Edgar Filing: ALBEMARLE CORP

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

(Amendment No. )



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ALBEMARLE CORPORATION

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that Albemarle Corporation’s 2018 Annual Meeting (the “Annual Meeting”) of Shareholders will be held at the Renaissance Charlotte SouthPark Hotel, 5501 Carnegie Boulevard, Charlotte, North Carolina 28209, on Tuesday, May 8, 2018, at 7:00 a.m., Eastern Time, for the following purposes:


1.	To consider and vote on a non-binding advisory resolution approving the compensation of our named executive officers;


2.	To elect the eleven nominees named in the accompanying Proxy Statement to the Board of Directors to serve for the ensuing year or until their successors are duly elected and qualified;


3.	To approve the amendment and restatement of our Amended and Restated Articles of Incorporation to adopt a majority shareholder vote standard for extraordinary transactions;


4.	To ratify the appointment of PricewaterhouseCoopers LLP ("PwC") as our independent registered public accounting firm for the fiscal year ending December 31, 2018; and


5.	To conduct any other business which may properly come before the Annual Meeting or any adjournments or postponements thereof.

Only shareholders of record at the close of business on Thursday, March 8, 2018, are entitled to receive notice of and vote at the Annual Meeting.

To ensure your vote is counted, you are requested to vote your shares promptly, regardless of whether you expect to attend the Meeting. Voting by the internet or telephone is fast and convenient, and your vote is immediately tabulated. In addition, by using the Internet or telephone, you help reduce our postage and proxy tabulation costs. You may also vote by completing, signing, dating and returning by May 7, 2018 the proxy enclosed with paper copies of the materials in the postage-paid envelope provided.

This year, we are again electronically disseminating Annual Meeting materials to some of our shareholders, as permitted under the “Notice and Access” rules approved by the Securities and Exchange Commission. Shareholders to whom Notice and Access applies will receive a Notice of Internet Availability of Proxy Materials containing instructions on how to access Annual Meeting materials via the internet. The Notice also provides instructions on how to obtain paper copies if preferred.

If you are present at the Annual Meeting, you may vote in person even if you already have voted your proxy by internet, telephone or mail. Seating at the Annual Meeting will be on a first-come, first-served basis.

By Order of the Board of Directors

Karen G. Narwold, Secretary

March 28, 2018

TABLE OF CONTENTS



TABLE OF CONTENTS	3
PROXY STATEMENT SUMMARY	4
COMPENSATION DISCUSSION AND ANALYSIS	7
ADDITIONAL INFORMATION	25
EXECUTIVE COMPENSATION COMMITTEE REPORT	27
COMPENSATION OF EXECUTIVE OFFICERS	28
SUMMARY COMPENSATION TABLE	28
COMPENSATION RISK ASSESMENT	29
GRANTS OF PLAN-BASED AWARDS	30
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END	32
OPTION EXERCISES AND STOCK VESTED	35
RETIREMENT BENEFITS	36
Pension Benefits Table	36
Supplemental Executive Retirement Plan.	37
Nonqualified Deferred Compensation	38
Agreements with Executive Officers and Other Potential Payments Upon Termination or a Change in Control	39
CEO Pay Ratio	44
EQUITY COMPENSATION PLAN INFORMATION	45
PROPOSAL 1 – ADVISORY RESOLUTION APPROVING EXECUTIVE COMPENSATION	46
GOVERNANCE MATTERS	48
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	55
DIRECTOR COMPENSATION	56
STOCK OWNERSHIP	58
Principal Shareholders	58
Directors and Executive Officers	60
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	61
PROPOSAL 2 – ELECTION OF DIRECTORS	62
AUDIT & FINANCE COMMITTEE REPORT	70
PROPOSAL 3 – AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS AMENDED	72
PROPOSAL 4 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	73
QUESTIONS AND ANSWERS ABOUT THIS PROXY STATEMENT AND THE MEETING	74
SHAREHOLDER PROPOSALS	79
CERTAIN MATTERS RELATING TO PROXY MATERIALS AND ANNUAL REPORTS	80
OTHER MATTERS	81
APPENDIX A	84

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all information that you should consider, and you should read the entire Proxy Statement carefully before voting. Throughout the Proxy Statement, “we,” “us,” “our,” “the Company” and “Albemarle” refer to Albemarle Corporation, a Virginia corporation.

Annual Meeting

Date and Time: Place:

Tuesday, May 8, 2018 Renaissance Charlotte SouthPark Hotel

7:00 a.m., Eastern Time 5501 Carnegie Boulevard

Charlotte, North Carolina 28209

Voting Matters

The following table summarizes the proposals to be considered at the Annual Meeting and the Board’s voting recommendation with respect to each proposal.



Proposal		Board Vote Recommendation
#1	Advisory Vote to Approve the Compensation of our Named Executive Officers (Say-on-Pay)	FOR
#2	Election of Directors	FOR each Nominee
#3	Approval of the amendment and restatement of our Amended and Restated Articles of Incorporation to adopt a majority shareholder vote standard for extraordinary transactions	FOR
#4	Ratification of Appointment of Independent Registered Public Accounting Firm for Fiscal Year 2018	FOR

Our Business



Business Segments
Lithium	Bromine Specialties	Catalysts^*
-- Energy Storage -- Glasses and Ceramics -- Greases and Lubricants -- Pharmaceutical Synthesis	-- Flame retardants -- Industrial water treatment -- Completion fluids for oilfield -- Plastic and synthetic rubber -- C3Ag and pharma synthesis	-- Fluid Cracking Catalysts -- Clean Fuels Technologies -- Organometallics & Curatives

*Effective in the first quarter 2018, our Performance Catalysts Solutions product category has been combined with our Refining Solutions segment and the segment has been renamed Catalysts.

Our Strategy


•	Organically grow Lithium production capacity: 165,000 MT LCE by 2021


•	Expand Catalysts segment through targeted research and development


•	Support Lithium segment growth through strong cash flow from mature businesses


•	Support growth through productivity and operational excellence

2017 Company Performance


•	Strong growth compared to 2016:


◦	19% growth in adjusted EBITDA


◦	29% growth in adjusted diluted earnings per share


•	2017 cash generation from Bromine Specialties and Refining Solutions as well as active portfolio management drove robust balance sheet to support Lithium investment


•	Lithium production capacity expansion for 2021 on track; wave II and III expansion accelerating

Governance Highlights

We believe good governance is integral to achieving long-term shareholder value. We are committed to governance policies and practices that best serve the interests of our Company and its shareholders. Our Board of Directors (the “Board of Directors” or the "Board") monitors developments in governance best practices to ensure it continues to meet its commitment to thoughtful and independent representation of shareholder interests. The following table summarizes certain corporate governance practices and certain facts about the Board:



Governance Practices
Annual Election of all Directors	Longstanding Commitment to Sustainability and Corporate Responsibility	Policies Prohibiting Hedging, Short Sale and Pledging Company Stock
Resignation Policy for Directors Not Receiving Majority Approval	Board and Committee Authority to Retain Independent Advisors	No Shareholder Rights Plan (Poison Pill)
Policy Requiring Directors to Not Stand for Re-election in the Year in Which They Reach 72 Years of Age	Regular Executive Sessions of Independent Directors	Robust Stock Ownership Guidelines (6X Salary for CEO)
Compensation Recovery Policy (Clawback Policy)	Risk Oversight by Full Board and Committees	Annual Board and Committee Evaluation Process led by Lead Independent Director



Director Nominees: Key Facts
4 years average tenure	10 of 11 are independent	45% ethnic and gender diversity	45% have CEO or COO experience

Majority Shareholder Vote Standard for Extraordinary Transactions

The Board, after careful consideration and in accordance with the recommendation of its Nominating & Governance Committee, has concluded that it is in the best interests of the Company and its shareholders to amend and restate the Company's articles of incorporation (the "Charter") to adopt a majority shareholder vote standard for extraordinary transactions and adopt a majority shareholder vote standard for all future Charter amendments other than Charter amendments to the affiliated transaction provisions.

With the exception of transactions with affiliates, which are addressed elsewhere in the Charter, our Charter currently provides that a merger, statutory share exchange, sale or other disposition of all or substantially all the Company’s assets other than in the usual and regular course of business, or a dissolution, shall be approved by at least two-thirds of the shareholder votes entitled to be cast on such transaction. We refer to these types of transactions as “Extraordinary Transactions.” Any amendment to this Charter provision currently requires the approval of at least two-thirds of the shareholder votes entitled to be cast.

The Board has approved, and recommends to the Company’s shareholders for approval, amending and restating the Charter to (1) adopt a majority shareholder vote standard for approving Extraordinary Transactions, and (2) provide for a majority shareholder vote standard for all future Charter amendments (other than Charter amendments to the affiliated transaction provisions). See proposal #3 on page 72 for additional information.

CEO Compensation


•	Target Total Direct Compensation is at the median of the peer group


•	Pay mix: 84% of CEO pay is based on company performance


•	50% of CEO equity is based on Relative Total Shareholder Return


•	CEO pay shows a strong correlation between 3 year realizable pay and 3 year total shareholder return

COMPENSATION DISCUSSION AND ANALYSIS

The following pages describe Albemarle’s executive compensation program and the compensation decisions made by the Executive Compensation Committee (the “Committee”) for our Named Executive Officers ("NEOs"), listed below.



NEO	Title
Luther C. Kissam IV	Chairman, President and Chief Executive Officer
Scott A. Tozier	Executive Vice President, Chief Financial Officer
Karen G. Narwold	Executive Vice President, Chief Administrative Officer and Corporate Secretary
Matthew K. Juneau	Executive Vice President, Corporate Strategy and Investor Relations
Donald J. LaBauve, Jr.	Vice President, Corporate Controller and Chief Accounting Officer

EXECUTIVE SUMMARY

Compensation Program Highlights


•	84% of CEO target total direct compensation (and 77% on average for all NEOs) is incentive-based.


•	CEO compensation over a three-year period shows a strong correlation between realizable pay and total shareholder return relative to our Peer Group, with our performance rank well aligned with our pay rank.


•	Performance metrics aligned with our Peer Group and our company goals: annual Adjusted EBITDA⁽¹⁾ and Adjusted Free Cash Flow⁽¹⁾ and Relative Total Shareholder Return (“TSR”) measured over a 3-year performance period.⁽¹⁾


•	Focused Peer Group of similarly-sized companies.

___________________________________________________


⁽¹⁾	See pages 14 and 18 for a discussion of how Adjusted EBITDA, Adjusted Free Cash Flow and TSR are calculated.

Aligning Our Incentives With Our Strategy and Shareholder Interests

We seek to align our executive compensation program with shareholder interests and our business strategy. This means keeping the foundation of our program focused on performance-based pay that supports our strategy and the related metrics of relative TSR, Adjusted EBITDA and Adjusted Free Cash Flow, with a variable (“at-risk”) pay percentage higher than that of our peers.

Shareholder Alignment: In May 2017, the Company held our annual shareholder advisory vote to approve the compensation paid to our NEOs in 2016, which resulted in approximately 97.1% of the votes cast approving such compensation.

In the fall of 2017 we continued our annual engagement with our shareholders. This engagement gave us a basis for further evaluation of our practices in executive compensation and corporate governance. This initiative was led by a group of senior officers of the Company, acting on behalf, and at the request, of the Committee, by reaching out to shareholders holding 63% of our outstanding shares, and holding follow-up calls with shareholders representing 39% of our outstanding shares. This outreach reflects our commitment to understand and address key issues of importance to our shareholders. In line with the high support for our executive compensation program as expressed in the 2017 annual shareholder advisory vote to approve the compensation to our NEOs, shareholders continued their support for our compensation program and the changes made over the past few years.

In considering investor feedback, our evolving business needs, and in furtherance of our desire to continue to link executive pay to performance, the Committee approved the following changes to our executive compensation program for fiscal year 2017.



Shareholder Feedback	Changes to our Executive Compensation Program
• In 2017, shareholders expressed their support for our compensation program and the changes we made over the last 2 years. The changes we made in 2017 follow up on feedback we received from shareholders in 2016.	• Shareholder feedback received in 2017 did not result in any changes to our compensation program for 2018, given the general support as expressed by our shareholders for the program and the changes we made in the last 2 years.
• In 2016, shareholders expressed their preference that we revise our equity program so that, in the event of a Change in Control, equity would only vest following a termination (commonly called “double trigger” vesting).	• We included a “double trigger” in our 2017 equity plan submitted for approval by our shareholders. We also included the “double trigger” in the award agreements issued at the beginning of 2017 under the existing equity plan.
• In 2016, shareholders asked us to explain any changes in the 2017 Peer Group, so that it is transparent why we are changing, and what criteria are used for selecting peer companies.	• We adjusted the 2017 Peer Group to be more reflective of our size, given the sale of the Chemetall® Surface Treatment business in December 2016.

Pay for Performance: 2017 Compensation Outcomes

For 2017, our executive compensation program resulted in rewards consistent with our business achievements and the contributions of our NEOs:


•	Our Annual Incentive Plan (AIP) performance was above target, with Company performance resulting in a payout of 156%;

Our 2015-2017 TSR was 137.9%, positioning Albemarle at the 100^th percentile relative to the 2017 Peer Group.

CEO Pay At-A-Glance: Realizable Pay Relative Degree of Alignment

We believe our CEO’s total compensation reflects a pay opportunity commensurate with median levels among our Peer Group. It is important to the Committee that 50% of the value associated with

LTIP awards is performance-based measured by relative Peer Group performance such that realizable values are reflective of the Company’s performance.

Realizable Pay Relative Degree of Alignment (“RPRDA”) is an important measure the Committee uses to assess whether the value associated with LTIP awards is based on relative Peer Group performance. This measure addresses the question: Is realizable pay commensurate with the total shareholder return achieved by shareholders, relative to our Peer Group?

The RPRDA compares the percentile ranks of the CEO’s three-year realizable pay and the Company’s three-year TSR performance, relative to the 2017 Peer Group. The RPRDA is equal to the difference between the combined performance rank minus the combined pay rank.

Realizable pay captures the following elements of compensation for the three-year period:


•	Base salary in the year it is earned;


•	Annual incentive compensation paid for the year it is earned; and


•	“In-the-money” value of outstanding equity awards, calculated based on stock price at year-end 2017 rather than the grant date fair value. The use of an end-of-year stock price directly correlates the value of an executive’s equity with the return our shareholders receive from investing in our common stock over the same period.

For the three-year analysis we used the following data:


•	TSR based on the three year performance period 2015-2017;


•	Mr. Kissam’s realizable pay based on the period 2015-2017;


•	Peer Group CEO pay based on the period 2014-2016 (as more recent data was not available at the time this Proxy Statement was issued).

The following chart shows Mr. Kissam’s RPRDA for the 3-year period, with both relative TSR and CEO compensation ranked in the 4th quartile of the 2017 peer group, showing a strong alignment between realizable pay and TSR over the three-year period.

THE EXECUTIVE COMPENSATION PROGRAM IN DETAIL

Compensation principles

The Committee designs and oversees the Company’s compensation policies and approves compensation for our NEOs. Our overarching goal is to create executive compensation plans that incent and are aligned with the creation of sustained shareholder value. To accomplish this, our plans are designed to:


•	Support our Business Strategy – We align our programs with business strategies focused on long-term growth and sustained shareholder value. Our plans provide incentives to our NEOs to overcome challenges and exceed our Company goals.


•	Pay for Performance – A large portion of our executive pay is dependent upon the achievement of specific corporate, business unit and individual performance goals. We pay higher compensation when goals are exceeded and lower compensation when goals are not met.


•	Pay Competitively – We set target compensation to be at or around the market median relative to the companies that make up our Peer Group.


•	Discourage Excessive Risk-taking – Our compensation programs are balanced and designed to discourage excessive risk-taking.

Compensation principles are aligned with good governance practices and pay for performance

Below is a list of things that we do and don’t do in order to ensure that our program reflects good governance practices and pay for performance.



What We Do		What We Don’t Do
We balance short-term and long-term compensation, designed to discourage short-term risk-taking at the expense of long-term results. 56% of our NEO total direct compensation is equity based.		No excessive perquisites are provided to any NEO.
We make performance-based compensation a significant component of each NEO’s total compensation. 50% of NEO long term equity is performance based and 50% of NEO long term equity is time based.		No stock option re-pricing without shareholder approval or discounted stock options are permitted under our 2017 equity plan.
We employ longer than peer group median vesting periods in our annual LTIP grants, which encourage executive retention and a long-term perspective (see page 19).		No excise tax gross-ups for change of control payments are provided to any NEO.
We require above peer group median stock ownership for our NEOs.		Hedging and short selling. We do not allow for hedging or short selling of our shares by our NEOs or Directors.
The Committee uses an independent executive compensation consultant who reports directly to the Committee.
We have a clawback policy for the recovery of cash and non-cash compensation in the event of NEO misconduct which results in a financial restatement.
We have an annual frequency of our advisory vote on executive compensation (say-on-pay).
We require a double trigger for equity to vest following a Change in Control (CIC).

The components of our executive compensation program

We provide our NEOs with the following components of compensation:



Annual	Annual base salary and annual cash incentive opportunities.
Long-Term	Long Term Incentive awards for our NEOs comprise a combination of 50% Performance Stock Units (PSUs), 25% Restricted Stock Units (RSUs), and 25% stock options.
Benefits	Various health and welfare benefits, including health and life insurance, retirement benefits and savings plan that are generally available to all our employees.
Post-Termination Benefits	Severance and change in control benefits.

For each NEO, the Committee reviews and approves annually each component of compensation and the resulting total compensation. The Committee benchmarks the individual components of compensation and total compensation to the Peer Group of companies the Committee selects. In setting the compensation for each NEO, the Committee also considers other factors, including the scope and complexity of his or her position, level of performance, skills and experience and contribution to the overall success of the Company. As a result, we do not set compensation for our NEOs in a formulaic manner.

Our compensation program is designed to focus our NEOs on long-term success

We design our compensation programs to keep our NEOs focused on the long-term success of our Company by making a substantial portion of their compensation subject to the achievement of specific performance measures, requiring NEOs to hold a significant amount of Company stock during the term of their employment and granting stock-based awards with multi-year vesting periods.

The performance period covered by our PSU grants is three years, with the vesting of any award earned occurring in two equal tranches – the first tranche after the end of the third year of the performance period and the second tranche on the following January 1. PSUs are earned based on relative TSR as compared to our Peer Group. The Committee chose this measure to provide an even stronger linkage between the rewards for our leaders and the returns experienced by our shareholders, and also because this measure was thought to be well aligned with the longer three-year performance period.

RSUs typically have a minimum vesting period of three years and also vest in two equal tranches – the first tranche at the third anniversary of the Grant Date and the second tranche at the fourth anniversary of the Grant Date.

Stock option grants made after 2015 cliff vest at the third anniversary of the Grant Date. These awards reinforce the focus of our NEOs on the long-term success of the Company by aligning their personal financial success with that of our shareholders.

Competitive Compensation – Peer Group

We use the following criteria for selecting peer companies that we include in our compensation peer group. The committee uses the peer group to align executive compensation with comparable positions within that peer group.



Criteria for selecting peer companies		How we use the compensation peer group
Companies with the same eight-digit GICS code as Albemarle		As an input in designing compensation plans, benefits and perquisites
Comparable size based on revenue of approximately 0.5-2.0 times that of Albemarle		As an input in developing base salary ranges, annual incentive targets and long-term awards
Market capitalization of approximately 0.25-4.0 times that of Albemarle		To benchmark total direct compensation, including the pay mix

We use industry and revenue as our two main indicators for determining our peers. We believe that using an industry-specific group of similarly sized companies is appropriate because it provides us with the best comparisons for competitive compensation offered by publicly held companies with similar business challenges and the type of leadership talent needed to achieve success over the long-term. We consider market value as an important factor for peer selection, but believe that market value should be balanced with sales (which are less volatile and a better predictor of compensation levels).

In setting base salaries, target total cash compensation and target total direct compensation, the Committee generally focused on the median of the last reported data from the 2016 Peer Group. The Committee also referred to survey information from nationally recognized compensation surveys.

For 2017, Albemarle updated its Peer Group given the sale of the Chemetall Surface Treatment business and the fact that two companies from the 2016 Peer Group were acquired by other companies. Our selected 2017 Peer Group (the "2017 Peer Group") consists of 17 chemical companies.



2017 Peer Group
Ashland Inc. Cabot Corporation The Chemours Company Celanese Corporation CF Industries Holdings, Inc. FMC Corporation	H. B. Fuller Company W. R. Grace & Co. International Flavors & Fragrances, Inc. Koppers Holdings Inc. The Mosaic Company	Minerals Technologies Inc. Olin Corporation PolyOne Corporation RPM International Inc. A. Schulman, Inc. Scotts Miracle-Gro Company

The 2017 Peer Group includes eleven companies from the 2016 Peer Group.


•	No longer included:


◦	Cytec Industries Inc., Sigma-Aldrich Corporation and Chemtura were acquired.


◦	PPG Industries, Inc., Huntsman Corporation and Eastman Chemical Company are no longer included as their projected sales are more than 300% of Albemarle's projected sales.


•	New to the 2017 Peer Group:


◦	The Chemours Company, PolyOne Corporation, Scotts Miracle-Gro Company, International Flavors & Flagrances, Inc., Minerals Technologies Inc., and Koppers Holdings Inc.

NEO Target and Actual Compensation

The Committee does not rely exclusively on the Peer Group data or survey data in establishing target levels of compensation, or employ a rigid or formulaic process to set compensation levels. The Committee does utilize the Peer Group data and survey data as one of many tools. In setting compensation levels, the Committee considers the following factors:


•	The competitive data (Peer Group and other survey data), focusing on the median data as a starting point;


•	Each NEO’s performance;


•	Each NEO’s scope of responsibility and impact on the Company’s performance;


•	Internal equity – an NEO’s compensation relative to his or her peers, direct reports and supervisors;


•	The recommendations of the Board’s independent executive compensation consultant, Pearl Meyer, with respect to the NEOs; and


•	The CEO’s recommendations for his direct reports.

The Committee evaluates the performance of each NEO in light of our overall financial performance (as described in greater detail below) and non-financial performance goals and strategic objectives approved by the Committee and the Board of Directors. For 2017, as in past years, the Committee structured a compensation package for our NEOs comprised of base salary and benefits coupled with annual and long-term incentives, which we believe provides an appropriate mix of financial security, risk and reward.

2017 Base Salaries

Base salary provides our NEOs with a basic level of financial security and supports the Committee’s objectives in attracting and retaining top talent. Base salaries for our NEOs other than the CEO are recommended by our CEO and are reviewed and approved by the Committee. Base salary for our CEO is recommended and approved by the Committee.



Executive Officer	2016 Year-End Base Salary		2017 Increase in Annual Base Salary		2017 Annual Base Salary
Luther C. Kissam IV
Chairman, President and Chief Executive Officer	$	882,000	$	118,000	$	1,000,000
Scott A. Tozier
Executive Vice President, Chief Financial Officer	$	505,000	$	55,000	$	560,000
Karen G. Narwold
Executive Vice President, Chief Administrative Officer and Corporate Secretary	$	460,000	$	25,000	$	485,000
Matthew K. Juneau
Executive Vice President, Corporate Strategy and Investor Relations	$	415,000	$	12,000	$	427,000
Donald J. LaBauve, Jr.
Vice President, Corporate Controller and Chief Accounting Officer	$	285,715	$	7,714	$	293,429

2017 base salaries for each of the NEOs were determined in recognition of the responsibilities of their positions, their contributions to the success of the Company and their relative position to the peer group of companies. With 2016 base salaries for Mr. Tozier and Ms. Narwold below the peer group median, the Committee supported salary increases to bring their base salaries closer to or at the peer group median. Mr. Kissam's adjustment in base salary brings his base salary to 98% of the peer group median, which is commensurate with his tenure with and contribution to the company. The adjustment in

base salary for Mr. Kissam was given in recognition for his significant contributions to the company and specifically the development of the long-term company strategy, the successful divestiture of the Chemetall Surface Treatment business, securing a second lithium concession in Chile and strengthening the Albemarle leadership team. Salary increases went into effect on April 1, 2017. The Committee believes that each NEO’s salary was reasonable and appropriate.

Purpose and key features of the 2017 Annual Incentive Program (AIP)

The Committee designed the AIP to provide both an incentive to achieve, and a reward for achieving, our annual goals and objectives. Each year, the Committee and the Board approve the performance goals under the AIP. These performance goals are intended to ensure that our NEOs execute on short-term financial and strategic initiatives that drive our business strategy and long-term shareholder value.

For 2017, the Committee established the following Company performance measures and weightings for the AIP:



Metrics	Weight
Adjusted EBITDA	60	%
Adjusted Free Cash Flow	30	%
Stewardship	10	%
Total	100	%

Rationale behind the performance metrics

The Committee chose these performance metrics to align the AIP with our 2017 goals and objectives. The Committee chose the relative weights of the performance measures based on the desire to emphasize financial results while maintaining a focus on non-financial objectives.

The Committee chose Adjusted EBITDA and Adjusted Free Cash Flow as the 2017 AIP metrics because they were considered the key measures of financial performance in the Company’s 2017 annual operating plan.

•

The level of Adjusted EBITDA aligned with the Target payout level was the 2017 operating plan amount, and represented growth over 2016 Adjusted EBITDA (excluding EBITDA generated by Chemetall, which was divested mid December 2016). Adjusted EBITDA is defined as total Albemarle earnings before interest, tax, depreciation and amortization, as adjusted for non-recurring, non-operating and special items.

•

The Committee focuses on Adjusted Free Cash Flow as a performance measure aligned with our objectives of generating cash for debt reduction and growth and reducing our investment in working capital. The target payout level was set at a lower level than our 2016 Adjusted Free Cash Flow (excluding Free Cash Flow generated by the Chemetall® Surface Treatment business, which was divested mid December 2016), because our investment plan included an increase of $208 million of capital expenditures, due to the growth in the lithium business. Our 2017 Adjusted Free Cash Flow is defined as cash flow from operating activities, as shown on the Statement of Cash Flows and adjusted to exclude pension contributions and dividends from joint ventures and add back net income from joint ventures, and adjusted for non-recurring, non-operating and special items.


•	The superior performance levels for both of these metrics were set at levels by the Committee that were believed to be realistic, but only as the result of exceptional performance.

•

Stewardship metrics were included because they are critical to our license to operate and consistent with our values. These objectives were challenging, as the Committee set quantitative target and superior levels of performance for each of these metrics at levels that required year-over-year improvement, with no payout earned for any one individual Stewardship metric if target performance for that metric was not achieved.

The Committee may take into account extraordinary or infrequently occurring events or significant corporate transactions in deciding to adjust the results used to determine whether or not the AIP objectives have been met. The Committee retains the right to exercise discretion in determining the final level of the awards paid, in order to ensure that the AIP remains consistent with its stated objectives. In the last 10 years the Committee has not used its discretion in determining the achievement of the performance metrics. They have used their discretion in the final awards paid to ensure alignment between individual performance and AIP payout.

Individual performance modifiers

At the beginning of 2017, individual objectives were set for each NEO. Individual performance was evaluated by comparing actual performance to the pre-established leadership objectives and considering individual accomplishments not contemplated in the setting of the pre-established objectives. The Committee assessed the performance of the CEO, and the CEO presented his assessment of each other NEO to the Committee.

Performance goals typically include both leadership objectives and strategic business objectives. At the end of each fiscal year, an individual performance modifier is determined for each participant, and a judgment is then made as to the final bonus amount that takes into account both Company results and individual performance.

Performance against our 2017 AIP Metrics

The following table summarizes the threshold, target and superior performance levels set by the Committee and actual results for the Adjusted EBITDA and Adjusted Free Cash Flow metrics for 2017.

Performance at the threshold level paid out 0%, performance at the target level paid out 100% and performance at the superior (maximum) level paid out 200%. We used linear interpolation to determine awards for performance between the identified points. Target and actual results exclude the Chemetall® Surface Treatment business, the sale of which closed mid December 2016. Bonus payouts, in the combination of the payout based on business performance and individual multiplier, are capped at 200%.



2017 Annual Incentive Plan (AIP) Metrics
AIP Metric	Weight		Threshold				Target				Superior			2017 Results			Achievement Against Target		Payout Based on Weight
Adjusted EBITDA	60	%		$	735	MM	$	817	MM		$	899	MM	$	867	MM	106	%	96	%
Adjusted Free Cash Flow	30	%		$	264	MM	$	293	MM		$	322	MM	$	395	MM	135	%	60	%
Stewardship			Score based on 3 Quantitative Stewardship Metrics:														0	%	0	%
	4	%	●	Occupational Safety					0	%
	3	%	●	Process Safety					0	%
	3	%	●	Environment					0	%
																			156	%

The following table further illustrates the 2017 financial targets compared to 2016 target and actual performance (excluding the Chemetall® Surface Treatment business) and our rationale for setting 2017 Adjusted Free Cash Flow below the 2016 target level.



	2017 Financial Targets Compared to 2016 Target and Actual Performance (2016 excluding the Chemetall® Surface Treatment business)
	2016 Target in Millions	2016 Actual in Millions	2017 Target
	2016 Target in Millions	2016 Actual in Millions	2017 Target	Relative to 2016 Target	Relative to 2016 Actual
Adjusted EBITDA	$718	$740	$817	114%	110%
Adjusted Free Cash Flow	$424	$500	$293	69%	59%
2017 Adjusted Free Cash Flow was set below the 2016 target level, given a significant increase in our capital expenditures in support of the growth in the lithium industry. Our capital expenditures increased with $208 million.

The performance for the stewardship metrics (occupational safety, process safety and environmental responsibility) was determined by the Committee’s quantitative assessment of the level of achievement for the three different stewardship objectives. For each of the three stewardship metrics, we have set a target and superior performance level. Performance below target does not pay out. Occupational safety was measured as employee lost time away from work; process safety was measured by severity score; and environmental responsibility was measured by the number of our environmental incidents. We believe in the importance of setting meaningful stewardship standards for our global organization. We did not meet the target stewardship levels for the 2017 performance year and have developed specific measures to improve performance in 2018.

The following table illustrates the 2017 AIP payout against payout levels over the 4 previous years. The chart illustrates that payout results ranged from as low as 10% to as high as 156%, with an average payout over the 5-year period of 99%. We believe the fluctuations in payout confirm the correlation of pay to performance at Albemarle.

AIP earning opportunity for our NEOs

Each of our current NEOs can earn a bonus under the AIP targeted at a certain percentage of his or her base salary. For 2017, our NEOs’ target bonus percentages were 125% (Mr. Kissam), 75% (Messrs. Tozier and Juneau and Ms. Narwold) and 40% (Mr. LaBauve) for achieving the target performance levels for the AIP Company metrics.

Mr. Kissam’s pay mix for 2017 included a base salary below market median, and a target bonus percentage above market median at 125%. This combination of base salary and target bonus percentage positions Mr. Kissam’s target total cash at the 96^th percentile of the 2017 Peer Group. His total direct compensation positions Mr. Kissam at the 101^th percentile of the 2017 Peer Group.

For Company performance that does not reach threshold level for any of the metrics, the NEOs will not earn their AIP. For performance at the target level for any of the metrics, the NEOs may earn the target level AIP. For Company performance at the Superior level, up to two times a target level award may be earned. For Company performance between threshold, target and superior, earned bonuses will be interpolated, with the exception of the Stewardship metrics that do not pay out for performance below the target level.



2017 Annual Incentive Plan (AIP) Payout
AIP Metric	Weight		Threshold		Target		Superior
Adjusted EBITDA	60	%	0	%	100	%	200	%
Adjusted Free Cash Flow	30	%	0	%	100	%	200	%
Stewardship	10	%	0	%	100	%	200	%

Individual performance can be used to modify the bonus amount up or down. The individual multiplier ranges from 0% to 150%. Under the AIP, the maximum annual incentive payments (the combination of company performance and individual multiplier) are set in the first quarter of the calendar year and are capped to a payout of 200% for each of the NEOs. The AIP is designed to be compliant with Internal Revenue Code (“Code”) Section 162(m) and therefore allow for the full tax deduction of the annual incentive payments.

Actual earnings for our NEOs under the 2017 AIP

The Committee reviewed the Company’s 2017 performance and determined that the potential awards for the NEOs were funded consistent with the plan metrics set during the first quarter of the year in accordance with Code Section 162(m). After this determination was made, Mr. Kissam engaged the Committee in a further discussion of the Company’s performance and of each NEO’s individual performance compared to their objectives. In light of the accomplishments by each NEO that were cited by Mr. Kissam to the Committee, it was recommended by Mr. Kissam and approved by the Committee that the individual performance modifier for each NEO be set as follows: Mr. Tozier – 100%, Ms. Narwold – 100%, Mr. Juneau – 100% and Mr. LaBauve – 100%. When applied to and combined with the Company score, this yielded actual bonus payouts for each NEO shown in the table below.

In the case of Mr. Kissam, in early 2018 the Board assessed his performance against both quantitative metrics (safety and financial goals as well as the use of cash) and qualitative objectives (strategy, people, innovation and Board collaboration) and determined that an individual modifier of 95% was appropriate given the Company did not meet its stewardship performance metrics for 2017. When applied to and combined with the Company score, this yielded an actual bonus payout for Mr. Kissam at 146% of his target bonus amount.



2017 AIP Payouts
Name	Base Salary		X	Target Bonus %		=	Target Bonus Amount		X	Company Performance		X	Individual Performance		=	Actual Bonus Amount
Luther C. Kissam IV	$	1,000,000	x	125	%	=	$	1,250,000	x	156.4	%	x	95	%	=	1,857,250
Scott A. Tozier	$	560,000	x	75	%	=	$	420,000	x	156.4		x	100		=	656,880
Karen G. Narwold	$	485,000	x	75	%	=	$	363,750	x	156.4		x	100		=	568,905
Matthew K. Juneau	$	427,000	x	75	%	=	$	320,250	x	156.4		x	100		=	500,871
Donald J. LaBauve, Jr.	$	293,429	x	40	%	=	$	117,372	x	156.4		x	100		=	183,569

Purpose and key features of the Long Term Incentive Plan (LTIP)

We believe it is important to provide a long-term incentive opportunity to our NEOs charged with driving sustainable growth and long-term value creation for Albemarle, further aligning their interests with those of our shareholders. We do this through an annual LTIP grant, in 2017 comprised of PSUs, RSUs and stock options, designed to ensure an equity mix that is performance-based and retentive in nature.

The Committee considers grant values and grant terms from both our Peer Group and survey information when establishing long-term incentives for management. While the Committee generally believes that median values and typical terms are competitive and provide an appropriate balance of opportunity and reward to management without heightened compensation-related risk, the Committee will authorize values above or below the median and different terms where it believes it is in the interest of the Company and its shareholders to do so in light of the factors mentioned above.

Our PSU grant performance measure is relative TSR as compared to our Peer Group for the three-year performance period. The relative TSR performance metric was selected to emphasize the linkage between our pay-for-performance philosophy and our shareholders’ interests, and is intended to focus Company leadership on superior value creation during the three-year performance period and beyond.

The Committee believes that the PSU grant, when viewed in conjunction with annual grants of stock options and RSUs results in an LTIP approach that aligns the pay for performance of our executives with the investment returns experienced by our long-term shareholders. We employ longer vesting period than our peer group median.



	Albemarle	Compensation Peer Group Median
PSUs	Earned PSU grants vest for 50% at the end of the 3-year performance period, with the remaining 50% vesting at the beginning of year four.	Earned PSU grants vest in full after 3 years.
RSUs	RSUs vest for 50% after 3 years, with the remaining 50% vesting after 4 years.	RSUs cliff vest after 3 years.
Stock Options	Stock Options cliff vest after 3 years.	Stock options step-vest over a 3-year period.

PSU results for the 2015-2017 performance period

Payouts under the 2015 PSU grants are earned based on the achievement of a TSR performance relative to the 2015 Peer Group over a three year measurement period. The 2015 Peer Group included all companies in the Dow Jones Chemical Index. Our relative TSR for the period was outstanding with performance at the 100^th percentile relative to the 2015 Peer Group. TSR is calculated using the following formula:

The following chart illustrates Total Shareholder Return within our 2015 peer group at the 25^th, 50^th and 75^th percentile. Among the peer group the highest TSR over this period equaled 82.8%. Albemarle's TSR over this period at 137.9% positions it at the 100^th percentile relative to the 2015 compensation peer group.



Relative Performance Level	2015-2017 TSR
25th Percentile	7.1%
50th Percentile	31.3%
75th Percentile	54.5%
Albemarle	137.9%

The following table illustrates threshold, target and superior relative performance levels and the percentage of the target grant earned for each performance level. Results between threshold and target, and target and superior performance, will be interpolated. The table also includes the relative performance result and the percentage of grants earned as determined by the Committee.



	2015 PSU Grant Metrics
	Threshold		Target		Superior		Metric Result
Percentile performance relative to the 2015 Peer Group	25th		50th		75th		100th
% of Grants Earned	25	%	100	%	200	%	200	%

The following table shows the grants approved in February 2015 by the Committee for the NEOs. The table also includes the grant values approved by the Committee in February 2018 after it determined the 2015-2017 relative performance results.



	2015 PSU Grants			2015 Earned PSUs
	Number of Units at Threshold	Number of Units at Target	Number of Units at Superior
	25%	100%	200%
Luther C. Kissam IV	10,700	42,798	85,596	85,596
Scott A. Tozier	2,408	9,630	19,260	19,260
Karen G. Narwold	1,873	7,490	14,980	14,980
Matthew K. Juneau	1,605	6,420	12,840	12,840
Donald J. LaBauve, Jr.	402	1,606	3,212	3,212

Half of the shares earned vested on February 23, 2018, when the Committee certified performance. The other half will vest on January 1, 2019.

2017 LTIP grants

In February 2017, the Committee approved a total grant value for the NEOs under the LTIP. The values granted to each NEO are set forth below, as well as the approximate percentage apportioned in the form of PSUs, RSUs and Stock Options. Mr. Kissam’s equity grant reflects our emphasis on long-term incentives in our pay mix, with base salary below the median of the peer group, target total cash below peer group median and equity above peer group median for a total direct compensation 1% above the peer group median.



	2017 Grants
	Value Granted		Stock Options		RSUs		PSUs
Luther C. Kissam IV	$	4,000,000	25	%	25	%	50	%
Scott A. Tozier	$	900,000	25	%	25	%	50	%
Karen G. Narwold	$	700,000	25	%	25	%	50	%
Matthew K. Juneau	$	600,000	25	%	25	%	50	%
Donald J. LaBauve, Jr.	$	150,000	—	%	50	%	50	%

The number of units for the PSUs and RSUs was based on the stock closing price at the grant date. The number of stock options was determined using the Black Scholes value of the options.

PSU Grants

In February 2017, the Committee approved a grant of PSUs, based on the grant date closing stock price, to our NEOs, as follows:



	2017 PSU Grants
	Number of Units at Threshold	Number of Units at Target	Number of Units at Superior
	25%	100%	200%
Luther C. Kissam IV	5,381	21,522	43,044
Scott A. Tozier	1,346	5,382	10,764
Karen G. Narwold	1,211	4,844	9,688
Matthew K. Juneau	808	3,230	6,460
Donald J. LaBauve, Jr.	202	808	1,616

Consistent with the approach adopted since 2014, the 2017 PSU grant is based on the Company’s TSR relative to the 2017 Peer Group as measured over a three-year performance period.

Performance and payout opportunities as shown in the table reflect the dual character of the PSU grant:


•	The grant is performance-based to ensure payout opportunities are aligned with shareholder interests.


•	The grant is also competitive in nature and as such reflects performance and payout opportunities aligned with the Peer Group and the broader market in which we compete for talent.



	2017 PSU Grant Metrics
	Threshold		Target		Superior
Percentile performance relative to the 2017 Peer Group	25th		50th		75th
% of Grants Earned	25	%	100	%	200	%

Half of any shares earned will vest in early 2020 at the time the Committee evaluates the three-year relative TSR performance against the performance of the Company’s 2017 Peer Group. The other half will vest on January 1, 2021.

RSU Grants

In February 2017, the Committee approved RSU awards to our NEOs, as follows:



	2017 Restricted Stock Units
Luther C. Kissam IV	10,762
Scott A. Tozier	2,692
Karen G. Narwold	2,422
Matthew K. Juneau	1,616
Donald J. LaBauve, Jr.	808

Half of the RSUs will vest on each of the third and fourth anniversary of the grant date in 2020 and 2021.

Stock Option Grants

In February 2017, the Committee approved a grant of stock options to our NEOs, as follows:



	2017 Stock Options
Luther C. Kissam IV	35,740
Scott A. Tozier	8,935
Karen G. Narwold	8,042
Matthew K. Juneau	5,361
Donald J. LaBauve, Jr.	N/A

The options vest on the third anniversary of the grant date and expire ten years from the date of the grant.

Other benefits the Company provides to NEOs

The Company provides NEOs with the same benefits provided to other Albemarle employees, including:


•	Health and dental insurance (Company pays a portion of costs);


•	Basic life insurance;


•	Long-term disability insurance;


•	Participation in the Albemarle Corporation Savings Plan (the “Savings Plan”), including Company matching and defined contribution pension contributions;


•	Participation in the EDCP (see below for definition);


•	Participation in Albemarle Corporation Pension Plan, defined below, for those executives hired prior to 2004 (Messrs. Kissam, Juneau and LaBauve only); and


•	Matching charitable contributions.

Executive Deferred Compensation Plan (“EDCP”)

We maintain a deferred compensation plan that covers executives, including the NEOs, who are limited in how much they can contribute to tax-qualified deferred compensation plans (such as our Savings Plan). We maintain this plan in order to be competitive and because we want to encourage executives to save for their retirement. A participant in the EDCP may defer up to 50% of base salary and/or up to 100% of cash incentive awards (net of FICA and Medicare taxes due). We also provide for employer contributions in the EDCP to provide executives with the same proportional benefits as are provided to all other employees, but that cannot be provided under our tax-qualified plan because of statutory limitations that apply under that plan. The EDCP also provides for a supplemental benefit of 5% of compensation in excess of amounts that may be recognized under the tax-qualified Savings Plan and of the cash incentive bonus award paid during the year.

Defined Benefit Plan

We previously maintained a traditional tax-qualified defined benefit pension plan ("Pension Plan"), which was fully frozen as of December 31, 2014. In 2004, we implemented a new defined contribution pension benefit in our tax-qualified Savings Plan for all non-represented employees hired on or after April 1, 2004, and limited participation in the "Pension Plan" to then-current participants. Mr. Kissam, Mr. Juneau and Mr. LaBauve joined the Company prior to April 1, 2004, and, as such, participated in the Pension Plan. We also maintain a supplemental executive retirement plan (“SERP”) to provide participants with the difference between (i) the benefits they would actually accrue under the Pension Plan but for the maximum compensation and benefit limitations under the Internal Revenue Code, and (ii) the benefits actually accrued under the Pension Plan, which are subject to the Code’s compensation and benefit limits. Certain provisions of the SERP also permit the Committee to award key executives additional pension credits related to offset reduction in the Pension Plan plan as a mid-career hire. This provision was also limited to then-current participants in 2004 concurrent with the Pension Plan changes. The Company froze accruals in the Pension Plan and SERP effective December 31, 2014.

Beginning on January 1, 2013, all our NEOs, regardless of hire date, participate in the same tax- qualified Savings Plan and EDCP. The new defined contribution plan design has provided all participating employees the opportunity to receive a Company contribution of 11% of their base and bonus earnings for the calendar year if they contribute at least 9% of their base and bonus earnings to the Savings Plan. Such Company contributions go into the tax-qualified Savings Plan up to the compensation and benefit limitations under the Code, and after that are credited to an EDCP account.

Perquisites

Our perquisites are intended to be limited in nature, and are focused in areas directly related to a business purpose, or in helping to foster the health, security and well-being of our senior executives for the benefit of the Company.

When an NEO is required to geographically relocate in order to join the Company, or is asked to relocate due to a change in their work location after joining the Company, we provide them with the same relocation package that is also offered to management and senior professional employees. Certain relocation expenses are grossed-up for taxes, as is the competitive practice within our Peer Group, and more broadly, in the general marketplace.

We also offer limited reimbursement for executive physical exams and financial planning. Our policy is to not provide tax gross-ups on such amounts to NEOs.

Post-termination payments

We believe that providing our executives, including our NEOs, with reasonable severance benefits aligns their interests with shareholders’ interests in the context of potential change in control transactions, and also believe that such benefits help facilitate our recruitment and retention of senior executive talent.

Consistent with this philosophy, we maintain a Severance Pay Plan (“SPP”), which provides severance payments to certain of our employees if we (a) terminate their employment without cause (or request that they relocate and they elect not to do so) after a change in control, or (b) eliminate their position (or a change in our organizational structure has a similar effect) absent a change in control. The SPP provides our NEOs with severance payments only in the absence of a change in control.

Between 2006 and 2017, we entered into severance compensation agreements (and related amendments) with each of our NEOs, providing for severance payments for a change in control-related termination. None of these severance compensation agreements include an excise tax gross-up.

The Committee periodically reviews our post-employment compensation arrangements taking best practices into consideration, and believes that these arrangements are generally consistent with arrangements currently being offered by our Peer Group. The Committee has determined that both the terms and payout levels are appropriate to accomplish our stated objectives. The Committee also considered the non-competition agreement that we would receive from the NEO in exchange for any post-employment termination benefits. Based on these considerations, the Committee believes that such arrangements are appropriate and reasonable.

For additional information with respect to change in control arrangements, please see “Agreements with Executive Officers and Other Potential Payments upon Termination or a Change in Control” on page 39.

ADDITIONAL INFORMATION

We believe this additional information may assist you in better understanding our compensation practices and principles.

Role of the Committee and the CEO

The Committee, consisting entirely of independent Directors, is responsible for executive compensation. As part of the compensation-setting process each year, the Committee meets periodically with the CEO to review a list of corporate performance goals and receives comments from members of the Board of Directors. The CEO recommends to the Committee the compensation amounts for each of our NEOs, other than himself. The Committee has retained an independent compensation consultant, Pearl Meyer, to provide advice on best practices and market developments. The CEO, the Executive Vice President and Chief Administrative Officer, Human Resources staff members and the Committee’s consultant attend Committee meetings and make recommendations regarding plan design and levels of compensation.

While the Committee will ask for advice and recommendations from management and Pearl Meyer, the Committee is responsible for executive compensation and as such:


•	Sets NEO base salaries;


•	Reviews financial and operational goals, performance measures and strategic and operating plans for the Company;


•	Establishes specific goals, objectives and potential awards for the AIP and LTIP;


•	Reviews annual and long-term performance against goals and objectives and approves payment of any incentive earned;


•	Reviews contractual agreements and benefits, including supplemental retirement and any payments that may be earned upon termination, and makes changes as appropriate;


•	Reviews incentive plan designs and makes changes as appropriate; and


•	Reviews total compensation to ensure compensation earned by NEOs is fair and reasonable relative to corporate and individual performance.

Total compensation actions, annual and long-term performance goals and objectives, contractual agreements and benefits are discussed with and approved by the Board. The Incentive Plan governing short and long term incentives is approved by the Board and subject to shareholder approval.

Role of Compensation Consultant

The Committee retained Pearl Meyer to provide independent advice to the Committee. Pearl Meyer gathers and analyzes data at the direction of the Committee, advises the Committee on compensation standards and trends, and assists in the development of policies and programs. The Committee directs, approves and evaluates Pearl Meyer’s work in relation to all executive compensation matters. The Committee considers Pearl Meyer to be independent from our management pursuant to the U.S. Securities and Exchange Commission standards. Please see “Independence of the Executive Compensation Consultant” on page 52.

The Committee regularly meets with Pearl Meyer without management present. Pearl Meyer participates in Committee meetings throughout the year, reviews materials in advance, consults with the Chairperson of the Committee, provides to the Committee data on market trends and compensation

design, assesses recommendations for base salary and annual incentive awards for our NEOs and periodically meets with management. Pearl Meyer may provide consulting advice to management outside the scope of executive compensation with the approval of the Committee. In 2017, Pearl Meyer did not provide consulting advice to management outside the scope of executive compensation. The Committee does not delegate authority to Pearl Meyer.

Deductibility of Compensation

In determining the total compensation of each NEO, the Committee considers the tax deductibility of compensation. The Committee believes it is in our best interest and that of our shareholders to provide compensation that is tax deductible by the Company. While the Committee intends that all compensation be deductible, there may be instances where potentially non-deductible compensation is provided to reward executives consistent with our compensation philosophy for each compensation element.

Clawbacks

In 2017 we adopted a Compensation Recoupment and Forfeiture Policy under the 2017 Incentive Plan. In the event misconduct by any employee results in a financial restatement (all as more specifically defined in the policy), the policy requires that our Chief Executive Officer and Chief Financial Officer reimburse us for (i) the gross amount of any bonus or other incentive-based or equity-based compensation received by such officer from the Company during the 12-month period following the date the document requiring the financial restatement was first publicly issued or filed (whichever occurs first) with the SEC, and (ii) any profits realized from the sale of securities of the Company during such 12-month period. The policy further requires any employee who engaged in such misconduct to reimburse the Company the same amounts set forth in (i) and (ii) above applicable to that employee, and requires any such employee whose employment is terminated for cause to forfeit all unpaid cash-based incentive compensation under our incentive plan (whether or not accrued and/or payable at such time) and all unvested equity-based awards (whether or not earned at such time), in each case as of the date such employee is notified of termination of his or her employment for cause (as defined under the policy).

In addition, in our Form 10-K for the year ended December 31, 2017, we disclosed that based on an internal investigation, we voluntarily self-reported potential issues relating to the use of third party sales representatives in our Refining Solutions business to the U.S. Department of Justice (the "DOJ") and the SEC and that we intended to cooperate with the DOJ and the SEC in their review of these matters. Our Board of Directors determined, as a prudent governance measure while the investigation is pending, to condition payment of each NEO’s cash incentive bonus for the fiscal year 2017 (the “2017 cash incentive”) on each NEO executing a clawback agreement applicable to the 2017 cash incentive. Accordingly, on February 26, 2018, the Company entered into a clawback agreement with each of our NEOs. The clawback agreements supplement the Company’s existing policy described above and provide that each NEO's 2017 cash incentive is subject to clawback by the Company in the event that the Committee determines that, with respect to the Company’s internal investigation or the government’s review of these matters following such self-report, the NEO: (1) engaged in unlawful conduct or misconduct; (2) failed to cooperate in any related investigation; (3) violated the Company’s Code of Conduct or any other Company policy; or (4) failed to exercise appropriate supervision or oversight.

EXECUTIVE COMPENSATION COMMITTEE REPORT

The Executive Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section of this Proxy Statement with management and, based on such review and discussion, recommended to the Board of Directors that it be included in this Proxy Statement.

EXECUTIVE COMPENSATION COMMITTEE

J. Kent Masters, Chair

Barry W. Perry

Harriett Tee Taggart

Alejandro D. Wolff

March 28, 2018

COMPENSATION OF EXECUTIVE OFFICERS

Total Compensation of Our Named Executive Officers

The following table presents information for the fiscal years ended December 31, 2017, 2016 and 2015 relating to total compensation of our CEO, CFO, and the three other highest paid executive officers (the “NEOs”).

SUMMARY COMPENSATION TABLE



Summary Compensation Table
Name and Principal Position	Year	Salary⁽¹⁾		Bonus		Stock Awards⁽²⁾⁽³⁾		Option Awards⁽²⁾		Non-Equity Incentive Plan Compensation		Change in Pension Value and NQDC Earnings⁽⁴⁾			All Other Compensation⁽⁵⁾		Total
Luther C. Kissam IV	2017	$	970,500	$	—	$	3,465,777	$	1,000,005	$	1,857,250	$	857,015		$	346,188	$	8,496,735
Chairman, President and Chief Executive Officer	2016	871,500		—		3,695,834		1,000,008		1,682,415		595,260			589,133		8,434,150
	2015	830,000		—		2,368,441		1,600,015		850,000		(582,528		)	196,094		5,262,022
Scott A. Tozier	2017	546,250		—		866,753		250,001		656,880		—			149,673		2,469,557
Executive Vice President, Chief Financial Officer	2016	505,000		—		831,705		225,001		700,000		—			215,035		2,476,741
	2015	500,000		—		532,924		360,022		330,000		—			143,728		1,866,674
Karen G. Narwold	2017	478,750		—		780,029		225,015		568,905		—			129,442		2,182,141
Executive Vice President, Chief Administrative Officer and Corporate Secretary	2016	455,000		—		1,123,254		175,006		650,000		—			1,316,665		3,719,925
	2015	435,000		—		414,497		280,033		320,000		—			127,690		1,577,220
Matthew K. Juneau	2017	424,000		—		520,216		150,001		500,871		250,840			109,616		1,955,544
Executive Vice President, Corporate Strategy and Investor Relations	2016	411,250		—		554,532		150,000		620,000		172,700			117,155		2,025,637
	2015	396,250		—		355,283		240,014		410,000		(398,098		)	79,513		1,082,962
Donald J. LaBauve, Jr.	2017	291,501		—		166,149		—		183,569		108,531			55,213		804,963
Vice President, Corporate Controller and Chief Accounting Officer	2016	279,896		—		173,890		—		174,400		63,917			86,518		778,621

___________________________________________________

(1) Salary amounts include cash compensation earned by each named executive officer during the applicable fiscal year, as well as any amounts earned in the applicable fiscal year but contributed into the Savings Plan and/or deferred at the election of the named executive officer into the EDCP. For a discussion of the deferred compensation program and amounts deferred by the named executive officers in fiscal year 2017, including earnings on amounts deferred, please see “Nonqualified Deferred Compensation” on page 38. No salary amounts or other compensation are reported for Mr. LaBauve for 2015 because he was not a named executive officer for that year.

(2) The amount represents the aggregate grant date fair value of stock or option awards recognized in the fiscal year in accordance with FASB ASC Topic 718. This amount does not reflect our accounting expense for these award(s) during the year and does not correspond to the actual cash value that will be recognized by the named executive officer when received. For more information on the assumptions for these awards, please see Note 18 to our Consolidated Financial Statements filed on Form 10-K for the year ended December 31, 2017. Information on individual equity awards granted to each of the named executive officers in fiscal year 2017 is set forth in the section entitled “Grants of Plan-Based Awards” on page 30.

(3) Amounts for fiscal year 2017 include performance unit awards with a performance measure of Total Shareholder Return calculated at 100% of Target level, assuming a fair value per share of $116.4300 using the Monte Carlo valuation method. The maximum payable for Superior level performance on our 2017 PSU award is 200% of Target level. The aggregate grant date fair value at the Superior level of 200% for each of the named executive officers is: Mr. Kissam $5,011,613; Mr. Tozier $1,253,253; Ms. Narwold $1,127,974; Mr. Juneau $752,138; and Mr. LaBauve $188,151. Also includes 2017 Restricted Stock Units assuming a fair value price per share of $92.93 with an aggregate grant date fair value for Mr. Kissam $959,970; Mr. Tozier $240,126; Ms. Narwold $216,042; Mr. Juneau $144,148; and Mr. LaBauve $72,074.

(4) Includes the actuarial increases in the present values of the named executive officers’ benefits under our pension plans determined using interest rate and mortality rate assumptions consistent with those used in our financial statements. Messrs. Kissam and Juneau had, respectively, a loss of $582,528 and $398,098 in 2015.

For a full description of the pension plan assumptions used by us for financial reporting purposes, see Note 15 to our Consolidated Financial Statements beginning on page 86 of the 2017 Annual Report.

(5) All other compensation amounts reported for 2017 include:



All Other Compensation
Name	Company Contribution to Albemarle 401K Plan	Company Contributions to Defined Retirement Benefit in Savings Plan	Company Contributions to Nonqualified Deferred Compensation Plan	Executive Physical Exam	Other⁽¹⁾	Total
Luther C. Kissam IV	13,050	13,500	286,091	3,300	30,247	346,188
Scott A. Tozier	13,050	13,500	106,228	2,500	14,395	149,673
Karen G. Narwold	13,050	13,500	88,575	2,500	11,817	129,442
Matthew K. Juneau	13,050	13,500	66,566	2,500	14,000	109,616
Donald J. LaBauve, Jr.	13,050	13,500	24,919	2,500	2,455	56,424

___________________________________________________

⁽¹⁾

Includes the following: personal financial consulting expenses paid by the Company on behalf of each named executive officer other than Mr. LaBauve; annual credit card fees for Messrs. Kissam and Tozier and Ms. Narwold; and personal use of Company aircraft for Messrs. Kissam and LaBauve. The aircraft fees are calculated based on a cost per hour that reflects the incremental cost to the company for operating the aircraft.

Compensation Risk Assessment

As part of its oversight of the Company’s executive compensation program, the Executive Compensation Committee considers the impact of the Company’s executive compensation program and the incentives created by the compensation awards that it administers, on the Company’s risk profile. In addition, the Company reviews all employee, including non-executive, compensation policies and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk-taking, to determine whether they present a significant risk to the Company. At the Committee’s direction, our Executive Vice President, Chief Administrative Officer and Corporate Secretary and her staff, together with our Chief Risk and Compliance Officer and a member of our internal audit team, conducted a risk assessment of our compensation programs. This assessment included, but was not limited to, evaluation of each compensation program based on the following categories: (i) performance measures, (ii) funding, (iii) performance period, (iv) pay mix, (v) goal setting and leverage, and (vi) controls and processes.

The Committee reviewed the findings of the assessment and concluded that our compensation programs are designed with the appropriate balance of risk and reward in relation to our overall business strategy and that the balance of compensation elements discourages excessive risk-taking. The Committee therefore determined that the risks arising from our compensation policies and practices for employees are not reasonably likely to have a material adverse effect on the Company. In its discussions, the Committee considered the attributes of our programs, including:


•	The balance between annual and long-term performance opportunities;


•	Alignment of our programs with business strategies focused on long-term growth and sustained shareholder value;


•	Dependence upon the achievement of specific corporate and individual performance goals that are objectively determined with verifiable results;


•	The corporate goals include both financial and stewardship metrics (safety and environment) and have pre-established Threshold, Target and Maximum award limits;


•	The Executive Compensation Committee’s ability to consider non-financial and other qualitative performance factors in determining actual compensation payouts;


•	Stock ownership guidelines that are reasonable and align executives’ interests with those of our shareholders; and


•	Forfeiture and recoupment policy provisions in the Plan for cash and equity awards.

Grants of Plan-Based Awards

The Albemarle Corporation 2008 Incentive Plan, as amended in 2010 (the "Plan"), served as the core program for the performance-based compensation components of our named executive officers’ total compensation. All incentive awards for our NEOs in 2017 were made under the Plan. In May 2017, our shareholders approved the The Albemarle Corporation 2017 Incentive Plan, which replaced the Plan and defines the incentive arrangements for eligible participants beginning in May 2017 and:


•	Authorizes the granting of annual and long-term cash incentive awards, stock options, stock appreciation rights, performance shares, restricted stock, RSUs and other incentive awards, all of which may be made subject to the attainment of performance goals recommended by management and approved by the Executive Compensation Committee;


•	Provides for the enumeration of the business criteria on which performance goals are to be based; and


•	Establishes the maximum share grants or awards (or, in the case of cash incentive awards, the maximum compensation) that can be paid to a participant under the Plan.

With the exception of significant promotions and new executive hires, grants generally are made at the first meeting of the Executive Compensation Committee each year following the availability of the financial results for the prior year. Awards to our named executive officers were made on February 24, 2017, for the 2017 LTIP. These awards consisted of stock options, PSUs and RSUs.


•	The awards of PSUs vest 50% at the time the Executive Compensation Committee determines the performance relative to the goals after the end of the three-year performance period, and the remaining 50% vests on the following January 1.


•	The 2017 stock options fully vest on the third anniversary of the grant date.


•	The 2017 award of RSUs will vest 50% on the third anniversary of the grant date, while the remaining 50% will vest on the fourth anniversary of the grant date.

Effective for tax years beginning after December 31, 2017, U.S. tax law changes will expand the definition of covered employees under Section 162(m) to include, among others, the Chief Financial Officer, and eliminate the performance-based compensation exception beginning in 2018. At this time, it is not certain that our performance-based compensation for periods prior to 2018 will qualify for an exemption from the deduction limit under transition relief applicable to arrangements in place as of November 2, 2017.

The Committee views the tax deductibility of executive compensation as one factor to be considered in the context of its overall compensation philosophy, and will consider the tax law changes. The Committee reviews each material element of compensation on a continuing basis to determine whether deductibility can be accomplished without sacrificing flexibility and other important elements of the overall executive compensation program.

For additional information with respect to these awards, please see “Compensation Discussion and Analysis” beginning on page 7.

The following table presents information regarding grants of plan-based awards to our named executive officers during the fiscal year ended December 31, 2017.

GRANTS OF PLAN-BASED AWARDS



Grants of Plan-Based Awards ⁽¹⁾
Name	Grant Date	Estimated Future Payouts Under Non-Equity Incentive Plan Awards						Estimated Future Payouts Under Equity Incentive Plan Awards			All Other Stock Awards: Number of Shares of Stock or Units (#)	All Other Option Awards: Number of Securities Underlying Options (#)	Base Price per Option Award⁽⁴⁾	Grant Date Aggregate Fair Value of Stock and Option Awards⁽²⁾⁽³⁾ $

		Threshold		Target		Max		Threshold # of Shares	Target # of Shares	Max # of Shares
Luther C. Kissam IV		$	0	$	1,250,000	$	2,500,000
	2/24/2017											35,740	92.93	$	1,000,005
	2/24/2017										10,762			$	959,970
	2/24/2017							5,381	21,522	43,044				$	2,505,806
Scott A. Tozier		$	0	$	420,000	$	840,000
	2/24/2017											8,935	92.93	$	250,001
	2/24/2017										2,692			$	240,126
	2/24/2017							1,346	5,382	10,764				$	626,626
Karen G. Narwold		$	0	$	363,750	$	727,500
	2/24/2017											8,042	92.93	$	225,015
	2/24/2017										2,422			$	216,042
	2/24/2017							1,211	4,844	9,688				$	563,987
Matthew K. Juneau		$	0	$	320,250	$	640,500
	2/24/2017											5,361	92.93	$	150,001
	2/24/2017										1,616			$	144,147
	2/24/2017							808	3,230	6,460				$	376,069
Donald J. LaBauve, Jr.		$	0	$	117,372	$	234,743
	2/24/2017										808			$	72,074
	2/24/2017							202	808	1,616				$	94,075

___________________________________________________


1	For additional information with respect to the plan-based awards, please see “Compensation Discussion and Analysis” beginning on page 7.


2	Reflects the full grant date fair market value of the PSU award made February 24, 2017, with a performance measure of TSR calculated at 100% of Target level that vests 50% in 2020 and 50% in 2021 if the performance metrics are met. Assumes a fair value per share of $116.43 using the Monte Carlo valuation method.


3	Reflects the full grant date fair market values of the RSU award made February 24, 2017. The restricted stock units will vest in equal increments on the third and fourth anniversaries of the grant date.

On February 24, 2017, the Executive Compensation Committee approved grants of 35,740, 8,935, 8,042, and 5,361 options to Mr. Kissam, Mr. Tozier, Ms. Narwold, and Mr. Juneau, respectively, under the Plan. Assumes a fair value per share of $27.98 under the Black Scholes fair value model. The exercise price of each stock option is $92.93, which represents the closing price of our Common Stock as of the date of the grants. The options will cliff vest on the third anniversary of the date of grant, or February 24, 2020. The expiration date of the options is February 23, 2027, ten years from date of grant. If the individual terminates employment with us for any reason prior to the full vesting of such award, the unvested portions of such award will be forfeited. However, if the individual retires, becomes disabled, dies, or is terminated by the company without cause, then the individual will become vested in a pro-rata portion of the stock options.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table presents information concerning the number and value of unexercised options, non-vested stock (including restricted stock, restricted stock units or performance units) and incentive plan awards for the named executive officers outstanding as of the end of the fiscal year ended December 31, 2017.



		Option Awards					Stock Awards
Name	Award Type	Number of Securities Underlying Unexercised Options (#) Exercisable⁽¹⁾	Number of Securities Underlying Unexercised Options (#)Unexercisable⁽¹⁾	Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested² ($)			Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested⁽²⁾ ($)
Luther C. Kissam IV
3/12/2010	OPTION	36,000		$	41.94	3/11/2020
1/31/2011	OPTION	40,000		$	56.16	1/30/2021
2/24/2012	OPTION	59,000		$	66.14	2/23/2022
2/22/2013	OPTION	54,927	27,463	$	65.00	2/21/2023
2/24/2014	OPTION	27,267	54,534	$	63.84	2/23/2024
2/24/2015	OPTION		99,195	$	56.08	2/23/2025
2/26/2016	OPTION		62,267	$	56.56	2/25/2026
2/24/2017	OPTION		35,740	$	92.93	2/23/2027
2/26/2016	RSU						17,682	$	2,261,351	⁴
2/24/2017	RSU						10,762	$	1,376,352	⁶
2/24/2014	PSU										37,594	⁷	$	4,807,897
2/24/2015	PSU										42,798	⁸	$	5,473,436
2/26/2016	PSU										35,361	⁹	$	4,522,318
2/24/2017	PSU										21,522	¹⁰	$	2,752,448
Scott A. Tozier
2/24/2012	OPTION	14,500		$	66.14	2/23/2022
2/22/2013	OPTION	10,986	5,492	$	65.00	2/21/2023
2/24/2014	OPTION	6,135	12,270	$	63.84	2/23/2024
2/24/2015	OPTION		22,320	$	56.08	2/23/2025
2/26/2016	OPTION		14,010	$	56.56	2/25/2026
2/24/2017	OPTION		8,935	$	92.93	2/23/2027
2/26/2016	RSU						3,980	$	509,002	⁴
2/24/2017	RSU						2,692	$	344,280	⁶
2/24/2014	PSU										8,460	⁷	$	1,081,949
2/24/2015	PSU										9,630	⁸	$	1,231,581
2/26/2016	PSU										7,957	⁹	$	1,017,621
2/24/2017	PSU										5,382	¹⁰	$	688,304
Karen G. Narwold
2/24/2012	OPTION	12,500		$	66.14	2/23/2022
2/22/2013	OPTION	8,240	4,119	$	65.00	2/21/2023
2/24/2014	OPTION	4,090	8,180	$	63.84	2/23/2024
2/24/2015	OPTION		17,361	$	56.08	2/23/2025
2/26/2016	OPTION		10,897	$	56.56	2/25/2026
2/24/2017	OPTION		8,042	$	92.93	2/23/2027
2/26/2016	RSU						3,096	$	395,947	⁴
5/12/2016	RSU						6,591	$	842,923	⁵
2/24/2017	RSU						2,422	$	309,750	⁶
2/24/2014	PSU										5,640	⁷	$	721,300
2/24/2015	PSU										7,490	⁸	$	957,896
2/26/2016	PSU										6,189	⁹	$	791,511
2/24/2017	PSU										4,844	¹⁰	$	619,499



		Option Awards					Stock Awards
Name	Award Type	Number of Securities Underlying Unexercised Options (#) Exercisable⁽¹⁾	Number of Securities Underlying Unexercised Options (#)Unexercisable⁽¹⁾	Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested² ($)			Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested⁽²⁾ ($)
Matthew K. Juneau
1/31/2011	OPTION	10,400		$	56.16	1/30/2021
2/24/2012	OPTION	9,700		$	66.14	2/23/2022
2/22/2013	OPTION	6,866	3,433	$	65.00	2/21/2023
2/24/2014	OPTION	4,090	8,180	$	63.84	2/23/2024
2/24/2015	OPTION		14,880	$	56.08	2/23/2025
2/26/2016	OPTION		9,340	$	56.56	2/25/2026
2/24/2017	OPTION		5,361	$	92.93	2/23/2027
2/26/2016	RSU						2,654	$	339,420	⁴
2/24/2017	RSU						1,616	$	206,670	⁶
2/24/2014	PSU										5,640	⁷	$	721,300
2/24/2015	PSU										6,420	⁸	$	821,053
2/26/2016	PSU										5,305	⁹	$	678,456
2/24/2017	PSU										3,230	¹⁰	$	413,084
Donald J. LaBauve, Jr.
3/12/2010	OPTION	1,000		$	41.94	3/11/2020
1/31/2011	OPTION	1,866		$	56.16	1/30/2021
2/24/2012	OPTION	2,300		$	66.14	2/23/2022
2/22/2013	OPTION	2,060	1,030	$	65.00	2/21/2023
2/24/2014	OPTION	1,023	2,046	$	63.84	2/23/2024
2/24/2015	OPTION		3,720	$	56.08	2/23/2025
5/8/2015	RSU						2,375	$	303,739	³
2/26/2016	RSU						1,328	$	169,840	⁴
2/24/2017	RSU						808	$	103,335	⁶
2/24/2014	PSU										1,410	⁷	$	180,325
2/24/2015	PSU										1,606	⁸	$	205,391
2/26/2016	PSU										1,327	⁹	$	169,710
2/24/2017	PSU										808	¹⁰	$	103,335

___________________________________________________


⁽¹⁾	The vesting dates for the stock options outstanding are as follows per option grant date:



Grant Date	Vesting Schedule
3/12/2010	Vested in three equal increments on the first, second and third anniversaries of the grant date, or March 12, 2011, 2012 and 2013
9/13/2010	Cliff vested on third anniversary of the grant date, or September 13, 2013
1/31/2011	Vested in three equal increments on the first, second and third anniversaries of the grant date, or January 31, 2012, 2013 and 2014 (except for Mr. Tozier’s stock option award, which cliff vested on third anniversary of grant date, or January 31, 2014)
2/24/2012	Vested in three equal increments on the first, second and third anniversaries of the grant date, or February 24, 2013, 2014 and 2015
2/22/2013	Vests in three equal increments on the third, fourth and fifth anniversaries of the grant date, or February 22, 2016, 2017 and 2018
2/24/2014	Vests in three equal increments on the third, fourth and fifth anniversaries of the grant date, or February 24, 2017, 2018 and 2019
2/24/2015	Vests in three equal increments on the third, fourth and fifth anniversaries of the grant date, or February 24, 2018, 2019 and 2020
2/26/2016	Cliff vests on the third anniversary of the grant date, or February 26, 2019
2/24/2017	Cliff vests on the third anniversary of the grant date, or February 24, 2020


⁽²⁾	Based on the closing price per share of Common Stock on December 29, 2017, which was $127.89.


⁽³⁾	Reflects a RSU award granted in 2015 that cliff vests on the third anniversary date of the grant, May 8, 2018. The RSU award converts 1-for-1 into shares of our Common Stock upon vesting. For further information on the RSU awards, please see “Compensation Discussion and Analysis.”


⁽⁴⁾	Reflects a RSU award granted in 2016 that will vest 50% in 2019 with the remaining 50% vesting in 2020. For further information on the RSU awards, please see “Compensation Discussion and Analysis.”


⁽⁵⁾	Reflects a RSU award granted in 2016 that cliff vests on the third anniversary date of the grant, May 12, 2019. For further information on the RSU awards, please see “Compensation Discussion and Analysis.”


⁽⁶⁾	Reflects a RSU award granted in 2017 that will vest 50% in 2020 with the remaining 50% vesting in 2021. For further information on the RSU awards, please see “Compensation Discussion and Analysis.”


⁽⁷⁾	Reflects a PSU award granted in 2014 that vested 50% in 2017 with the remaining 50% having vested on January 1, 2018. Assumes 100% vesting of the award at the earned amount of 200% Superior level. For further information on the PSU awards, please see “Compensation Discussion and Analysis.”


⁽⁸⁾	Reflects a PSU award granted in 2015 that if earned will vest 50% in 2018 with the remaining 50% vesting on January 1, 2019. Assumes 100% vesting of the award at a 100% Target level. For further information on the PSU awards, please see “Compensation Discussion and Analysis.”


⁽⁹⁾	Reflects a PSU award granted in 2016 that if earned will vest 50% in 2019 with the remaining 50% vesting on January 1, 2020. Assumes 100% vesting of the award at a 100% Target level. For further information on the PSU awards, please see “Compensation Discussion and Analysis.”


⁽¹⁰⁾	Reflects a PSU award granted in 2017 that if earned will vest 50% in 2020 with the remaining 50% vesting on January 1, 2021. Assumes 100% vesting of the award at a 100% Target level. For further information on the PSU awards, please see “Compensation Discussion and Analysis.”

Option Exercises and Stock Vested

The following table presents information concerning the exercise of stock options and the vesting of stock (including restricted stock, restricted stock units or performance units) for the named executive officers during the fiscal year ended December 31, 2017.

OPTION EXERCISES AND STOCK VESTED



	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)			Number of Shares Acquired on Vesting (#)	Value Realized on Vesting ($)
Luther C. Kissam IV					16,291	$	1,402,329	⁽⁵⁾
					37,594	$	3,493,610	⁽⁶⁾
	50,000	$	4,381,740	⁽¹⁾
Scott A. Tozier					3,259	$	280,535	⁽⁵⁾
					8,460	$	786,188	⁽⁶⁾
	25,000	$	1,349,148	⁽²⁾
Karen G. Narwold					2,444	$	210,379	⁽⁵⁾
					5,640	$	524,125	⁽⁶⁾
	11,500	$	687,573	⁽³⁾
	20,000	$	1,320,546	⁽⁴⁾
Matthew K. Juneau					2,444	$	210,380	⁽⁵⁾
Matthew K. Juneau					5,640	$	524,125	⁽⁶⁾
Donald J. LaBauve, Jr.					611	$	52,595	⁽⁵⁾
Donald J. LaBauve, Jr.					1,410	$	131,031	⁽⁶⁾

___________________________________________________


⁽¹⁾	On July 7, 2017, Mr. Kissam exercised and sold options for 50,000 shares of Common Stock at a grant price of $22.45 and a sale price of $110.084764.


⁽²⁾	On July 7 2017, Mr. Tozier exercised and sold options for 25,000 shares of Common Stock at a grant price of $56.16 and a sale price of $110.125881.


⁽³⁾	On June 19, 2017, Ms. Narwold exercised and sold options for 20,000 shares of Common Stock at a grant price of $42.13 and a sale price of $108.157339.


⁽⁴⁾	On August 23, 2017, Ms. Narwold exercised and sold options for 11,500 shares of Common Stock at a grant price of $56.16 and a sale price of $115.949000.


⁽⁵⁾	A PSU award granted in 2014 vested on January 1, 2017. The value realized on vesting was calculated using a value of $86.08 per share, which was the closing price of our Common Stock on the New York Stock Exchange (“NYSE”) on December 31, 2016.


⁽⁶⁾	A PSU award granted in 2015 vested on February 24, 2017. The value realized on vesting was calculated using a value of $92.93 per share, which was the closing price of our Common Stock on the NYSE on February 24, 2017. This represents 50% of the award. The remaining 50% vested on January 1, 2018.

Retirement Benefits

Pension Benefits Table

In 2004, we implemented a new defined contribution retirement pension benefit (“DCPB”) in the Savings Plan for all non-represented employees hired on or after April 1, 2004. Non-represented employees hired prior to that date continued to participate in our Pension Plan.

On October 1, 2012, the Board of Directors approved an amendment to our retirement plans to freeze accrued benefits in the Pension Plan and SERP effective December 31, 2014, and to provide for non-represented employees hired before April 1, 2004 who are participants in the Pension Plan to (i) become eligible for the DCPB in the Savings Plan effective January 1, 2013, and (ii) receive a one-time employer discretionary contribution in the Savings Plan in December 2012. In addition, the Board of Directors authorized application of a higher benefit formula for calculating accrued benefits in 2013 and 2014 only, as well as including an offset factor that would be applied to accrued benefits earned in 2013 and 2014.

The following table presents information concerning the Pension Plan and the SERP. The Pension Plan provides for payments or other benefits to our named executive officers at, following, or in connection with retirement. To the extent benefits under the Pension Plan exceed limits imposed under applicable provisions of the Code, they will be paid under the SERP.



Pension Benefits
Name	Plan Name	Number of Years Credited Service (#)		Present Value of Accumulated Benefit ($)	⁽²⁾⁽⁴⁾	Payments During Last Fiscal Year
Luther C. Kissam IV	Pension Plan	11.3325	⁽¹⁾	445,508		—
	SERP⁽³⁾	11.2500	⁽¹⁾	7,471,340		—
Scott A. Tozier	Pension Plan	N/A		N/A		N/A
	SERP	N/A		N/A		N/A
Karen G. Narwold	Pension Plan	N/A		N/A		N/A
	SERP	N/A		N/A		N/A
Matthew K. Juneau	Pension Plan	32.6650		1,548,020		—
	SERP⁽³⁾	32.6650		1,154,290		—
Donald J. LaBauve, Jr.	Pension Plan	24.3333		891,496		—
	SERP⁽³⁾	24.3333		45,020		—


⁽¹⁾	The differences in service between the qualified Pension Plan and the SERP are generally due to rounding differences. The qualified plan bases credited service on hours worked during the year, whereas the SERP special 4% pension benefit bases credited service on the completed years and months of employment. Credited Service for both plans froze as of 12/31/2014.


⁽²⁾	For the qualified Pension Plan, pension earnings are limited by the 401(a)(17) pay limit. A temporary supplemental early retirement allowance of $5 per month per year of service is payable from the Pension Plan for participants who retire at age 60 with at least 15 years of service. SERP pay for the special 4% benefit includes 100% of cash incentive bonuses paid during the year.


⁽³⁾	The named individuals are vested in their SERP benefits.


⁽⁴⁾	The present value of accumulated benefits including supplements, if any, is based on the actuarial present value of benefits payable at age 60, the earliest age at which unreduced benefits are payable. The following assumptions were used to determine the above present values:

a. Discount rates of 4.71%, 4.48%, and 4.04% as of December 31, 2015, 2016 and 2017, respectively;

b. Payment form of a life annuity with a 60-month guarantee of payments from the qualified Pension Plan, and a lump sum from the SERP; and

c. Mortality based on the RP2014 (revised in 2015) healthy annuitants with MP2016 generational projection scales and RP2014 (revised in 2015) healthy annuitants with MP2017 generational projection scales, respectively.

The benefit formula under the Pension Plan is based on the participant’s final average earnings, which are defined as the average of the highest three consecutive calendar years’ earnings (base pay plus 50% of incentive awards paid in any fiscal year) during the ten consecutive calendar years immediately preceding the date of determination. Benefits under the Pension Plan are computed on the basis of a life annuity with 60 months of guaranteed payments. The benefits listed in the above compensation table (other than short service benefits under the SERP) are not subject to deduction for Social Security or other offset payments.

Supplemental Executive Retirement Plan

The SERP is a nonqualified defined benefit pension plan that provides eligible individuals the difference between the benefits they would actually accrue under the qualified Pension Plan but for the maximum benefit and compensation limitations under the qualified plan and deferrals of their compensation under our EDCP, and the benefits they actually accrue under the qualified Pension Plan. SERP benefits are paid in a lump sum on the later of (i) age 55 (65 if the employee has not completed at least ten years of service with us) and (ii) the employee’s separation from service (except that for key employees, as defined under relevant law, not earlier than six months after the employee’s separation from service).

All benefits under the SERP will be immediately paid (except that for key employees as defined under relevant law, not earlier than six months after the employee’s separation from service) if, within 24 months following a change in control, a participant’s employment is terminated.

The SERP is administered by our Employee Relations Committee, which consists of employees appointed by the CEO and the Executive Vice President and Chief Administrative Officer. The Board or the Executive Compensation Committee of the Board may generally amend or terminate the SERP at any time. Certain amendments to the SERP may also be approved by the Employee Relations Committee.

In 2005, we amended and restated the SERP. Some of the amendments to the SERP were made to ensure compliance with Section 409A of the Code, enacted as part of the American Jobs Creation Act of 2004 (“Code Section 409A”), which imposes restrictions and requirements that must be satisfied in order to assure the deferred taxation of benefits as intended by the SERP. In 2012, the Board of Directors further amended the SERP (i) to remove the current provisions for freezing Final Average Compensation (as defined in the SERP) on and after December 31, 2012, and (ii) to freeze all benefits under the SERP as of December 31, 2014, which is consistent with the changes under our qualified Pension Plan.

In addition to the retirement benefits provided under the Pension Plan and the SERP, which are reflected in the table above, certain key employees may be granted special pension benefits equal to 4% of the employee’s average pay over the highest three consecutive years of service before the determination date, multiplied by the number of years of service up to 15 years, net of certain other benefits (including amounts received under the qualified and nonqualified plans). These benefits vest only after the employee has completed five years of service with us and are paid on the later of (i) age 55 (65 if the employee has not completed at least ten years of service with us) and (ii) the employee’s separation from service (except that for key employees as defined under relevant law, not earlier than six months after the employee’s separation from service). All such benefits shall be paid in one lump sum payment. These benefits have been granted to Mr. Kissam.

Nonqualified Deferred Compensation

Executive Deferred Compensation Plan. Company contributions that cannot be made under our qualified Savings Plan because of limitations under the Code are credited under the EDCP. In addition to these Savings Plan’s make-up contributions, an EDCP participant may elect to defer up to 50% of base salary and/or 100% of each cash incentive award paid in a year (net of FICA and Medicare taxes due). Such amounts are deferred and will be paid at specified payment dates or upon retirement or other termination of employment. The EDCP also provides for a supplemental benefit of 5% of compensation in excess of amounts that may be recognized under the tax-qualified Savings Plan and of the cash incentive bonus award paid during the year.

Amounts credited under the EDCP are credited daily with investment gains and losses as if such amounts were invested in one or more of the Plan’s investment options. Accounts are generally paid at the time and in the form specified by participants when they make deferral elections, or upon a participant’s earlier death or disability.

The EDCP is administered by our Employee Relations Committee, which consists of employees appointed by the CEO and the Executive Vice President and Chief Administrative Officer. The Executive Compensation Committee of the Board may generally amend or terminate the EDCP at any time. Certain amendments to the EDCP may also be approved by the Employee Relations Committee.

The following table presents information concerning our named executive officers’ benefits under the EDCP.

NONQUALIFIED DEFERRED COMPENSATION⁽¹⁾



Nonqualified Deferred Compensation
Name	Executive Contributions in Last FY ($)		Company Contributions in Last FY ($)⁽²⁾		Net Aggregate Earnings in Last FY ($)⁽³⁾		Aggregate Withdrawals/ Distributions ($)		Aggregate Balance at Last FYE ($)⁽⁴⁾⁽⁵⁾
Luther C. Kissam IV	$	—	$	260,687	$	276,069	$	—	827,951
Scott A. Tozier	—		107,971		78,193		—		315,823
Karen G. Narwold	—		95,390		48,949		—		237,326
Matthew K. Juneau	109,852		86,333		157,299		—		736,002
Donald J. LaBauve, Jr.	—		23,354		5,889		—		52,703

___________________________________________________


⁽¹⁾	Amounts reflected are based on activities recorded by Merrill Lynch, the plan’s administrator, as of December 31, 2017.


⁽²⁾	All amounts are reported as compensation to the named executive officers in the Summary Compensation Table.


⁽³⁾	Amounts reflected are based on aggregate earnings and gain/loss in last FY.


(4	)Ending balances include Saving Plan’s make-up contributions and Company contributions on deferred base salary and/or cash incentive awards of the following amounts: Mr. Kissam: $143,625; Mr. Tozier: $60,325; Ms. Narwold: $53,463; Mr. Juneau: $48,523 and Mr. LaBauve: $14,170.


(5)	Executive contributions included in aggregate balance that are reported as compensation to the named executive officers in the Summary Compensation Table in 2015, 2016 and 2017 are as follows: Mr. Juneau: $109,852 (2017), $79,562 (2016) and $43,521 (2015).

Agreements with Executive Officers and Other Potential Payments Upon Termination or a Change in Control

Severance Pay Plan

We adopted our Severance Pay Plan (“SPP”) in December 2006 and amended the SPP in 2008. For our named executive officers, the SPP provides for severance payments if we terminate their employment without cause because the individual’s position is eliminated or the organizational structure of the Company is changed which results in a redesign of work process and responsibilities affecting at least two individuals. In addition to offering outplacement assistance benefits for one year, the SPP provides for severance payments to our named executive officers, consisting of (other than for Mr. Kissam) the sum of (x) one year of base salary in effect at the termination time, and (y) the employee’s target cash incentive award for the most recent year in which the employee participated in an annual bonus program. Mr. Kissam is eligible to receive 1.5 times the amount of his annual base salary in effect at the termination time plus 1.5 times his target cash bonus for the year in which the termination takes place (or the most recent year he participated in an annual bonus program if he is not participating in the year of the termination).

Under the SPP, Mr. Kissam is also eligible to receive the benefits described above in the event of a termination pursuant to a “good reason for resignation,” as defined in the SPP. The SPP defines “good reason for resignation” as (a) a material diminution in base compensation, authority, duties, responsibilities or the budget over which the officer retains authority, (b) a material change in the geographic location at which services must be performed, or (c) any other action or inaction that constitutes our material breach of any written employment arrangement between us and the officer.

Our named executive officers (each of whom, other than Mr. LaBauve, is a party to a severance compensation agreement as described below, but not an employment agreement) are eligible to receive payments under the SPP only if a change in control has not occurred. If their employment is terminated in the event of a change of control, they are only eligible to receive severance payments under their severance compensation agreements (described below), but not the SPP.

For Mr. LaBauve, who does not have a severance compensation agreement, the following benefits would be payable under the SPP if, within two years after a change in control, the Company terminates his employment without cause or he elects to not relocate pursuant to the Company’s relocation policy in the event his office is relocated: one year of outplacement assistance benefits and a lump sum payment equal to the sum of (i) the greater of his base salary immediately prior to his termination of employment or prior to the change in control, and (ii) the greater of his actual cash bonus for the year preceding the date on which the change in control occurs or his target bonus for the year of the change in control.

The SPP term is indefinite and may be amended or terminated at any time in the absence of a change in control. The SPP expires two years after any change in control, and after a change in control, an employee’s consent is required for an amendment or termination to be effective as to such employee. The term “change in control” has substantially the same meaning in the SPP and the severance compensation agreements described below.

Assuming the triggering event took place on December 31, 2017, each named executive officer would receive the following estimated payments and benefits under the SPP:



Estimated Payments and Benefits under the SPP
	Estimated SPP Payments		Estimated Payments
Name	Pre-Change in Control		Post-Change in Control⁽¹⁾
Luther C. Kissam IV	$	3,375,000	—
Scott A. Tozier	$	980,000	—
Karen G. Narwold	$	849,000	—
Matthew K. Juneau	$	747,000