. Any shares not purchased prior to the termination of an option may be again subjected to an option under Part B. An employee will not be granted an option under Part B if the employee, immediately after the option is granted, owns stock having 5% or more of the total combined voting power or value of all classes of stock of the company. No employee will be granted an option that permits the employee to accrue rights to purchase stock under all employee stock purchase plans of the company at a rate that exceeds $25,000 (or such other maximum as may be prescribed from time to time under the Internal Revenue Code) of fair market value of such stock (determined at the date of grant) for each calendar year in which the option is outstanding at any time in accordance with the provisions of Section 423(b)(8) of the Internal Revenue Code.
Upon termination of a participant’s status as an Employee prior to the Purchase Date of an Offering Period for any reason, other than as a result of injury, disability, redundancy, retirement or death, the Contributions and any interest credited to his or her account will be refunded to the Employee or his or her beneficiary or estate as the case may be, through normal payroll processing as soon as administratively practicable following such termination.
If a participant ceases to be employed by the Corporation as a result of injury, disability, redundancy, death or retirement after reaching any age he or she is bound to retire under his or her employment contract, the option holder (or a personal representative in the case of death) may exercise his or her options within the three month period following the date on which he or she ceases to be a director or employee of the Corporation or the designated subsidiaries, provided that in no circumstances can an option be exercised after the Purchase Date. If the participant fails to exercise his or her options within such three month period, his or her account balance will be refunded to him or her or his or her beneficiary or estate, as the case may be, through normal payroll processing as soon as administratively practicable following such date of cessation.
All shares purchased under an option will be paid for in full at the time the option is exercised by transfer of the purchase price from the employee’s payroll deduction account.
Plan Benefits
Participation in Part B is voluntary and dependent upon each Eligible Employee’s election to participate, and the benefit of participating will depend on the terms of the offerings (if any) and fair market value of the stock on the Exercise Date. Accordingly, future benefits that would be received by Eligible Employees under the proposed Part B are not determinable at this time.
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Table of ContentsTax Consequences.
Part B is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.
In accordance with SEC rules, the following description of tax matters relating to Part B is provided. In general, a participant has no taxable event at the time of grant of an option or at the time of exercise of an option, but will realize taxable income at the time the participant sells the shares acquired under Part B.
If the participant observes certain holding period requirements, the participant’s gain on sale will generally be taxed at capital gains rates, except that in certain circumstances a portion of the participant’s gain will be treated as ordinary income. Those circumstances will generally occur if the exercise price of the shares is established as a percentage less than 100% of the fair market value of the shares at the beginning of the offering period, or if at the beginning of the period it is unknown what the exercise price will be, for example, if the exercise price can be determined only on the Exercise Date. The participant’s ordinary income will not be greater than the excess, if any, of the fair market value of the shares at the time of grant over the exercise price (or, if lower, the actual proceeds of sale over the actual purchase price of the shares). If the exercise price is a function of the value of the shares on the Exercise Date, the exercise price will be determined as if the option was exercised at the time of grant for purposes of calculating this limit. If the participant sells the shares only after satisfying the holding period requirements, the company will not be entitled to a deduction.
If the participant sells the shares before satisfying the holding period requirements, then the participant will realize ordinary income in an amount equal to the difference between the exercise price and the fair market value of the stock on the Exercise Date. The company will be entitled to a corresponding deduction. The remainder of the proceeds of sale will be taxed at capital gains rates.
PART C
Part C is for the purpose of granting sharesave options to non-UK/US employees and directors. The terms of Part C are in general terms the same as those of Part A above except that:
The Board of Directors recommends a vote “FOR” the approval of the 2008 Sharesave Plan.
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Table of ContentsMANAGEMENT
The following sets forth certain information as of March 12, 2008 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.
Nominees for Director
Class I Directors who will serve until the 2011 Annual Meeting and are seeking election or re-election
Hugh Aldous is a partner at Grant Thornton LLP, Chartered Accountants. He was formerly a partner of Robson Rhodes LLP, Chartered Accountants where he served as Chief Executive Officer from 1987 to 1997. Robson Rhodes merged with Grant Thornton on July 1, 2007. Mr. Aldous currently serves as Chairman of Eastern European Trust plc, a London listed co-investor in Russia and Eastern Europe. Mr. Aldous is also a non-executive director of two UK listed public investment companies Henderson TR Pacific Investment Trust plc and Elderstreet Venture Capital Trust plc. He is also a director of Polar Capital Holdings plc, a UK based asset management company and Melorio plc. Mr. C. Hale is also a director of this company. Mr. Aldous was a member of the UK Competition Commission, has authored several reports on corporate governance issues, has served as the audit committee chairperson for several companies and currently chairs the audit committee of one public company and serves as a member of the audit committee of another. Mr. Aldous is a member of the Audit Committee.
Peter Fearn is currently President of Dipharma Srl, an Italian chemicals company supplying the pharmaceuticals industry. He also owns SKMP Limited, a consulting firm specializing in mergers and acquisitions in the chemicals industry. Between 2002 and 2005, he was CEO of Finnish Chemicals Oy. Previously, Mr. Fearn was Main Board Director of Laporte plc, the British specialty chemicals company and CEO of their Specialty Organics division. Earlier in his career, he was with Courtaulds plc for approximately twelve years and was a Member of their Group Executive, as well as CEO of the Coatings Division for Europe, Africa and the Middle East, having previously held several international positions. A Fellow of the Institute of Chartered Accountants (FCA), Mr. Fearn began his career with KPMG.
Joachim Roeser is currently CEO of the Amber Chemical Group, a global specialty silicone producer owned by Caledonia Investments. He is a German national and has lived and worked in Belgium, France and Germany as well as in the UK. Previously, he was president and CEO of Luzenac, a Rio Tinto subsidiary and the leading talc mining producer in the world, for five years. Prior to that, Mr. Roeser was European president of Ferro Corporation. He started his career thirty years ago in the emulsifier and starch industry before joining Arco Chemical in 1983, where he held a number of senior management positions, and ultimately served as Global Business Director, Styrene for two years. Mr. Roeser earned his Bachelor of Science degree in Chemical Engineering from the University of Wuppertal.
Continuing Directors
Class II Directors who will serve until the 2009 Annual Meeting
James Puckridge was Chairman of Elf Atochem UK Limited, 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 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. He has been Chairman of the Trustees of the Innospec Limited Pension Plan since October 3, 2000. Mr. Puckridge is Chairman of the Compensation Committee and a member of the Nominating and Governance Committee.
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Paul Jennings serves as President and Chief Executive Officer of the Corporation, having been appointed to this position on June 23, 2005. Prior to this he served as Executive Vice President and Chief Financial Officer having joined the Corporation in November 2002. Before joining the Corporation, Mr. Jennings served as Chief Financial Officer for Griffin LLC, a joint venture between Griffin Corporation and Du Pont 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 fiber, chemical, film and coating industries. Mr. Jennings was appointed as a non-executive director of Exide Technologies with effect from September 18, 2006.
Class III Directors who will serve until the 2010 Annual Meeting
Dr. Robert Bew serves as Non-Employee Chairman of the Corporation. Until January 1, 2001 he was Chairman of the European Process Industries Competitiveness Centre, an organization specializing in increasing competitiveness in process industries, and until 2002 he was Chairman of the Teesside Chemical Initiatives (TCI). He spent over thirty five years with ICI, most recently as CEO of ICI’s International Chemical & Polymer division based in Teesside, UK. Previously he served as head of ICI Corporate Planning and between 1995 and 1997 he was also Chairman of Phillips Imperial Petroleum Limited, a refinery joint venture between ICI and Phillips Petroleum. Dr. Bew is a member of the Nominating and Governance Committee.
Martin Hale is a Director of Chemtura Corporation (formerly Great Lakes Chemical Corporation (“Great Lakes”) which merged with Crompton Corporation to form Chemtura Corporation on July 1, 2005), having been a Director of Great Lakes 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. From 1983 to 2001 Mr. Hale was Executive Vice President and Partner of Hellman Jordan Management Co, a registered investment adviser. He also serves as an Honorary Trustee of the Museum of Fine Arts, Boston. Martin Hale is the brother of Charles Hale who is also a Director of the Corporation. Mr. Martin Hale is the Chairman of the Audit Committee.
Officers (other than those who are directors and listed above)
Ian Cleminson serves as Executive Vice President and Chief Financial Officer to the Corporation, having joined it in February 2002. Prior to his appointment as Chief Financial Officer, Mr. Cleminson was Financial Controller for the Fuel Specialties and Active Chemicals divisions within Innospec. He joined the Corporation from BASF plc where between 1999 and 2002 he served as Financial Controller of their Superabsorbants division. Previously, he worked as a senior manager with KPMG, the global accountancy firm, having worked as an accountant in private practice since 1989.
Andrew Hartley serves as Vice President and General Counsel to the Corporation, having been appointed as Corporate Secretary on November 1, 2004. Prior to this, Mr. Hartley was Company Secretary and General Counsel of BASF plc, the UK subsidiary of the global chemical company, BASF AG. He has held in-house legal positions since 1990, prior to which he worked in private practice.
Cathy Hessner serves as Senior Vice President, Human Resources of the Corporation, having joined it in March 2003. Prior to joining the Corporation, she served as European Human Resources Director for Nova Chemicals, a US commodity chemicals company. From 1995 to 1999, Dr. Hessner served as European HR Director, based in the UK, for Anheuser-Busch, the US brewing corporation and, prior to that, spent nine years with various divisions of Mars Incorporated in a variety of human resources and general business roles.
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Ian McRobbie serves as Senior Vice President, Research and Technology, having joined the Corporation in January 2002. Between 1989 and 2002 he was Technical Director of A H Marks and Company Limited, a privately owned British chemical company operating in agrochemical and specialty chemical markets. Prior to this, he worked in senior research and manufacturing roles for Seal Sands Chemical Co. Limited (a wholly owned subsidiary of the Hexcel Corporation based in California) and BTP plc (now part of Clariant).
Richard Shone serves as Vice President, Safety, Health and Environment of the Corporation, having joined the Corporation in a similar capacity in May 1997. Prior to that, from 1986, he served as General Manager, Group Safety Hazards and Environment of Laporte plc, having previously worked for the UK’s Health and Safety Executive.
Patrick Williams serves as Executive Vice President and President, Fuel Specialties of the Corporation. Prior to holding this position, Mr. Williams held a number of senior management and sales leadership positions in Innospec Fuel Specialties LLC, latterly acting as the Chief Executive Officer of this business. Before joining the predecessor company of Innospec Fuel Specialties LLC, Starreon Corporation, in 1993, Mr. Williams established a number of businesses and currently holds equity positions in a small exploration and oil production company and a real estate business.
Mr. Charles M. Hale and Mr. Samuel A. Haubold will retire immediately after the Annual Meeting.
Family Relationships
There are no other family relationships between any of the persons referred to in the sections “Nominees for Director”, “Continuing Directors” or “Officers” above.
LEGAL PROCEEDINGS
The Corporation’s Form 10-K for the year ended December 31, 2007, a copy of which is enclosed with this Proxy Statement and which was filed with the SEC on February 25, 2008 sets forth details of legal proceedings in which the Corporation is involved. Information relating to such legal proceedings is incorporated herein by reference.
No director or officer and to our knowledge no affiliate of the Corporation or any associate of any director or officer is involved, or has a material interest in, any proceedings which would have a material adverse effect on the Corporation.
Corporate Governance Guidelines
Our Board of Directors believes that the purpose of corporate governance is to ensure that we maximize stockholder value in a manner consistent with all applicable legal and regulatory requirements as well as the highest standards of business ethics and integrity. The Corporation has adopted a set of Corporate Governance Guidelines available on the Corporation’s website, including specifications for director qualification and responsibility, which the Board and senior management believe promote this purpose and represent best practices. The Board of Directors believes that corporate governance is an evolving process and periodically reviews and updates the Corporate Governance Guidelines.
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Table of ContentsThe guidelines can be accessed electronically in the Investor Relations section of our website, www.innospecinc.com, by writing to Investor Relations at Innospec Inc., Innospec Manufacturing Park, Oil Sites Road, Ellesmere Port, Cheshire, CH65 4EY, England, or by e-mailing investor@innospecinc.com.
Information about the Board of Directors
Attendance
The Board of Directors met seven times and the Committees of the Board met a total of twenty times during fiscal year ended December 31, 2007. Directors are expected to attend all Board Meetings and meetings of committees on which they serve. All of the directors attended the 2007 Annual Meeting. Each of the directors attended all of the meetings of the Board and meetings of committees of the Board on which he served in person or by teleconference.
Independent Board of Directors
The Board of Directors, after considering broadly all relevant facts and circumstances of which it is aware, including those matters set forth under “Certain Other Transactions and Relationships” and under “Management—Family Relationships”, has determined that a majority of its members are independent within the meaning of the NASDAQ Stock Market listing rules applicable on the date hereof.
The Corporation adopted the following standards for director independence in compliance with NASDAQ’s corporate governance listing standards.
1. No director qualifies as “independent” unless the Board affirmatively determines that the director has no material relationship with the Corporation or its wholly-owned subsidiaries (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Corporation). These determinations must be disclosed.
2. The Board has established the following criteria for determining director independence:
a. A director who is an employee, or whose immediate family member is an executive officer of the Corporation is not “independent” until three years after the end of such employment relationship;
b. A director who receives, or whose immediate family member receives, more than $60,000 per year in direct compensation from the Corporation, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not “independent” until three years after he or she ceases to receive more than $60,000 per year in such compensation;
c. A director who is affiliated with or employed by, or whose immediate family member is affiliated with or employed in a professional capacity by, a present or former internal or external registered public accounting firm of the Corporation is not “independent” until three years after the end of the affiliation or the employment or auditing relationship;
d. A director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of the Corporation’s present executives serve on that company’s compensation committee is not “independent” until three years after the end of such service or the employment relationship; and
e. A director who is an executive officer or an employee, or whose immediate family member is an executive officer, of a company that makes payments to, or receives payments from, the Corporation for property or services in an amount which, in any single fiscal year, exceeds the greater of $200,000, or 5% of such other company’s consolidated gross revenues, is not “independent” until three years after falling below such threshold.
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Table of ContentsThe Board determined that each member of the Board, except for Mr. Jennings, meets the aforementioned independence standards. Mr. Jennings does not meet the aforementioned independence standards, because, as the current President and Chief Executive Officer of the Corporation, he is an employee of the Corporation.
The Corporation is listed on the NASDAQ Stock Market (“NASDAQ”). Rule 4200(a)(15) of NASDAQ’s Marketplace Rules sets forth the applicable criteria for determining director independence. By virtue of Rule 4200(a)(15), all directors of the Corporation, except for Mr. Jennings, may be defined as independent.
Executive Sessions of Non-Employee Directors
“Non-employee” directors are all those who are not Corporation officers, and includes such directors who are not independent by virtue of a material relationship, former status or family membership, or for any other reason. Executive sessions are led by the Chairman. An executive session is held in conjunction with each regularly scheduled Board meeting and other sessions may be called by the Chairman at his own discretion or at the request of the Board. Dr. Robert E. Bew has been designated as the Chairman. There were four executive sessions during the fiscal year 2007.
Contacting the Board of Directors
Any stockholder who desires to contact the Chairman or any of the directors of the Corporation may do so via the following e-mail address: contact.board@innospecinc.com, or by writing to them at Innospec Inc., Innospec Manufacturing Park, Oil Sites Road, Ellesmere Port, Cheshire, CH65 4EY, England. Communications received electronically or in writing will be forwarded to the addressee of the communication.
Committees of the Board of Directors
The Corporation has Audit, Compensation and Nominating and Governance Committees, the members of which are as shown below.
Audit Committee
The Audit Committee operates pursuant to a written Charter, and is responsible for monitoring and overseeing the Corporation’s internal controls and financial reporting process, the independent audit of the Corporation’s consolidated financial statements by the Corporation’s independent registered public accounting firm, PricewaterhouseCoopers LLP, and the other responsibilities set forth in its Charter. The Charter was filed with the Corporation’s 2005 Proxy Statement. Mr. C. Hale has served as a member of this Committee since its formation on May 11, 1998. On February 20, 2002 Mr. M. Hale was appointed Chairman of the Committee. On March 31, 2004, Dr. Bew was appointed to the Committee. Mr. Aldous was appointed to the Committee on February 15, 2005. Dr Bew resigned from the Committee with effect from December 31, 2005 and will re-join with effect from May 6, 2008. Each of the members of the Committee meets the criteria for director independence for service on the Audit Committee as set forth in Rule 4350(d) of NASDAQ’s Marketplace Rules. The Committee met eight times during the fiscal year 2007.
All Audit Committee members possess the required level of financial literacy and at least one member of the Committee meets the current standard of requisite financial management expertise as required by NASDAQ on the date hereof. The Board of Directors has determined that Messrs. M. Hale and Aldous qualify as Audit Committee Financial Experts, as such term is defined in Item 401(h) of Regulation S-K, and are independent for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board made this determination based on Mr. M. Hale’s forty years of experience as a securities analyst and portfolio manager with emphasis on balance sheet study and his direct experience serving on the audit committee of the Great Lakes Chemical Corporation (now Chemtura Corporation) for the last twenty years (including five years as its chairman), and Mr. Aldous’ qualification as a chartered accountant and appointment as a partner of Grant Thornton LLP, Chartered Accountants.
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Table of ContentsPricewaterhouseCoopers LLP, the Corporation’s independent registered public accounting firm, reports directly to the Audit Committee.
The Audit Committee, consistent with the Sarbanes-Oxley Act of 2002 and the rules adopted thereunder, meets with management and the independent registered public accounting firm prior to the filing of officers’ certifications with the Securities and Exchange Commission (the “SEC”) to receive information concerning, among other things, significant deficiencies or material weaknesses in the design or operation of internal controls.
Any stockholder or employee may submit at any time a good faith complaint regarding any questionable accounting, internal accounting controls, or auditing matters concerning the Corporation without fear of dismissal or retaliation of any kind. Employees are encouraged to report their concerns and complaints to the Corporate Secretary or to the Audit Committee. Confidential, anonymous reports may be made by writing to: Corporate Secretary, Innospec Inc., Innospec Manufacturing Park, Oil Sites Road, Ellesmere Port, Cheshire, CH65 4EY, England. The Audit Committee has adopted a Complaint Monitoring Procedure Policy to enable confidential and anonymous reporting to the Audit Committee. All complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters will be retained in accordance with the Corporation’s document retention policy.
The Corporation’s Internal Audit group reports directly to the Audit Committee.
The Corporation limits the number of public company audit committees on which its audit committee members may serve to three or less.
The Audit Committee Report appears later in this Proxy Statement.
Compensation Committee
The Compensation Committee operates under a formal charter that governs its duties and standards of performance. The Charter was filed with the Corporation’s 2004 Proxy Statement.
The Committee reviews management compensation programs, recommends compensation terms and agreements for senior executive officers to the Board for Board approval, reviews changes in compensation for senior executive officers and non-employee directors and administers the Corporation’s stock option plans. Mr. Puckridge and Mr. C. Hale were appointed to the Committee on February 20, 2002. Mr. Puckridge was appointed Chairman on March 31, 2004. Mr. Haubold was appointed to the Committee on April 1, 2004. It is intended that Mr. Aldous and Mr. Fearn will be appointed to the Committee with effect from May 6, 2008. Each of the members of the Committee meets the criteria for director independence as set forth in Rule 4200(a)(15) of NASDAQ’s Marketplace Rules. The Committee met five times during the fiscal year 2007.
Compensation Committee Interlocks and Insider Participation
As described under “Director Independence” above, each of the Compensation Committee members are independent under the rules of the NASDAQ Stock Market and under the Corporation’s independence criteria.
During 2007 no Committee members were officers or employees of the Corporation, were former officers of the Corporation or were engaged in transactions with a related person that would be required to be disclosed by the rules promulgated by the SEC.
In addition, during 2007 none of the Corporation’s executive officers served as directors or board committee members of other entities, of which no executive officers served as a director of the Corporation or as a member of any of the Corporation’s Board Committees.
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Table of ContentsNominating and Governance Committee
On November 19, 2002, the Corporation formed a Nominating and Governance Committee and appointed Mr. Haubold as its Chairman and Mr. Puckridge as a member. Dr. Bew was appointed to the Committee on November 1, 2005. It is intended that Mr. Roeser will be appointed to the Committee with effect from May 6, 2008. The purpose of the Committee is to identify individuals qualified to become Board members consistent with criteria approved by the Board, recommend to the Board the persons to be nominated by the Board for election as directors at the Annual Meeting of Stockholders, develop and recommend to the Board a set of corporate governance principles and oversee the evaluation of the Board and management. The Committee met four times during the fiscal year 2007.
Each of the members of the Committee meets the criteria for director independence as set forth in Rule 4200(a)(15) of NASDAQ’s Marketplace Rules. The Committee operates under a formal charter that governs its duties and standards of performance. The Charter was filed with the Corporation’s 2004 Proxy Statement.
The Committee utilizes a variety of methods for identifying and evaluating nominees for director. The Committee regularly assesses the appropriate size of the Board and whether vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Committee considers potential candidates for director. Candidates may come to the attention of the Committee through current Board members, professional search firms, stockholders or other persons. These candidates are evaluated at regular or special meetings of the Committee and may be considered at any time during the year. The nominees for election at this year’s Annual Meeting of Stockholders were recommended for nomination by non-employee directors of the Corporation.
The policy of the Committee is to consider properly submitted stockholder nominations for election to the Board as described in the Corporate Governance Guidelines which may be found at Appendix A of the Corporation’s 2004 Proxy Statement, and can also be found on the Corporation’s website www.innospecinc.com. In order for any candidate to be considered by the Committee, and if nominated, included in the Proxy Statement, such recommendation should be received no later than the deadline for submission of stockholder proposals. See “Stockholders’ Proposals For the 2008 Annual Meeting”. Recommendations should be sent to the Corporate Secretary and should specify the nominee’s name, qualification for Board membership and any other information required by the Corporation’s Bylaws. All properly submitted stockholder proposals for director nominees received by the Corporate Secretary will be submitted to the Committee for review and consideration.
Code of Ethics
Management has adopted a Code of Ethics, violations of which may be reported to the Chairman of the Nominating and Governance Committee or the Corporate Secretary. This Code of Ethics is intended to promote, among other things, honest and ethical conduct, full and accurate reporting and compliance with applicable laws and regulations.
Copies of Code of Ethics, Corporate Governance Guidelines and Committee Charters
Any stockholder who requires a copy of the Code of Ethics, Corporate Governance Guidelines or any of the Board Committee Charters may obtain one by writing to Investor Relations at Innospec Inc., Innospec Manufacturing Park, Oil Sites Road, Ellesmere Port, Cheshire, CH65 4EY, England, or by e-mail to: investor@innospecinc.com. These documents can also be accessed via the Corporation’s website, www.innospecinc.com. The Charters of the Committees may be accessed at the Corporation’s website at www.innospecinc.com under the “Investor Relations”, then “Corporate Governance” headings.
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Table of ContentsCOMPENSATION DISCUSSION AND ANALYSIS
Our executive compensation program is designed to help us recruit and retain the executive talent required to successfully manage our businesses. Accordingly, the overall compensation program is designed to motivate employees to achieve business objectives and maximize their long-term commitment to our success by providing compensation elements that align executives’ interests with shareholder value and achievement of our long-term strategies.
Compensation Philosophy
The compensation philosophy of the Corporation is to link executive compensation to continuous improvement in corporate performance and increases in stockholder value. The goals of the Corporation’s executive compensation programs are to:
The Corporation regularly carries out a review of the market to ensure that each component of our executive compensation program is competitive at the market median, and aims to provide a balance between fixed elements of pay and performance related elements. No element of compensation is driven by tax, accounting or regulatory considerations. Further information on each of the components of compensation is given below.
Role of the Compensation Committee and its advisors in determining compensation
The Corporation’s Compensation Committee is responsible for assisting the Board in fulfilling its responsibilities for establishing and maintaining executive compensation and incentive programs in accordance with the philosophy outlined above. The Committee provides oversight to ensure that compensation and incentive programs are competitive, closely related to the achievement of corporate objectives and aligned with long-term interests of shareholders. Independent advice is provided to the Committee by Hay Group, who were appointed by the Committee. As part of their role as advisors to the Committee, Hay Group undertake external benchmarking of the senior executive salaries and overall compensation packages and provide ad hoc advice and support to the Chairman of the Committee as required. In addition, they provide advice on the CEO’s overall package and attend at least one Compensation Committee meeting a year. In 2007, the advisors attended two meetings of the Compensation Committee and had a number of telephone or e-mail discussions with the Chairman of the Committee. Any additional work undertaken by the advisor for the Corporation must have the approval of the Committee. The Chief Executive Officer (“CEO”) makes recommendations to the Committee on the performance of the senior executive officers, excluding himself. The Senior Vice President, Human Resources provides information to the Committee as requested. No further role is played by executive officers. The Compensation Committee reviews and, if appropriate, approves the recommendations of the CEO on the
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Table of Contentsbase salary for the named executive officers. In addition, the Committee recommends a base salary for the CEO to the Board, taking into account the market information provided by Hay Group, the performance of the CEO in the previous year and the overall business performance and results.
Elements of Compensation
The material elements of compensation for the Corporation’s named executive officers are discussed and explained in separate sections below.
A. Base Salary
The level of base salary takes into account a number of factors. Each year the external market is assessed by Hay Group, as independent advisors, and base salary is targeted at the median level of the relevant market. In addition, the level and scope of responsibility, experience, and corporate, business unit and individual performance are all key criteria in evaluating role size and hence base salary determination.
The relevant external market and the Hay Group pay database used for executives based in the UK comprises UK-based roles within industrial and service companies. All executive jobs are assessed and graded using the Hay methodology as described above, ensuring that when they are matched into the database by Hay Group, only jobs which are of a similar size are included. We believe that this approach is appropriate as it takes into account the specific nature of the roles as well as the size of the Corporation, the nature of its business and the markets within which it operates.
In addition we look at data for companies based in the UK with a revenue range of $300 million to $600 million and a market capitalization range of $350 million to $550 million. This provides an additional check to ensure that there is consistency in the data.
For the executive based in the US, namely the position of Executive Vice President, Fuel Specialties, US Chemical Industry data is used. Again the role is assessed before matching it into the database to ensure it is compared with jobs of a similar size in the United States.
In setting base salaries the Compensation Committee target the median (50th percentile) of the survey group. Individual salaries within a range are determined by each officer’s experience, expertise, overall performance and contribution to the Corporation and market competitiveness. We believe that this methodology enables us to remain competitive in our markets without incurring unnecessary costs. In 2007, as part of the annual salary review, Mr. Jennings’ base salary was increased by 10.34% to $641,376. The base salary increases for the other named executive officers were on average 6.1%, based on a competitive analysis. In addition, after consulting with their advisor the Committee recommended subsequent increases in the base salary to Mr. Jennings and Mr. Williams to reflect their outstanding contribution to the extraordinary performance of the Company and to take account of market rates. These recommendations were approved by the Board, and effective October 1, 2007, Mr. Jennings’ base salary was increased to $841,806 and Mr. Williams’ base salary was increased to $504,250.
B. Incentives
Incentive programs are operated both over the short-term and the long-term. Linking a significant proportion of pay to performance is a key element of executive remuneration. In setting the policy levels, the Compensation Committee reviewed each element of overall compensation and targeted market median practice in terms of the different components, using the benchmark market specified above. The Committee believes that the overall compensation has the appropriate balance between long and short term incentives and cash and non-cash compensation, based on knowledge of market practices and input from its advisors. In 2007, the Committee formally reviewed the allocation of compensation between the different elements of reward and
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Table of Contentsconfirmed that the balance was appropriate and in line with market practice. The Committee target at least 50% of total compensation for the CEO to be delivered through both long and short term variable compensation. In the case of the CEO, over 50% of his overall target compensation is delivered through variable compensation.
i) Annual Incentives
Management Incentive Compensation Plan (MICP)
The Corporation’s short term incentive plan is the MICP which is driven by annual performance. For the executives and senior management team, payments are based on achievement against pre-determined targets set by the Board for corporate performance and business unit performance (where appropriate) and personal performance against objectives. All bonus payments are subject to a corporate performance threshold: if this is not achieved then no bonus payments are made to individuals for that year regardless of personal and business unit performance. Further, for those individuals with a business unit performance measure, if business unit performance is below a threshold level then no bonus will be paid for that year, irrespective of overall corporate and individual performance.
In the case of the CEO the Committee has set a target bonus of 55% of his base salary. In calculating the bonus due, 80% is based on the achievement of corporate targets and business performance and 20% is based on achievement of personal objectives. In the case of the named executives, the target bonus is set at 40% (33% in the case of Mr. Williams, Executive Vice President and President, Fuel Specialties), with 80% based on Corporate and business performance and 20% based on achievement of personal objectives.
The Compensation Committee reviews the allocation between business and personal performance each year to ensure it is appropriate.
The performance measures are also reviewed to ensure they remain appropriate and stretching. The corporate measures are currently based on achievement of targeted levels of corporate cash and corporate operating income. These are key performance indicators for the Corporation. Personal objectives are specific to the particular business area or function within which the executive operates. In addition to the personal element shown above, if an individual’s performance assessment for the year is below satisfactory then no bonus is paid at all.
The levels of target bonus are kept under review and are targeted at the median level against the market. The maximum bonus achievable for out-performance is also reviewed to ensure that the incentive to deliver exceptional performance is in line with market trends. As a result the maximum bonus achievable for out-performance was increased for 2007 and the level of out-performance required for maximum bonus was also increased. In 2007, the maximum bonus achievable for out-performance was equal to 230% of target bonus for the CEO. This gives a maximum bonus potential of 126.5% of his base salary. In the case of the other executives, the maximum bonus potential is 92% of their base salary (76.6% in the case of Mr. Williams). Maximum bonuses are awarded when the business exceeds its targets for the business results by 30%. If however the business results are less than 90% of the targets, no bonuses are paid to any executive, regardless of their personal performance.
No awards are made under the bonus scheme until the annual business results have been audited by the independent registered public accounting firm and approved by both the Audit Committee of the Board and the full Board.
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Table of ContentsIn 2007, in determining the amount of bonus earned by the CEO, the Committee took into account, amongst other things, the improvement in the external value and perception of the Corporation, the significantly improved operating performance of the Corporation and the development of an R&D strategy which resulted in improved focus on development of new products to support the strategic direction or the Corporation. Based on the strong performance and results of the Corporation, the Board approved the Compensation Committee’s recommendation for Mr. Jennings to be awarded a bonus of $1,041,735.
A provision has now been introduced which allows for potential claw-back of bonuses already paid if, at some point in the future, it is identified that the audited results were inaccurate or need to be restated.
Co-Investment Plan
In recognition of the need to align shareholder and executive interests, the Corporation introduced the Co-Investment Plan in 2004. Under the terms of the plan an executive may invest a portion of the annual bonus (paid in accordance with the targets above) to purchase shares in the Corporation and receive an award of matching shares as described below. If the executive receives a bonus for exceeding his targets, then the executive is required to use one-third of that part of his bonus which is in excess of his target bonus to purchase shares, which will be matched as indicated:
All elections for deferral must be made within 21 days of the bonus notification date. Shares will be purchased at market price on the next available trading opportunity in accordance with the Corporation’s trading policy. Participants in the plan must generally remain employed for 3 years and continue to hold the shares purchased under this plan in order to receive the matching shares. The Compensation Committee retains the discretion to permit release of matching shares in certain circumstances. In the event that the Corporation undergoes a change of control, restrictions on the matching shares will lapse and shares will be released.
ii) Long term Incentives
Share option plans
To further align shareholder and executive interests and to drive long-term performance the Corporation operates two equity based incentive plans, the Company Share Option Plan (“CSOP”) and the Performance Related Share Option Plan (“PRSOP”). The policy for granting options to the named executives under these plans is targeted at the UK market median and is as follows:
For example, the CEO will typically receive CSOP options, valued at market price, to the value of 20% of his base salary.
Other employees also participate in these plans but with a lower grant level.
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Table of ContentsIn line with the focus on performance excellence, the performance rating of an individual is also taken into account in determining the grants made as follows:
Rating 1, defined as outstanding performance—150% of policy is granted
Rating 2, defined as exceeding performance expectations—125% of policy is granted
Rating 3, defined as a good performance—100% of policy is granted
If an individual receives a performance rating of below expectations for the year, they do not receive any stock option grants for that year.
The performance of the senior team is assessed by the CEO and the Compensation Committee. The CEO recommends a rating to the Compensation Committee. The Compensation Committee reviews these and assesses the performance of the CEO and makes a final recommendation on performance ratings to the full Board for approval.
This provides for a rigorous performance-related grant policy, in addition to the performance elements of the grants themselves.
In 2007, Mr. Jennings was rated as outstanding and as such was awarded stock options at 150% of the policy levels. In the case of the other named executive officers, based on the assessment of their individual performance, as approved by the Compensation Committee, Mr. Williams was awarded stock options at 150% of the policy levels, Dr. McRobbie and Mr. Hartley were awarded stock options at 125% of the policy levels and Dr. Hessner and Mr. Cleminson were awarded stock options at 100% of the policy.
The grants are issued on a date set by the Compensation Committee each year. This is usually after the release of the annual financial results. The Committee determines the grant date to be used in advance and the share price used is typically the closing share price at the end of the day prior to the agreed grant date.
The Committee also have the discretion to grant options outside of the stated policy to reflect extraordinary company performance. In addition, the Committee, acting on behalf of the Board, have the discretion to grant options outside of the policy levels and annual grant process for retention or recruitment purposes.
In 2007, the Committee made two stock options awards for retention purposes. Mr. Jennings was granted 100,000 zero cost options, 50,000 of which will vest after 3 years and 50,000 of which will vest after 6 years, subject to Mr. Jennings continuing to be employed by the Corporation and delivering a good performance each year. Mr. Williams was granted 50,000 zero cost options, 20,000 of which will vest after 3 years and 30,000 of which will vest after 4 years, subject to his continued employment with the Corporation and achieving a good performance in each year.
Following a review of the long term incentive policy and overall compensation against the market median provided by their advisors, the Compensation Committee have recognized that the grant policy stated above is below market median levels in both the UK and US and as a result does not provide the appropriate focus on long term performance or on shareholder value. The Committee have therefore revised the grant policy for 2008 as follows:
The impact of an individual executive’s personal performance on the grant policy remains unchanged. This change positions that element of overall compensation delivered through long term incentive plans closer to market practice in the UK & US and ensures the balance between fixed and variable compensation is appropriate and in line with market practice.
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Table of ContentsCSOP
Under the CSOP, options are granted at market value and become exercisable after three years. All options have a ten year term. Options are granted within 20 days after the announcement of results or similar information.
Except in certain circumstances participants must remain in employment with the Corporation in order to be able to exercise their options. The exceptions to this include death, injury, ill-health or disability, redundancy and the transfer of the part of the business within which the option holder works. In these cases, under the rules of the Plan, options vest and the holder has a 12 month period to exercise the options.
In the event of a change of control of the Corporation, under the rules of the Plan, all options become exercisable.
PRSOP
Under the PRSOP, participants are granted the right to acquire shares at no cost provided that specified performance criteria are achieved. The performance criteria that are set are designed to be “stretch” targets which focus on delivery of high performance and enhancing shareholder value. The performance criteria are regularly reviewed to ensure that they remain relevant and stretching. The criteria for awards made in 2007 are based on total shareholder return measured over a three year period starting with the financial year of the date of grant and the performance of the Corporation versus competitors as measured by share price performance over a three year period versus the Chemical Week 75 Index. The following levels of growth must be achieved before awards vest:
Awards vest on a straight line basis between each threshold.
The grants are issued on a date set by the Compensation Committee each year. This is usually after the release of the annual financial results. The Committee determines the grant date to be used in advance and the share price used is typically the closing share price at the end of the day prior to the agreed grant date.
If participants cease employment with the Corporation prior to the end of the vesting period awards will lapse unless the Compensation Committee determines otherwise.
In the event of a change of control of the Corporation, under the rules of the Plan, all options become exercisable.
Exceptional Performance
An additional long term incentive plan designed to reward selected executives for delivering exceptional performance has been recommended by the Compensation Committee, working with its advisors, and approved by the Board. Under this plan a discretionary bonus will be payable to eligible executives if the Innospec share performance out-performs that of competitors, as measured by the Russell 2000 Index, by a minimum of 10% over the three years from January 2008 to December 2010. The amount of bonus which can be earned will be a
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Table of Contentsset cash amount for each one percentage point of out-performance. The maximum bonus under this plan will be payable for an out-performance versus the Russell 2000 Index of 30%. No bonus is payable under this plan if the Innospec share price does not out-perform the Russell 2000 Index by more than 10% over the three year period. Participants in this plan must still be in employment with the Corporation at the end of the three year period in order to be eligible to receive any payment under this plan. Eligibility for participation in the plan is at the discretion of the Compensation Committee, acting on behalf of the Board.
Mr. Jennings, CEO, and Mr. Williams, Executive Vice President, Fuel Specialties, are the only executives eligible for participation under this plan. In the case of Mr. Jennings, the amount of bonus earned for each one percentage point of out-performance will be $400,000 and in the case of Mr. Williams the amount will be $200,000. In addition, as part of this plan to reward exceptional performance, a discretionary bonus to recognize exceptional performance prior to 2008 can be awarded. Under this plan a bonus of $1,000,000 was awarded to Mr. Jennings and a bonus of $500,000 awarded to Mr. Williams in 2007 to recognize the exceptional performance of the Corporation over the previous two years, specifically the establishment of a sustainable specialty chemical business, the reduced dependency on the declining TEL business, the significant improvement in the external perception of the Corporation and the exceptional improvement in shareholder value over the period.
C. Shareholding Guidelines
To further align shareholder and executive interests the Corporation has adopted a shareholding requirement for the executive team. All executives are required to acquire shares and to retain the equivalent of one times base salary. This level of shareholding must be reached within an agreed number of years from appointment. For example, in the case of the CEO, this is 4 years from the date of his appointment into his position. Only shares which are registered in the executive’s name are taken into account for these purposes. Unvested equity awards do not count. At the end of 2007, the shareholding of the CEO equated to 135.6% of his year end salary.
D. Other Benefits and Perquisites
These are provided as appropriate and are set by reference to median market practice. They consist of pension arrangements, company car or car allowance, life, disability and medical cover. There are no nonqualified deferred compensation plans. Full details are set out in the footnotes to the Summary Compensation Table.
E. Post-termination Compensation
Post-termination arrangements vary depending on the nature of the termination event and are in accordance with UK market norms. Full details are set out in the footnotes to the Post Employment Payments table.
F. Non Employee Directors
There are also two share plans which are specific to the non employee directors (NEDs). Under the NED Stock Plan non-employee directors are required to take one quarter of their annual fee in the form of shares in the Corporation and are required to hold these as shares as long as they remain a NED with the Corporation. The plan is intended to align the interests of the directors with those of the Corporation and its shareholders.
The NEDs are also eligible to participate in the Non Employee Director Stock Option Plan. The policy for granting options under this plan is:
The annual basic fee for a NED is currently $33,000 and this is the figure used for the annual grant for all NEDs, including the Chairman.
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Table of ContentsUnder this plan, options become exercisable after three years and have a ten year term. Generally, NEDs must remain a NED in order to exercise their options except in the case of death in which case options are able to be exercised for a twelve month period after the date of death. If a NED ceases to be a NED with the Corporation prior to the end of the vesting period, at the discretion of the Compensation Committee, options can be exercised for a period of twelve months from the date of termination of Office.
The NED compensation was reviewed in 2007 and compared to that offered by similar sized chemical companies. As a result, the annual basic fee will increase to $40,000 for 2008. The grant policy was also revised and from 2008, the annual grant will be $45,000 worth of options at market price.
Summary Compensation Table
Commentary on Summary Compensation Table
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Table of ContentsGrant Based Awards Table
Commentary on Grants Based Awards Table
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Table of ContentsOutstanding Equity Awards at Fiscal Year End
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Table of ContentsWith respect to non vested or unearned performance based share options, the number of shares reported in the table is based on achieving threshold performance goals, as in the previous fiscal year (2007) the performance achieved did not exceed the threshold performance of 4% increase in TSR per annum or the relative threshold performance of 90% of the Chemical Week 75 index performance. In the case of the option grants which expire in 2015, however, the number of shares reported is based on full achievement of the performance criteria as these shares vest in February 2008 and this is the expected outcome. The number of shares reported for Mr. Cleminson in the case of those granted in June 2006, which expire in June 2016 and those reported for Mr. Williams and Mr. Jennings in the case of those which expire on March 2, 2017, are based on full achievement of the performance criteria as this is the expected outcome in each case. In the case of the 200 options granted to all named officers which expire on March 12, 2017 the number of shares reported in each case is based on the full achievement of the performance criteria as this is the expected outcome.
Options Exercise and Stock Vested Table
The following table provides information for the named executive officers on stock option exercises during the fiscal year 2007, including the number of shares acquired on exercise and the value realized. No stock awards vested during 2007.
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Table of ContentsPensions Benefit Table
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Post Employment Payments Table
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Directors Compensation Table
Under the NED Stock Plan, the Non Employee Directors are required to take one quarter of their annual retainer fee in stock in the Corporation. This is taken at fair market value and the NEDs are required to hold the stock as long as they remain a NED.
During fiscal year 2007 the non-employee directors received the following compensation:
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporation’s directors and officers, and persons who beneficially own more than 10% 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 or other equity securities with 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 Corporation believes that each of its officers, directors and beneficial owners of more than 10% of the Common Stock complied with all Section 16(a) filing requirements applicable to them during fiscal 2007.
TRANSACTIONS WITH EXECUTIVES, OFFICERS, DIRECTORS AND OTHERS
During the past fiscal year, the Corporation and its subsidiaries had no transactions in which any director, or any member of the immediate family of any director, had a material direct or indirect interest reportable under the applicable rules of the SEC. The Corporation has not made any charitable contributions to any charity on which any director serves as an executive officer.
CERTAIN OTHER TRANSACTIONS AND RELATIONSHIPS
The Corporation has retained and continues to retain Kirkland & Ellis International LLP, a law firm in which Mr. Haubold was formerly a partner, to perform significant legal services for the Corporation. Mr. Haubold retired from Kirkland & Ellis International LLP in June 2003.
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Table of ContentsSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table “Beneficial Owners as of December 31, 2007” sets forth certain information with respect to the beneficial ownership of the Corporation’s Common Stock as of December 31, 2007 by holders of more than five percent of the Corporation’s outstanding Common Stock and as of December 31, 2007. The table “Share Ownership of Directors and Officers” sets forth information with regard to the directors of the Corporation and the executive officers of the Corporation included in the Summary Compensation Table in the CD&A (“Named Executives”), and all current directors and executive officers of the Corporation as a group. As of December 31, 2007, excluding treasury stock, there were 23,777,083 shares of Common Stock outstanding. As of February 8, 2008, excluding treasury stock, there were 23,672,783 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 sixty 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 sixty days of December 31, 2007 for five percent holders and executive officers of the Corporation. 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.
Beneficial Owners as of December 31, 2007 (Information as Reported in Schedule 13Gs as of December 31, 2007)
Based on a review of filings with the Securities and Exchange Commission, the Corporation is unaware of other holders of more than 5% of the outstanding shares of Innospec Inc Common Stock(4). Notes:
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Share Ownership of Directors and Officers as of March 12, 2008
The following table sets forth the amount of the Corporation’s common stock beneficially owned by each of the directors, the Chief Executive Officer, the Chief Financial Officer and the three other most highly compensated executive officers of the Corporation:
Notes:
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Table of ContentsEquity Compensation Plans
The following table summarizes information, as of February 8, 2008, relating to current stock option plans of the Corporation approved by security holders pursuant to which grants of options, restricted stock, restricted stock units or other rights to acquire shares have been granted from time to time under the CSOP, PRSOP, NEDs’ Stock Option Plan, Co-Investment Plan, NED Stock Plan and Savings Related Plan.
Equity Compensation Plan Information
The closing price of the Corporation’s Common Stock on NASDAQ Stock Market on March 12, 2008 was $20.85.
COMPENSATION COMMITTEE REPORT
The Board has adopted a written Compensation Committee Charter.
As part of fulfilling its responsibilities, the Compensation Committee:
Based upon these reviews and discussions, the Compensation Committee has recommended to the Board of Directors, and the Board of Directors has approved, that the Corporation’s Compensation Discussion and Analysis be included in this Proxy Statement filed with the Securities and Exchange Commission.
COMPENSATION COMMITTEE
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Table of ContentsAUDIT COMMITTEE REPORT
The Board has adopted a written Audit Committee Charter.
As part of fulfilling its responsibilities, the Audit Committee:
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 Corporation’s audited financial statements be included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 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 the years ended December 31, 2007 and 2006 (Note 1) were:
The Audit Related fees as of the years ended December 31, 2007 and 2006, respectively, were for assurance and services relating to consultations concerning financial accounting and reporting standards.
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Table of ContentsTaxation Advisory fees as of the years ended December 31, 2007 and 2006, respectively, were for tax planning and tax advice and advice related to mergers and acquisitions.
Taxation Compliance fees as of the years ended December 31, 2007 and 2006, respectively, were for services related to tax compliance, including the preparation of tax returns and claims for refund and advice regarding share option schemes.
Other fees as of the year ended December 31, 2007 were for services related to US GAAP training, testing of subsidiary merger documents and advice on the stock split.
Audit Committee Pre-approval Policies and Procedures
The Corporation’s Audit Committee adopted pre-approval policies and procedures for audit and non-audit services in August 2005. This was attached as an appendix to the Corporation’s 2006 Proxy Statement. For the years ended December 31, 2007 and 2006, no fees were paid to the principal accountant for which the de minimis exception was used. The Audit Committee reviewed and approved the audit and non-audit services rendered by PricewaterhouseCoopers to the Corporation during the year 2007 and concluded such services were compatible with maintaining PricewaterhouseCoopers’ independence.
No portion of this Audit Committee Report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, through any general statement incorporating by reference in its entirety the Proxy Statement in which this report appears, except to the extent that the Corporation specifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed to be filed under either the Securities Act or the Exchange Act.
AUDIT COMMITTEE
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Table of ContentsSTOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return to stockholders on the Common Stock of the Corporation, S&P 500 Index, NASDAQ Composite Index and Russell 2000 Index since December 31, 2002, assuming a $100 investment and the re-investment of any dividends thereafter.
Value of $100 Investment made December 31, 2002*
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Table of ContentsINFORMATION REGARDING THE CORPORATION’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The independent registered public accounting firm of the Corporation, selected by the Audit Committee for the fiscal year ending December 31, 2008, are PricewaterhouseCoopers LLP, 101 Barbirolli Square, Lower Mosley Street, Manchester, M2 3PW, 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 this Proxy Statement. If any other matter or matters are properly brought before the meeting, the persons named in the enclosed Proxy Form have discretionary authority to vote the proxy on each such matter in accordance with their judgment.
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 TO STOCKHOLDERS
Copies of the Corporation’s 2007 Annual Report on Form 10-K to Stockholders for the fiscal year ended December 31, 2007 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 on Form 10-K to Stockholders may obtain one by writing or calling Investor Relations, Innospec Inc., Innospec Manufacturing Park, Oil Sites Road, Ellesmere Port, Cheshire, CH65 4EY, England, telephone +44 151 355 3611, or by e-mail to investor@innospecinc.com.
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Table of ContentsSTOCKHOLDERS’ PROPOSALS FOR THE 2009 ANNUAL MEETING
The Corporation anticipates holding its 2009 Annual Meeting of Stockholders on May 5, 2009.
Under the regulations of the Securities and Exchange Commission, any stockholder desiring to make a proposal to be acted upon at the 2009 Annual Meeting of Stockholders and have it included in our proxy materials must present such proposals to the Secretary of the Corporation not later than December 1, 2008.
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 by-laws of the Corporation in order to be properly brought before that annual meeting of stockholders. Under the Corporation’s by-laws, any stockholder desiring to make a proposal to be acted upon at the 2009 Annual Meeting of Stockholders must present such proposals to the Secretary of the Corporation not before February 5, 2009 or later than March 7, 2009. By order of the Board of Directors
Andrew Hartley Vice President and General Counsel
March 31, 2008
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD
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INNOSPEC INC.
RULES of the INNOSPEC INC. PERFORMANCE RELATED STOCK OPTION PLAN 2008
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Table of Contents1. DEFINITIONS
In this Plan, the following words and expressions shall, where the context so permits, have the meanings set forth below:
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References to any statutory provision are to that provision as amended or re-enacted from time to time, and, unless the context otherwise requires, words in the singular shall include the plural (and vice versa) and words importing the masculine the feminine (and vice versa).
2.1 Procedure for Grant of Options
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2.2 Requirement to Issue Option Certificate
The Company shall issue to each Option Holder an Option Certificate which shall be in such a form as the Committee shall from time to time determine. The Option Certificate shall include details of:
The Option Certificate shall include a statement of the limitations provided in Section 2.4 of this Plan.
2.3 Right to Disclaim Option
Each Eligible Employee to whom an Option is granted may by notice in writing within 30 days of the Date of Grant disclaim in whole or in part his rights under the Option in which case the Option shall for all purposes be deemed never to have been granted.
2.4 Options may not be transferred
Subject to the rights of an Option Holder’s personal representatives to exercise an Option as provided in Rule 4.3 every Option shall be personal to the Eligible Employee to whom it is granted and shall not be capable of being transferred, assigned or charged. Each Option Certificate shall carry a statement to this effect.
3. CONDITIONS RELATING TO THE GRANT OF OPTIONS
3.1 Performance Conditions
Every Option shall be granted subject to the condition that (save as provided in Rules 4.3, 4.4 and 5) it shall only be exercisable in whole or in part following the attainment of the performance conditions as advised at the Date of Grant of the Option. Performance criteria will be set at the absolute discretion of the Committee. The Committee, when granting an Option that is intended to be an Incentive Stock Option, may not impose a condition or limitation upon the exercise of such Option if it would result in such Option failing to qualify as an Incentive Stock Option.
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Table of Contents3.2 Variation of Performance Conditions
In the application of Rule 3.1, when events have happened which cause the Committee to consider that the existing constraints and/or conditions (as the case may be) have become unfair or impractical, it may, in its discretion (provided such discretion is exercised fairly and reasonably), amend, relax, waive or substitute such constraints or conditions so that such constraints or conditions so amended, relaxed, waived or substituted would, in the reasonable opinion of the Committee, be no more or less difficult to abide by or satisfy than when they were originally imposed or last amended or relaxed (as the case may be). After any such amendment, relaxation, waiver or substitution the Committee shall issue to the Option Holder a replacement Option Certificate or other notice including the details specified in Rule 2.2.
3.3 Modified Terms and Conditions
The Committee may determine that any Option shall be subject to additional and/or modified terms and conditions relating to the grant and terms of exercise as may be necessary to comply with or take account of any securities, exchange control or taxation laws, regulations or practice of any territory which may have application to the relevant Eligible Employee, Option Holder or Member of the Group.
3.4 Additional Requirements
In exercising their discretion under Rule 3.3, the Committee may:
3.5 Maximum Aggregate Number of Shares
The present maximum aggregate number of Shares which may be issued under the Plan is 575,000 subject to any future increase in this limit which may be substituted at the discretion of the Committee upon approval by the shareholders of the Company. For the purposes of the limit in this Rule 3.5 any Shares subject to an Option or other rights granted under the Plan which have lapsed, been renounced or otherwise become incapable of being exercised or Vesting shall not be treated as issued.
3.6 United States Securities Act of 1933
The grant of any Option under the Plan to any person subject to United States securities laws shall be subject to fulfilling the requirements (including obtaining any required approval or consent) of the provision of the Securities Act or of any applicable regulation or enactment. The Options have not been, and will not be, registered under the Securities Act, or under any other securities laws in any other jurisdiction in the United States. Shares issued pursuant to the exercise of an Option may be registered on Form S-8. Until so registered, any transfer of such Shares may be restricted.
3.7 Plan Approval Required
This Plan shall not take effect and no Options or rights will be granted hereunder unless the Plan is approved by the Company’s shareholders within 12 months before or after the date the Plan is Adopted.
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4.1 Earliest Date of Exercise
Save as provided in Rules 4.3, 4.4 and 5, an Option may not be exercised before whichever is the latest of:
but in any event may not be exercised later than the tenth anniversary of the Date of Grant.
4.2 Requirement to remain in Employment
Subject to Rule 4.7 and save as provided in Rules 4.3, 4.4, 4.5 and 5, an Option may only be exercised by an Option Holder while he is an employee of a Member of the Group.
4.3 Death of Option Holder
An Option may be exercised by the personal representatives of a deceased Option Holder during the period of one year following the date of death.
4.4 Right to Exercise Prematurely irrespective of Performance Conditions
Where an Option Holder ceases to hold office or employment with a Member of the Group on account of:
Options will lapse and will only be exercisable at the absolute discretion of the Committee, in which circumstances Options will be exercisable by the Option Holder within a period of one year following the date of termination of any office or employment with a Member of the Group.
4.5 Right to Exercise if Performance Conditions Achieved
A Vested Option may be exercised by an Option Holder within the period of one year following the date on which he ceases to hold any office or employment with a Member of the Group on account of:
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Table of Contents4.6 Incentive Stock Options
Notwithstanding the provisions of Rules 4.2, 4.3, 4.4, 4.5, 5.1 and 5.2, with respect to any Option Holder granted an Incentive Stock Option hereunder, an Option may be exercised by such Option Holder only within the period of three months following the date on which he ceases to hold any office or employment with a Member of the Group, except in the event that the termination of employment is on account of permanent and total disability within the meaning of Section 422(e)(3) of the Code, in which case such Option Holder may exercise his Options within a period of one year following the date on which he ceases to hold any office or employment with a Member of the Group.
4.7 Transfer of Employment within Group
An Option Holder shall not be treated for the purposes of Rules 4.4, 4.5 and 4.10 as ceasing to hold an office or employment with a Member of the Group until such time as he is no longer an employee of any Member of the Group and an Option Holder (being a woman) who ceases to be such an employee by reason of pregnancy or confinement and who exercises her right to return to work before exercising an Option, shall be treated for those purposes as not having ceased to hold such an office or employment.
4.8 Transfer of Employment Overseas
Subject to the satisfaction of the conditions imposed pursuant to Rule 3.1 if an Option Holder, whilst remaining an employee of a Member of the Group, is transferred to work in another country and as a result of that transfer will either:
the Option Holder may exercise that Option in the period commencing three months before and ending three months after the transfer takes place. If he chooses not to exercise his Option at that time, it will not thereby lapse.
4.9 Section 409A
Notwithstanding any other provisions of these Rules, if an Option is granted to someone who is or would otherwise be subject to Section 409A of the Code and such Option is granted with an exercise price less than the Fair Market Value of the shares on the Date of Grant, it must be exercised (if at all) no later than 15 March of the calendar year immediately following the calendar year in which it is first capable of exercise under the Plan.
4.10 Lapse of Options
An Option shall lapse on the occurrence of the earliest of the following:
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5. TAKE-OVER, RECONSTRUCTION AND AMALGAMATION AND LIQUIDATION
5.1 Take-over pursuant to General Offer
If any company (“the Acquiring Company”) becomes a Parent of the Company as a result of making either a general offer to acquire the whole of the Company’s issued share capital (other than any shares already owned by the Acquiring Company or any Subsidiary of the Acquiring Company) and which is made on a condition that if it is satisfied the Acquiring Company will become the Parent, or a general offer to acquire all the Shares in the Company which are of the same class as the Shares then an Option may, subject to Rule 4.6 be exercised within the period of six months of the date on which the Acquiring Company becomes the Parent, and any condition subject to which the offer is made is satisfied.
5.2 Voluntary Winding-Up of the Company
If a resolution is passed for the voluntary winding-up of the Company, an Option may, subject to Rule 4.6, be exercised during the period of six months starting on commencement of such winding-up provided that any issue of shares pursuant to such exercise is authorized by the liquidator or the Court (if appropriate) upon the application of and at the sole cost and expense of the Option Holder.
5.3 Meaning of Obtaining Control
For the purpose of this Rule 5 a person shall be deemed to have obtained Control of the Company if he and others acting in concert with him have together obtained Control.
5.4 Rollover of Options
Notwithstanding anything to the contrary in these Rules, where any person mentioned in Rule 5.1 applies, an Option Holder may, by agreement with the Acquiring Company and within the appropriate period release his Option under the Plan (“the Old Option”) in consideration of the grant to him of a new option (“the New Option”) which is equivalent to the Old Option but relates to shares in a different company (whether the Acquiring Company or some other company). With effect from the date of release references in Rules 4, 5, 6, 7, 8, 9, 10, 11, and 12 (and, in relation to expressions used in those Rules, in Rule 1) to “the Company” and “Shares” shall, in relation to the New Option, be construed as references to the Acquiring Company and Shares in the Acquiring Company or that other company as the case may be.
5.5 Meaning of “appropriate period”
For the purpose of Rule 5.4 the “appropriate period” is the period mentioned in Rule 5.1 or Rule 5.2 as the case may be.
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6.1 Actions Required of the Option Holder
An Option may be exercised, in whole or in part, on giving 30 days notice, by the delivery to the secretary of the Company, or his duly appointed agent, of an Option Certificate covering not less than all the Shares over which the Option is then to be exercised, with the notice of exercise in the prescribed form duly completed and signed by the Option Holder.
6.2 Actions Required of the Company
The relevant Shares shall be allotted or transferred (as the case may be) within 28 days following such delivery and, accordingly in cases where Shares are to be transferred, the Company shall use its best endeavors to ensure due transfer thereof. At the request of the Option Holder, the Shares may be allotted or transferred (as the case may be) to a nominee provided the Option Holder has beneficial ownership of the Shares at the time of such allotment and transfer.
6.3 Partial Exercise
Where an Option is exercised in part the minimum number of Shares which may be exercised is 100 Shares and the Company shall issue a balancing Option Certificate to the Option Holder.
6.4 Indemnity against Taxation of the Option Holder
The Option Holder shall indemnify the Company (and, where relevant, any Member of the Group) against any tax arising in respect of the exercise of the Option which is a liability of the Option Holder but for which such company is required to account under the laws of any relevant territory (including for the avoidance of doubt, employee’s national insurance contributions, employer’s national insurance contributions if so determined by the Committee and other relevant social security contributions). Such company may recover the tax from the Option Holder in such manner as the Committee thinks fit including (but without prejudice to the generality of the foregoing):-
7.1 Ranking of Shares
All Shares issued pursuant to the exercise of Options under the Plan shall as to voting, dividend, transfer and other rights (including those arising on a liquidation) rank pari passu in all respects with the Shares then in issue, except that they shall not rank for any dividend or other rights declared by reference to a record date preceding the date of such exercise.
7.2 Admission to Official List of NASDAQ
If and so long as the Shares are listed on NASDAQ the Company shall use its best endeavors to procure that as soon as practicable after the allotment of any Shares pursuant to the Plan application shall be made to NASDAQ for permission to deal in these shares unless such application has already been made.
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8.1 General Power of Adjustment
The number of Shares over which an Option is granted shall be proportionately adjusted following any capitalization issue, sub-division, consolidation or reduction of share capital and in respect of any discount element in any rights issue or other variation of share capital. With respect to Options that it is intended will be Incentive Stock Options, no adjustment made pursuant to Rule 8.1 shall have the effect of reducing the aggregate exercise price below the aggregate Fair Market Value on the Date of Grant.
8.2 Notification of Option Holder
The Committee may take such steps as they may consider necessary to notify Option Holders of any adjustments made under Rule 8.1 and to call in, cancel, endorse, issue or re-issue any Option Certificate consequent upon such adjustment.
8.3 Certain Adjustments Requiring Shareholder Approval
Any adjustment to (i) the maximum aggregate number of shares issuable under the Plan (other than an increase merely reflecting a change in the number of outstanding shares, such as stock dividend or stock split), (ii) the definition of Eligible Employee, (iii) the company granting options, or (iv) the shares available under the Plan, shall require shareholder approval within 12 months before or after such adjustment is Adopted.
9.1 Delivery of Notices or Documents
Notices or documents required to be given to an Eligible Employee or to an Option Holder shall either be delivered to him by hand or sent to him by post at his last known home or business address according to the information provided by him. Notices sent by post shall be deemed to have been given on the day following the date of posting.
9.2 Copies of Shareholder Communications
The Company may distribute to Option Holders copies of any notices or document sent by the Company to its shareholders generally.
9.3 Maintenance of Unissued Share Capital
The Company shall at all times either keep available sufficient unissued Shares to satisfy the exercise of all Options which have neither lapsed nor been exercised (taking account of any other obligations of the Company to allot unissued Shares) or shall ensure that sufficient issued Shares will be available to satisfy the exercise of such Options.
9.4 The Committee’s Power to Administer Plan
The Committee may make such regulations for the administration of the Plan as they deem fit, provided that no regulation shall be valid to the extent it is inconsistent with the Rules.
9.5 The Committee’s Decision is Final and Conclusive
The decision of the Committee in any dispute relating to an Option, or the due exercise thereof, or any other matter in respect of the Plan, shall be final and conclusive subject to the determination of the Auditors when so required by Rule 8.1.
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Table of Contents9.6 Costs of Administering Plan
The costs of introducing and administering the Plan shall be borne by the Company.
10.1 Power to alter Rules
Subject to Rules 10.2 and 10.4 the Committee may in its discretion alter the Rules in any way it thinks fit.
10.2 Alteration which affects subsisting rights of Option Holders
Subject to Rule 10.4 no alteration may be made which would abrogate or adversely affect the subsisting rights of Option Holders save that the Committee may make such alterations to the provisions of Rule 4.5 as it in its discretion sees fit to take account of legal developments or advice or changes in market practice.
10.3 Notification to Option Holders
Written notice of any amendment made in accordance with this Rule 10 shall be given to all Option Holders.
10.4 Stockholder Approval
Except as otherwise provided herein, the Committee may from time to time amend the rules of the Plan, provided, however, no amendment shall result in the failure of the Plan or any provision thereof to comply with applicable rules under the Securities Exchange Act of 1934, or (where relevant) to qualify under Section 422 of the Code. In addition, to the extent necessary to comply with applicable rules of the Securities Exchange Act, of 1934 or (where relevant) Section 422 of the Code (or any successor rule or provision or applicable law or regulation), the Company shall obtain stockholder approval with respect to any amendment in such a manner and to such a degree as so required.
11.1 Termination of the Plan
The Plan shall terminate on the tenth anniversary of the earlier of the date on which it is approved by the Company’s shareholders in a general meeting or the date on which the Plan is Adopted, or at any earlier time by the passing of a resolution by the Committee. Termination of the Plan shall be without prejudice to the subsisting rights of Option Holders.
11.2 No Compensation for loss of Option Rights
The rights and obligations of any individual under the terms of his office or employment with any Member of the Group shall not be affected by his participation in the Plan or any right which he may have to participate therein and the Plan does not form part of any contract of employment between the individual and any Member of the Group. If an Eligible Employee shall cease for any reason (including termination, whether lawful or otherwise) to be in the employment of a Member of the Group, he shall not be entitled, by way of compensation for loss of office or otherwise howsoever, to any sum or any benefit to compensate him for the loss of any right or benefit accrued or in prospect under the Plan.
11.3 Governing Law
This Plan and all Options shall be governed by and construed in accordance with English Law.
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Table of Contents12. DISCRETION TO PAY CASH ON EXERCISE OF AN OPTION
If an Option Holder exercises an Option the Committee may in lieu of allotting or procuring the transfer of Shares in accordance with Rule 6.2 pay to such Option Holder a cash sum equal to the value of the Shares in respect of which the notice of exercise was given (calculated as the average of the middle market quotations on NASDAQ for the three Dealing Days prior to the date of exercise).
If payment is made pursuant to this Rule to an Option Holder, he shall have no further rights in respect of the Shares for which the notice of exercise was given. The Company may make any deductions in respect of such payment which it is required to make under the laws of any territory which laws are applicable to the Option Holder and the Company.
13. SECTION 162(M) OF THE CODE
The Committee intends for the Plan and the Options granted thereunder to qualify for the exception from Section 162(m) of the Code for “qualified performance based compensation” if it is determined by the Committee that such qualification is necessary for an Option grant. Accordingly, the Committee shall make determinations as to performance targets and all other applicable provisions of the Plan as necessary in order for the Plan and such Options granted thereunder to satisfy the requirements of Section 162(m) of the Code.
14. SECTION 409A OF THE CODE
To the extent that the Committee determines that any Option granted under the Plan is subject to Section 409A of the Code, the Option Certificate evidencing such Option shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and Option Certificate shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of the Plan to the contrary, in the event that the Committee determines that any Option may be subject to Section 409A of the Code and related Department of Treasury guidance, the Committee may adopt such amendments to the Plan and the applicable Option Certificate or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Committee determines are necessary or appropriate to (i) exempt the Option from Section 409A of the Code or (ii) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.
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INNOSPEC INC.
RULES of the INNOSPEC INC. COMPANY SHARE OPTION PLAN 2008
Table of ContentsCONTENTS
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1. DEFINITIONS FOR THE PURPOSE OF PART A
In this Plan, the following words and expressions shall, where the context so permits, have the meanings set forth below:
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subject to any adjustment pursuant to Rule 8.1;
References to any statutory provision are to that provision as amended or re-enacted from time to time, and, unless the context otherwise requires, words in the singular shall include the plural (and vice versa) and words importing the masculine the feminine (and vice versa).
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2.1 Procedure for Grant of Options
2.2 Requirement to Issue Option Certificate
The Company shall issue to each Option Holder an Option Certificate which shall be executed in such manner as shall take effect as a binding contractual obligation of the Company and which shall be in such a form as the Directors from time to time determine (subject to the approval of HMRC). The Option Certificate shall include details of:
The Option Certificate shall include a statement of the limitations provided in section 2.4 of this Plan.
2.3 Right to Disclaim Option
Each Eligible Employee to whom an Option is granted may by notice in writing within 30 days of the Date of Grant disclaim in whole or in part his rights under the Option in which case the Option shall for all purposes be deemed never to have been granted.
2.4 Options may not be transferred
Subject to the rights of an Option Holder’s personal representatives to exercise an Option as provided in Rule 4.3, every Option shall be personal to the Eligible Employee to whom it is granted and shall not be capable of being transferred, assigned or charged. Each Option Certificate shall carry a statement to this effect.
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Table of Contents3. CONDITIONS RELATING TO THE GRANT OF OPTIONS
3.1 Statutory Limit
Any Option granted to an Eligible Employee shall be limited and take effect so that immediately following such grant, the aggregate Market Value of all the Shares which he may acquire on the exercise of all options which he then holds and which are or may become capable of being exercised and which were granted under:
3.2 Interpretation of Individual Limits
3.3 Maximum Aggregate Number of Shares
The present maximum aggregate number of Shares which may be issued under both Part A and Part B of the Plan is 190,000 subject to any future increase in this limit which may be substituted at the discretion of the Directors upon approval by the stockholders of the Company. For the purposes of the limit in this Rule 3.3 any Shares subject to an Option or other rights granted under the Plan which have lapsed, been renounced or otherwise become incapable of being exercised or vesting shall not be treated as issued.
3.4 United States Securities Act of 1933
The grant of any Option under the Plan to any person subject to United States securities laws shall be subject to fulfilling the requirements (including obtaining any required approval or consent) of the provision of the Securities Act or of any applicable regulation or enactment. The Options have not been, and will not be, registered under the Securities Act, or under any other securities laws in any other jurisdiction in the United States. Shares issued pursuant to the exercise of an Option may be registered on Form S-8. Until so registered, any transfer of such Shares may be restricted.
3.5 Additional Conditions
The Directors when granting any Option may in their absolute discretion impose any conditions and limitations (additional to any conditions and limitations contained in any other of these Rules) upon the exercise of any Option provided that such additional conditions and limitations shall:
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4.1 Earliest Date of Exercise
Save as provided in Rules 4.3, 4.4 or 5, an Option may not be exercised before whichever is the latest of:
but in any event may not be exercised later than the day preceding the tenth anniversary of the Date of Grant.
4.2 Requirement to remain in Employment
Save as provided in Rules 4.3, 4.4 and 5, an Option may only be exercised by an Option Holder while he is a director or employee of a Participating Company or an Associated Company of a Participating Company.
4.3 Death of Option Holder
An Option may be exercised by the personal representatives of a deceased Option Holder during the period of one year following the date of death.
4.4 Right to Exercise Prematurely irrespective of Additional Conditions
An Option may be exercised by an Option Holder (irrespective of whether any additional conditions and limitations imposed on the Option in accordance with Rule 3.6 have been fulfilled) within the period of one year following the date on which he ceases to hold any office or employment with a Participating Company or an Associated Company of a Participating Company on account of:
4.5 Transfer of Employment within Group
An Option Holder shall not be treated for the purposes of Rules 4.4 and 4.7, as ceasing to hold an office or employment with a Participating Company until such time as he is no longer a director or employee of any
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Table of ContentsParticipating Company or an Associated Company of a Participating Company and an Option Holder (being a woman) who ceases to be such a director or employee by reason of pregnancy or confinement and who exercises her right to return to work under section 79 of the Employment Rights Act 1996 before exercising an Option, shall be treated for those purposes as not having ceased to hold such an office or employment.
4.6 Transfer of Employment Overseas
Subject to the satisfaction of any additional conditions and limitations imposed pursuant to Rule 3.5 if an Option Holder, whilst remaining a director or employee of a Participating Company or an Associated Company of a Participating Company, is transferred to work in another country and as a result of that transfer will either:
the Option Holder may exercise that Option in the period commencing three months before and ending three months after the transfer takes place. If he chooses not to exercise his Option at that time, it will not thereby lapse.
4.7 Lapse of Options
An Option shall lapse on the occurrence of the earliest of the following:
4.8 Compliance with the United States Securities Law
Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act, the United States Securities Exchange Act of 1934, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of Counsel for the Company with respect to such compliance.
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Table of Contents4.9 Shares to be held for Investment Purposes
As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of Counsel for the Company, such a representation is required in order to comply with any of the aforementioned relevant provisions of law.
4.10 Shareholder Approval
If any amendment requiring the approval of the Company’s Shareholders is made subsequent to the first registration of any class of equity security by the Company under Section 12 of the Securities Exchange Act of 1934, such shareholder approval shall be:
4.11 Option Holder with Material Interest
An Option may not be exercised by an Option Holder at any time when he is prohibited from such exercise by virtue of the provisions of paragraph 9 of Schedule 4 to the ITEPA (material interest in a close company).
5. TAKE-OVER, RECONSTRUCTION AND AMALGAMATION AND LIQUIDATION
5.1 Take-over pursuant to Tender Offer
If any person obtains Control of the Company as a result of making either a tender offer to acquire the whole of the Company’s issued share capital (other than any shares already owned by the Holding Company of an Acquiring Company or any Subsidiary of such Holding Company) and which is made on a condition that if it is satisfied the offer or will have such Control, or a tender offer to acquire all the Shares in the Company which are of the same class as the Shares then an Option may be exercised within the period of six months of the date on which Control is so obtained and any condition subject to which the offer is made is satisfied (or until the expiry of the period mentioned in Rule 5.4, if earlier).
5.2 Take-over pursuant to Scheme of Arrangement
If any person obtains Control of the Company in pursuance of a compromise or scheme of arrangement sanctioned by the Court under legislation which HMRC has agreed is equivalent to Section 899 of the Companies Act 2006 then an Option may be exercised during the period which starts on the date the Court sanctions such scheme of arrangement and ends six months later or, if earlier, on the day immediately preceding the date upon which the scheme shall become effective.
5.3 Scheme of Arrangement without Change of Control
If, without any person obtaining Control of the Company, the Court sanctions a scheme of arrangement affecting the Shares under legislation which HMRC has agreed is equivalent to Section 899 of the Companies Act 2006 then an Option may be exercised during the period which starts on the date the Court sanctions such scheme of arrangement and ends six months later or, if earlier, on the day immediately preceding the date upon which the scheme shall become effective.
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Table of Contents5.4 Compulsory Acquisition of Shares
If any person becomes bound or entitled to acquire Shares in the Company under legislation which HMRC has agreed is equivalent to Sections 979 to 982 of the Companies Act 2006 then an Option may be exercised during any period such person remains so bound or entitled.
5.5 Voluntary Winding-Up of the Company
If a resolution is passed for the voluntary winding-up of the Company, an Option may be exercised during the period of six months starting on commencement of such winding-up provided that any issue of shares pursuant to such exercise is authorized by the liquidator or the Court (if appropriate) upon the application of and at the sole cost and expense of the Option Holder.
5.6 Meaning of Obtaining Control
For the purpose of this Rule 5, a person shall be deemed to have obtained Control of the Company if he and others acting in concert with him have together obtained Control.
5.7 Rollover of Options
Notwithstanding anything to the contrary in these Rules, where any person mentioned in Rule 5.1 is a company an Option Holder may, by agreement with the Acquiring Company and within the appropriate period release his Option under the Plan (“the Old Option”) in consideration of the grant to him of a new option (“the New Option”) which, within the meaning ascribed by paragraph 27(2) of Schedule 4 of ITEPA, is equivalent to the Old Option but relates to shares in a different company (whether the Acquiring Company or some other company falling within sub-paragraph (b) or (c) of paragraph 16 of Schedule 4 to ITEPA). With effect from the date of release references in Rules 4, 5, 6, 7, 8, 9, 10, 11 and 12 (and, in relation to expressions used in those Rules, in Rule 1) to “the Company” and “Shares” shall, in relation to the New Option, be construed as references to the Acquiring Company and Shares in the Acquiring Company or that other company as the case may be, but references to Participating Company shall continue to be construed as if references to the Company were references to Innospec Inc.
5.8 Meaning of “appropriate period”
For the purpose of Rule 5.7, the “appropriate period” is:
6.1 Actions Required of the Option Holder
An Option may be exercised, in whole or in part, by the delivery to the secretary of the Company, or his duly appointed agent, of an Option Certificate covering not less than all the Shares over which the Option is then to be exercised, with the notice of exercise in the prescribed form duly completed and signed by the Option Holder together with a remittance of the Acquisition Price payable in respect of the Shares over which the Option is to be exercised.
6.2 Actions Required of the Company
The relevant Shares shall be allotted or transferred (as the case may be) within 28 days following such delivery and, accordingly in cases where Shares are to be transferred, the Company shall use its best endeavors to
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Table of Contentsensure due transfer thereof. At the request of the Option Holder, the Shares may be allotted or transferred (as the case may be) to a nominee provided the Option Holder has beneficial ownership of the Shares at the time of such allotment and transfer.
6.3 Partial Exercise
Where an Option is exercised in part the minimum number of Shares which may be exercised is 100 Shares and the Company shall issue a balancing Option Certificate to the Option Holder.
7.1 Ranking of Shares
All Shares issued pursuant to the exercise of Options under the Plan shall as to voting, dividend, transfer and other rights (including those arising on a liquidation) rank pari passu in all respects with the Shares then in issue, except that they shall not rank for any dividend or other rights declared by reference to a record date preceding the date of such exercise.
7.2 Admission to NASDAQ
If and so long as the Shares are listed on NASDAQ the Company shall use its best endeavors to procure that as soon as practicable after the allotment of any Shares pursuant to the Plan application shall be made to NASDAQ for permission to deal in those shares unless such application has already been made.
8.1 General Power of Adjustment
The number of Shares over which an Option has been granted and the Share Price thereof shall, subject to the prior approval of HMRC, be proportionately adjusted following any capitalization issue, sub-division, consolidation or reduction of share capital and in respect of any discount element in any rights issue or other variation of share capital to the intent that (as nearly as may be possible without involving fractions of a Share or a Share Price calculated to more than two places of decimals) the Acquisition Price payable in respect of an Option shall remain unchanged PROVIDED that, save as provided in Rule 8.2, no adjustment made pursuant to this Rule 8.1 shall have the effect of reducing the Share Price below the par value of a Share.
8.2 Requirement to Capitalise Reserves
Any adjustment made to the Share Price of unissued Shares which would have the effect of reducing the Share Price to less than the par value of the Share shall only be made if and to the extent that the Directors are authorized to capitalise from the reserves of the Company a sum equal to the amount by which the par value of the Shares in respect of which the Option is exercisable exceeds the adjusted Share Price. The Directors may apply such sum in paying up such amount on such Shares so that on the exercise of any Option in respect of which such a reduction shall have been made, the Directors shall capitalize such sum (if any) and apply the same in paying up such amount as aforesaid.
8.3 Notification of Option Holder
The Directors may take such steps as they may consider necessary to notify Option Holders of any adjustments made under Rule 8.1 and to call in, cancel, endorse, issue or re-issue any Option Certificate consequent upon such adjustment.
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9.1 Delivery of Notices or Documents
Notice or documents required to be given to an Eligible Employee or to an Option Holder shall either be delivered to him by hand or sent to him by post at his last known home or business address according to the information provided by him. Notices sent by post shall be deemed to have been given on the day following the date of posting.
9.2 Copies of Shareholder Communications
The Company may distribute to Option Holders copies of any notices or document sent by the Company to its shareholders generally.
9.3 Maintenance of Unissued Share Capital
The Company shall at all times either keep available sufficient unissued Shares to satisfy the exercise of all Options which have neither lapsed nor been exercised (taking account of any other obligations of the Company to allot unissued Shares) or shall ensure that sufficient issued Shares will be available to satisfy the exercise of such Options.
9.4 Directors’ Power to Administer Plan
The Directors may make such regulations for the administration of the Plan as they deem fit, provided that no regulation shall be valid to the extent it is inconsistent with the Rules.
9.5 Directors’ Decisions are Final and Conclusive
The decision of the Directors in any dispute relating to an Option, or the due exercise thereof, or any other matter in respect of the Plan, shall be final and conclusive.
9.6 Costs of Administering Plan
The costs of introducing and administering the Plan shall be borne by the Company.
10.1 Power to alter Rules prior to HMRC approval
Subject to Rule 10.5, the Directors may, prior to approval of Part A of the Plan by HMRC, alter the Rules of the Plan as may be necessary in order to obtain such approval.
10.2 Power to alter Rules following HMRC approval
Subject to Rules 10.3 and 10.5, after the date on which Part A of the Plan is approved by HMRC, the Directors may in their discretion alter the Rules provided that no such alteration to a Key Feature of Part A shall be effective until it has been approved by HMRC.
10.3 Alterations which affect Share Price and subsisting rights of Option Holders
Subject to Rules 8.1 and 10.5, no adjustment may be made to the Share Price or the Acquisition Price and no alteration may be made which would abrogate or adversely affect the subsisting rights of Option Holders save that the Directors may (subject to Rule 10.2) make such alterations to the provisions of Rule 4.4 as they in their discretion see fit to take account of legal developments or advice or changes in market practice.
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Table of Contents10.4 Notification to Option Holders
Written notice of any amendment made in accordance with this Rule 10 shall be given to all Option Holders.
10.5 Stockholder Approval
Except as otherwise provided herein, the Directors may from time to time amend the rules of the Plan. Provided, however, no amendment shall result in the failure of the Plan or any provision thereof to comply with applicable rules under the Securities Exchange Act of 1934, or (where relevant) to qualify under Section 422 of the Code. In addition, to the extent necessary to comply with applicable rules of the Securities Exchange Act, of 1934 or (where relevant) Section 422 of the Code (or any successor rule or provision or applicable law or regulation), the Company shall obtain stockholder approval with respect to any amendment in such a manner and to such a degree as so required.
11. EMPLOYMENT AND SOCIAL TAXES
The Option Holder shall indemnify the Company (and, where relevant, any Participating Company) against any tax arising in respect of the exercise of the Option which is a liability of the Option Holder but for which such company is required to account to HMRC (including for the avoidance of doubt employee’s national insurance contributions and, if so determined by the Directors, employer’s national insurance contributions). Such company may recover the tax from the Option Holder in such manner as the Directors think fit including (but without prejudice to the generality of the foregoing):
12.1 Termination of the Plan
The Plan shall terminate on the tenth anniversary of the earlier of the date on which it is approved by the Company’s shareholders in general meeting or the date on which the Plan is adopted, or at any earlier time by the passing of a resolution by the Directors. Termination of the Plan shall be without prejudice to the subsisting rights of Option Holders.
12.2 No Compensation for loss of Option Rights
The rights and obligations of any individual under the terms of his office or employment with any Participating Company shall not be affected by his participation in the Plan or any right which he may have to participate therein and the Plan does not form part of any contract of employment between the individual and any Participating Company. If an Option Holder shall cease for any reason (including termination, whether lawful or otherwise) to be in the employment of a Participating Company or an Associated Company of a Participating Company, he shall not be entitled, by way of compensation for loss of office or otherwise howsoever, to any sum or any benefit to compensate him for the loss of any right or benefit accrued or in prospect under the Plan.
12.3 Governing Law
This Plan and all Options shall be governed by and construed in accordance with English Law.
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Table of ContentsPART B
13. DEFINITIONS FOR PURPOSES OF PART B
13.1 Part B not Approved by HMRC
This Part B of the Rules of the Plan is not approved by HMRC under the provisions of the Act or ITEPA and any requirement to obtain the approval of HMRC as set out in Part A of the Rules of the Plan shall not apply to this Part B of the Rules of the Plan.
13.2 Incentive Stock Options
This Part B of the Rules of the Plan is intended to permit the grant of Incentive Stock Options if the Directors so determine.
13.3 Terms of Part A apply except as amended
The Rules as contained in Part A of the Plan shall apply to Options granted under this Part B unless amended in accordance with the provisions hereof.
For the purposes of Part B, “Eligible Employee” shall mean any person who as of the Date of Grant:
For the purposes of Part B, the definition of “Share Price” shall be as follows:
the price per Share, as determined by the Directors, at which an Eligible Employee may acquire Shares in respect of which an Option has been granted to him, being not less than:
provided, however, with respect to any individual responsible for payment of income tax in the United States, the Share Price shall be the Market Value of a Share on the Date of Grant only, subject in all cases to any adjustment pursuant to Rules 8.1 and 16.4.
14. GRANT OF UNAPPROVED OPTIONS
14.1 Specification of Unapproved Options
The Directors shall specify when an Option is granted under this Part B of the Rules of the Plan and the relevant Option Certificate shall be written accordingly, and shall set forth all of the details provided for under Rule 2.2. The Share Price with respect to any Option granted under Part B of the Rules which is intended to qualify as an Incentive Stock Option shall not be less than the Market Value on the Date of Grant.
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Table of Contents14.2 Modified Terms and Conditions
The Directors may determine that any Option granted under this Part B of the Rules shall be subject to additional and/or modified terms and conditions relating to the grant and terms of exercise as may be necessary to comply with or take account of any securities, exchange control or taxation laws, regulations or practice of any territory which may have application to the relevant Eligible Employee, Option Holder or Participating Company.
14.3 Additional Requirements
In exercising their discretion under Rule 14.2, the Directors may:
15. CONDITIONS RELATING TO THE GRANT OF UNAPPROVED OPTIONS
Rules 3.1 and 3.2 of Part A shall not apply to this Part B of the Plan.
15.2 Plan Approval Required
Part B of the Plan shall not take effect and no options or rights will be granted hereunder unless the Plan is approved by the stockholders of the Company within 12 months before or after the date the Plan is adopted.
15.3 Additional Conditions
The Directors, when granting an Option under this Part B which it is intended shall qualify as an Incentive Stock Option, may not impose a condition or limitation upon the exercise of such Option if it would result in such Option failing to qualify as an Incentive Stock Option.
15.4 Calendar Year Limitation
The aggregate Market Value (determined at the Date of Grant) of Shares with respect to which Incentive Stock Options become exercisable for the first time by an individual Option Holder in any calendar year shall not exceed $100,000.
16. EXERCISE OF UNAPPROVED OPTIONS
16.1 Right to Exercise Prematurely irrespective of Additional Conditions
Notwithstanding Rule 4.2, and except as otherwise provided in this Rule 16.1, an Option which it is intended shall qualify as an Incentive Stock Option may only be exercised by an Option Holder while he is an Eligible Employee under the Code.
In relation to any Option which it is intended shall qualify as an Incentive Stock Option, Rule 4.4 of Part A shall not apply to Part B of the Plan and is hereby replaced, for purposes of such Option only, by the following provision:
“An Option may be exercised by an Option Holder within the period of three months following the date on which he ceases to hold any office or employment with a Participating Company or an Associated Company of a
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Table of ContentsParticipating Company, except in the event the termination of employment is on account of permanent and total disability within the meaning of section 422(e)(3) of the Code, in which case such Option Holder may exercise his Options within a period of one year following the date on which he ceases to hold any office or employment with a Participating Company or an Associated Company of a Participating Company.”
16.2 Requirement to Remain in Employment
Notwithstanding the provisions of Rule 4.2 and of Rule 5, an Option that qualifies as an Incentive Stock Option may only be exercised by an Option Holder while such individual is an employee of any company in the Group or as otherwise provided in Rule 16.1.
Rule 4.11 of Part A shall not apply to Part B of the Plan.
16.4 Limitation on Adjustments
With respect to Options granted under this Part B and intending to qualify as Incentive Stock Options, no adjustment made pursuant to Rule 8.1 shall have the effect of reducing the aggregate Share Price below the aggregate Market Value on the Date of Grant.
17. DISCRETION TO PAY CASH ON EXERCISE OF AN OPTION
If an Option Holder exercises an Option the Directors may in lieu of allotting or procuring the transfer of Shares in accordance with Rule 6.2 of Part A pay to such Option Holder a cash sum equal to the amount by which the value of the Shares in respect of which the notice of exercise was given (calculated as the average of the middle market quotations on NASDAQ for the three Dealing Days prior to the date of exercise) exceeds the Acquisition Price of those Shares.
If payment is made pursuant to this Rule to an Option Holder, he shall have no further rights in respect of the Shares for which the notice of exercise was given. The Company may make any deductions in respect of such payment which it is required to make under the laws of any territory which laws are applicable to the Option Holder and/or his employing Participating Company.
No Option granted under Part B of the Plan will be paralleled with an Option granted under Part A of the Plan.
18. EMPLOYMENT AND SOCIAL TAXES
The Option Holder shall indemnify the Company (and, where relevant, any Participating Company) against any tax arising in respect of the exercise of the Option which is a liability of the Option Holder but for which such company is required to account under the laws of any relevant territory (including for the avoidance of doubt employee’s national insurance contributions, employer’s national insurance contributions if so determined by the Directors or other relevant social security contributions). Such company may recover the tax from the Option Holder in such manner as the Directors think fit including (but without prejudice to the generality of the foregoing):
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Table of Contents19. SECTION 162(M) OF THE CODE
The Directors intend for Part B of the Plan and the Options granted thereunder to qualify for the exception from Section 162(m) of the Code for “qualified performance based compensation” if it is determined by the Directors that such qualification is necessary for an Option grant. Accordingly, the Directors shall make determinations as to performance targets and all other applicable provisions of Part B of the Plan as necessary in order for Part B of the Plan and such Options granted thereunder to satisfy the requirements of Section 162(m) of the Code.
20. SECTION 409A OF THE CODE
To the extent that the Directors determine that any Option granted under Part B of the Plan is subject to Section 409A of the Code, the Option Certificate evidencing such Option shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, Part B of the Plan and the Option Certificate shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of Part B of the Plan to the contrary, in the event that the Directors determine that any Option may be subject to Section 409A of the Code and related Department of Treasury guidance, the Directors may adopt such amendments to Part B of the Plan and the applicable Option Certificate or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Directors determine are necessary or appropriate to (i) exempt the Option from Section 409A of the Code or (ii) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.
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INNOSPEC INC.
RULES of the INNOSPEC INC. NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN 2008
Table of ContentsCONTENTS
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Table of Contents1. DEFINITIONS
In this Plan, the following words and expressions shall, where the context so permits, have the meanings set forth below:
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References to any statutory provision are to that provision as amended or re-enacted from time to time, and, unless the context otherwise requires, words in the singular shall include the plural (and vice versa) and words importing the masculine the feminine (and vice versa).
2.1 Procedure for Grant of Options
2.2 Requirement to Issue Option Certificate
The Company shall issue to each Option Holder an Option Certificate which shall be in such a form as the Committee shall from time to time determine. The Option Certificate shall include details of:
2.3 Right to Disclaim Option
Each Participant to whom an Option is granted may by notice in writing within 30 days of the Date of Grant disclaim in whole or in part his rights under the Option in which case the Option shall for all purposes be deemed never to have been granted.
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Table of Contents2.4 Options may not be transferred
Subject to the rights of an Option Holder’s personal representatives to exercise an Option as provided in Rule 3.3, every Option shall be personal to the Participants to whom it is granted and shall not be capable of being transferred, assigned or charged. Each Option Certificate shall carry a statement to this effect.
2.5 Modified Terms and Conditions
The Committee may determine that any Option shall be subject to additional and/or modified terms and conditions relating to the grant and terms of exercise as may be necessary to comply with or take account of any securities, exchange control or taxation laws, regulations or practice of any territory which may have application to the relevant Participant or Option Holder.
2.6 Additional Requirements
In exercising their discretion under Rule 2.5, the Committee may:
2.7 Maximum Aggregate Number of Shares
The present maximum aggregate number of Shares which may be issued under the Plan is 85,000 subject to any future increase in this limit which may be substituted at the discretion of the Committee upon approval by the stockholders of the Company. For the purposes of the limit in this Rule 2.7 any Shares subject to an Option or other rights granted under the Plan which have lapsed, been renounced or otherwise become incapable of being exercised or vesting shall not be treated as issued.
3.1 Earliest Date of Exercise
Save as provided in Rules 3.3, 3.4 and 4, an Option may not be exercised before any date or dates which may have been specified in accordance with Rule 2.2 in the relevant Option Certificate, but in any event may not be exercised later than the tenth anniversary of the Date of Grant.
3.2 Requirement to remain in Office
Save as provided in Rules 3.3, 3.4 and 4, an Option may only be exercised by an Option Holder while he is a non-employee director of the Company.
3.3 Death of Option Holder
An Option may be exercised by the personal representatives of a deceased Option Holder during the period of one year following the date of death.
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Table of Contents3.4 Right to Exercise Prematurely
Save as provided in Rule 3.3, where an Option Holder ceases to hold Office with the Company, Options will lapse and will only be exercisable at the absolute discretion of the Committee, in which circumstances Options will be exercisable by the Option Holder within a period of one year following the date of termination of Office with the Company.
3.5 Section 409A
Notwithstanding any other provisions of these Rules, if an Option is granted to someone who is or would otherwise be subject to Section 409A of the Code and such Option is granted with a Share Price less than the fair market value of the shares on the Date of Grant, it must be exercised (if at all) no later than 15 March of the calendar year immediately following the calendar year in which it is first capable of exercise under the Plan.
3.6 Lapse of Options
An Option shall lapse on the occurrence of the earliest of the following:
4. TAKE-OVER, RECONSTRUCTION AND AMALGAMATION AND LIQUIDATION
4.1 Take-over pursuant to General Offer
If any company (“the Acquiring Company”) becomes a Parent of the Company as a result of making either a tender offer to acquire the whole of the Company’s issued share capital (other than any shares already owned by the Acquiring Company or any Subsidiary of the Acquiring Company) and which is made on a condition that if it is satisfied the Acquiring Company will become the Parent, or a tender offer to acquire all the Shares in the Company which are of the same class as the Shares then an Option may be exercised within the period of six months of the date on which and any condition subject to which the offer is made is satisfied.
4.2 Voluntary Winding-Up of the Company
If a resolution is passed for the voluntary winding-up of the Company, an Option may be exercised during the period of six months starting on commencement of such winding-up provided that any issue of shares pursuant to such exercise is authorized by the liquidator or the Court (if appropriate) upon the application of and at the sole cost and expense of the Option Holder.
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Table of Contents4.3 Rollover of Options
Notwithstanding anything to the contrary in these Rules, where any person mentioned in Rule 4.1 applies, an Option Holder may, by agreement with the Acquiring Company and within the appropriate period release his Option under the Plan (“the Old Option”) in consideration of the grant to him of a new option (“the New Option”) which is equivalent to the Old Option but relates to shares in a different company (whether the Acquiring Company or some other company). With effect from the date of release references in Rules 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13 (and, in relation to expressions used in those Rules, in Rule 1) to “the Company” and “Shares” shall, in relation to the New Option, be construed as references to the Acquiring Company and Shares in the Acquiring Company or that other company as the case may be.
4.4 Meaning of “appropriate period”
For the purpose of Rule 4.3, the “appropriate period” is the period mentioned in Rule 4.1.
5.1 Actions Required of the Option Holder
An Option may be exercised, in whole or in part, on giving 30 days notice, by the delivery to the secretary of the Company, or his duly appointed agent, of an Option Certificate covering not less than all the Shares over which the Option is then to be exercised, with the notice of exercise in the prescribed form duly completed and signed by the Option Holder, to | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
