-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PdOrZrPgXqmxHR1yybd9HOO/WWvMGy3TJVNJGD6B3st1sW20nR43vDbrCL20RtAB b6PBNzICZYTM6rNWYib2zQ== 0001047469-98-011894.txt : 19980330 0001047469-98-011894.hdr.sgml : 19980330 ACCESSION NUMBER: 0001047469-98-011894 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980423 FILED AS OF DATE: 19980327 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAWTER INTERNATIONAL INC CENTRAL INDEX KEY: 0000058091 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 361370818 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-07558 FILM NUMBER: 98575178 BUSINESS ADDRESS: STREET 1: ONE TERRA WAY STREET 2: 8601 95TH STREET CITY: KENOSHA STATE: WI ZIP: 53412-7716 BUSINESS PHONE: 4149477300 MAIL ADDRESS: STREET 1: ONE TERRA WAY STREET 2: 8601 95TH STREET CITY: KENOSHA STATE: WI ZIP: 53412-7716 FORMER COMPANY: FORMER CONFORMED NAME: LAWTER CHEMICALS INC DATE OF NAME CHANGE: 19810602 FORMER COMPANY: FORMER CONFORMED NAME: KRUMBHAAR CHEMICALS INC DATE OF NAME CHANGE: 19701117 DEF 14A 1 DEF 14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant /X/ Filed by a Party other than the Registrant / / Check the appropriate box: / / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) /X/ Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to Section240.14a-11(c) or Section240.14a-12 LAWTER INTERNATIONAL, INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): /X/ No fee required. / / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ----------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ----------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ----------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ----------------------------------------------------------------------- (5) Total fee paid: ----------------------------------------------------------------------- / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ----------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ----------------------------------------------------------------------- (3) Filing Party: ----------------------------------------------------------------------- (4) Date Filed: ----------------------------------------------------------------------- [LOGO] LAWTER INTERNATIONAL, INC. NOTICE OF ANNUAL MEETING OF STOCKHOLDERS APRIL 23, 1998 TO THE STOCKHOLDERS: Notice is hereby given that the Annual Meeting of Stockholders of Lawter International, Inc., a Delaware corporation, will be held at the Company's Corporate Headquarters, 1 Terra Way, 8601 95th Street, Kenosha, Wisconsin on Thursday, April 23, 1998, at 10:00 A.M., Central time, for the purpose of considering and taking action upon the following: 1. The election of seven directors of the Company to hold office until the Annual Meeting of Stockholders in 1999 or until their successors are elected and qualified. 2. Such other matters as may properly come before the meeting or any adjournment thereof. The Board of Directors has fixed the close of business on March 3, 1998, as the record date for said meeting, and only holders of Common Stock of the Company of record at that time will be entitled to notice of and to vote at said meeting or any adjournment thereof. The Annual Report and Form 10-K of the Company for the year ended December 31, 1997 are enclosed herewith. By Order of the Board of Directors. MARK W. JOSLIN SECRETARY March 24, 1998 YOUR VOTE IS IMPORTANT WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, MANAGEMENT URGES YOU TO DATE, SIGN AND MAIL THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED STAMPED ENVELOPE. YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO ITS EXERCISE. LAWTER INTERNATIONAL, INC. 1 TERRA WAY 8601 95TH STREET KENOSHA, WISCONSIN PROXY STATEMENT This Proxy Statement and the accompanying Proxy card are being mailed to stockholders on or about March 24, 1998, in connection with the solicitation of proxies by the Board of Directors of Lawter International, Inc. (hereinafter referred to as the "Company") for use at the Annual Meeting of Stockholders of the Company to be held on April 23, 1998, pursuant to the accompanying notice. All proxies duly executed and returned will be voted. In the absence of specific instructions to the contrary, proxies received will be voted in accordance with the recommendations made herein with respect to the proposals described in this Proxy Statement. Any stockholder who submits a proxy for said meeting has the right to revoke it at any time prior to the voting thereof, either in person at the meeting, by written notice to the Secretary of the Company, or by delivery of a later-dated proxy. Votes will be tabulated, using an automated scanner, by the inspectors of election appointed by the Company. Each stockholder is entitled to one vote for each share of Common Stock of the Company beneficially owned in his/her name at the close of business on March 3, 1998. As of said date, there were issued and outstanding 45,533,335 shares of Common Stock of the Company and a majority of such shares, present in person or represented by proxy, will constitute a quorum. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following persons are known by the Company to be the beneficial owners of more than 5% of the Company's outstanding Common Stock:
NAME AND ADDRESS OF AMOUNT AND NATURE OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP % OF CLASS - ----------------------------------------------------------- -------------------- ------------- James D. Terra............................................. 13,286,267 shares(1) 29.0% PO Box 229 Gurnee, Illinois 60031 Geocapital, Corp........................................... 2,287,496 shares 5.0% 767 Fifth Ave. 45th Floor New York, New York 10153 Societe Generale Asset Management Corp..................... 2,380,000 shares 5.2% 1221 Avenue of the Americas New York, New York 10020 FMR Corp................................................... 3,094,429 shares 6.8% 82 Devonshire Street Boston, Massachusetts 02109
- ------------------------ (1) As of March 3, 1998, Mr. Terra beneficially owned 11,503,130 shares of the Company's common stock as the executor of the estate of Daniel J. Terra (the "Estate") and 1,783,137 shares for his own account. On March 19, 1998, the Company agreed to repurchase all of the 11,503,130 shares of common stock held by the Estate. The transaction is expected to close on April 17, 1998, subject to satisfaction of customary closing conditions. 1 ELECTION OF DIRECTORS At the meeting, a full board of seven directors is proposed to be elected. Each of such directors will hold office until the annual meeting of stockholders in 1999 or until the election and qualification of a successor. The Board of Directors has nominated William P. Clark, Arthur A. Hartman, John P. Jilek, Leonard P. Judy, Richard D. Nordman, John P. O'Mahoney and Fred G. Steingraber for re-election to the Board. It is intended that all shares represented at the meeting by validly executed, unrevoked proxies solicited by the Board of Directors of the Company will be voted for the election as directors of the nominees named below, except as otherwise directed by stockholders in the accompanying form of proxy. Directors are elected by a plurality of the votes cast by the holders of the Common Stock of the Company at a meeting at which a quorum is present. "Plurality" means that the individuals who receive the largest number of votes cast are elected as directors up to the maximum number of directors to be chosen at the meeting. Consequently, any shares not voted (whether by abstention, broker non-votes or otherwise) have no impact in the election of directors except to the extent the failure to vote for an individual results in another individual receiving a larger number of votes. The names of the nominees of the Board of Directors, and certain information with respect to each, are as follows:
YEAR FIRST NAME, AGE, OCCUPATION ELECTED AND BUSINESS EXPERIENCE A DIRECTOR - ------------------------------------------------------------------------------------------------------ ------------- WILLIAM P. CLARK, 66.................................................................................. 1985 Chief Executive Officer, Clark Company, private investments, since 1985. Senior Counsel to the law firm of Clark, Cali & Negranti, since 1996. Chairman, US-ROC (Taiwan) Business Council, since 1997. He is a director of SBC Communications, Inc. and Dulles Access Rapid Transit (DART).(1)(2) ARTHUR A. HARTMAN, 71................................................................................. 1994 Senior Consultant, APCO Associates, Inc., international business consultants, since 1989. He is a director of ITT Hartford Insurance Group, Dreyfus Funds and First NIS Investment Fund.(1)(2) JOHN P. JILEK, 46..................................................................................... 1996 President and Chief Operating Officer, since 1996 and Vice President, 1989-1995, of the Company. LEONARD P. JUDY, 58................................................................................... 1993 Private investor since August 1994. Chairman of the Board and Chief Executive Officer 1988-1994, Rust-Oleum Corporation, manufacturer and marketer of premium coatings.(1)(2) RICHARD D. NORDMAN, 51................................................................................ 1982 Consultant, 1996-1997. President and Chief Operating Officer of the Company, 1986-1995, Chairman, Crown Financial Group, Inc., investment advisors, since 1996. JOHN P. O'MAHONEY, 41................................................................................. 1996 Chairman, since July 1996 and Chief Executive Officer, since January 1996, Vice President, 1993-1995, and European General Manager, 1990-1993, of the Company. FRED G. STEINGRABER, 59............................................................................... 1993 Chief Executive Officer, since 1983, Chairman of the Board and Chief Executive Officer, 1986-1995, A.T. Kearney, Inc., international management consultants. He is a director of Maytag Corporation, Mercury Finance Company, Southeastern Thrift and Bank Fund, and A.T. Kearney, Inc.(1)(2)(3)
- ------------------------ (1) Member of Audit Committee. (2) Member of Compensation Committee. (3) Member of Nominating Committee. 2 The Board of Directors of the Company held eight meetings during 1997. The Board has three committees, the Audit Committee, which held two meetings during 1997, the Compensation Committee, which held two meetings during 1997, and the Nominating Committee. Each director attended at least 90% of the aggregate of the meetings of the Board and the committees of which he is a member. The functions of the Audit Committee are to recommend to the Board of Directors the independent auditors to be selected for each year and to discuss with the auditors the scope of the annual audit, the results thereof, and the adequacy of the Company's accounting, financial and operating controls. The functions of the Compensation Committee are to review the performance and compensation of officers and to approve stock options granted to officers and other key employees. The function of the Nominating Committee is to recommend nominees for election to the Board of Directors. The Nominating Committee will consider recommendations for nominees for directorships submitted by stockholders. Stockholders may submit such recommendations in writing to the Secretary at the Company's Corporate Headquarters. No authority under the enclosed proxy will be exercised to vote for any person as a director who is not included in the nominees named above, unless any of such nominees should become unable to serve, in which case it is intended that the proxy will be voted for a nominee or nominees who will be designated by the Board of Directors. The Board has no reason to believe that any of the above nominees will cease to be a candidate prior to the meeting. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Each director and officer of the Company is required to report to the Securities and Exchange Commission, his or her transactions in the Common Stock of the Company. Mr. Judy was late in filing one Form 5 reporting the grant of stock options. COMPENSATION OF DIRECTORS Through the first quarter of 1997, Directors of the Company who are not officers or consultants were paid an annual fee of $11,000 plus $750 for each Board or Committee meeting attended. The annual directors' fee and amount paid for attendance at each meeting were subsequently increased to $15,000 and $1,000, respectively. The last increase in directors' fees was in 1991. In August of 1996, at the request of the other members of the Board of Directors, Mr. Judy agreed to assume additional duties as a director of the Company. In light of a new management team having taken office in 1996 and the death of Daniel J. Terra, the Chairman of the Company, the Board felt it would be in the Company's best interest to designate one independent director as the Board's liaison with management and to work directly with management on specific projects. In March of 1997, Mr. Judy was paid an additional $25,000 for these services. Pursuant to the Company's 1995 Non-Qualified Stock Option Plan for Non-Employee Directors (the "Director's Plan"), each eligible director, upon his or her initial election by the stockholders to the Board of Directors, is automatically granted an option to purchase a total of 15,000 shares of Common Stock, and upon his or her next election, is automatically granted one additional option to purchase 15,000 shares of Common Stock. Each director of the Company who is eligible to be granted an option under the Director's Plan shall thereafter receive an automatic grant for 5,000 shares the third and each subsequent time he or she is elected a director by the stockholders. On April 24, 1997, each of the non-employee directors received a grant of options covering 5,000 shares of Common Stock under the Director's Plan at an exercise price of $10.75 per share. 3 SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth certain information as of February 13, 1998 as to the beneficial ownership of the Company's outstanding Common Stock by the directors and named executive officers of the Company and by all current directors and executive officers of the Company as a group:
SHARES OF COMMON STOCK BENEFICIALLY % OF NAME OWNED(2) CLASS - ------------------------------------------------------------ ------------------ ----- William P. Clark............................................ 50,000 (1) Arthur A. Hartman........................................... 1,378,487(4) 3.0% Ludwig P. Horn.............................................. 47,638 (1) John P. Jilek............................................... 271,441 (1) Mark W. Joslin.............................................. 40,600 (1) Leonard P. Judy............................................. 59,000 (1) Richard D. Nordman.......................................... 242,457(3) (1) John P. O'Mahoney........................................... 307,196 (1) Fred G. Steingraber......................................... 50,000 (1) All current directors and executive officers as a group..... 2,446,819 5.4%
- ------------------------ (1) Less than 1%. (2) The numbers and percentages of shares owned as shown in the table assume that currently unexercised stock options covering shares which were exercisable within 60 days of February 13, 1998 had been exercised as follows: Mr. Clark -- 50,000; Mr. Hartman -- 50,000; Mr. Horn -- 42,500; Mr. Jilek -- 225,000; Mr. Joslin -- 40,600; Mr. Judy -- 50,000; Mr. Nordman -- 200,000; Mr. O'Mahoney -- 285,000; Mr. Steingraber -- 50,000; and all current directors and executive officers as a group -- 988,100. Such persons and the members of such group disclaim any beneficial ownership of the shares subject to such options. (3) Does not include 22,600 shares owned by Mr. Nordman's wife in which Mr. Nordman disclaims any beneficial interest. (4) Includes 1,328,487 shares owned by the Terra Foundation For The Arts of which Mr. Hartman is the President and Chairman. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee was composed of Mr. Clark, Mr. Hartman, Mr. Judy and Mr. Steingraber, the four independent, non-employee directors, at the time of the actions covered by this report. The Compensation Committee meets at least annually to discuss and determine compensation for executive officers. The Compensation Committee is solely responsible for determining the executive officers' salary, bonus and long-term compensation granted in the form of stock options. The Compensation Committee's executive compensation policies are designed to encourage superior performance and to provide levels of compensation that reward above-average corporate performance, recognize individual initiative and achievements, and assist the Company in attracting and retaining qualified executives. There are three elements to the Company's executive compensation: 1) Base Salary Compensation; 2) Incentive Bonus Plan; and 3) Stock Option Grants. Using the process described below, the Compensation Committee makes a subjective evaluation of the performance of each executive in establishing base salary and determining the amount, if any, of stock options to be granted to each executive. Predefined goals and achievement thereof are used to determine the incentive bonus. 4 An additional factor considered by the Compensation Committee in determining executive compensation is competitive market pay for similar positions at companies with similar profiles to Lawter. This information may be obtained from time to time by the Compensation Committee by utilizing the services of an outside firm with extensive expertise and experience in providing such services. BASE SALARY Base salary compensation is determined based on a subjective evaluation of the individual's potential impact on the Company, the skill and experience required for the job, the ongoing performance of the individual in the job and ongoing corporate performance. In evaluating corporate performance, the Compensation Committee considers various aspects of such performance, including earnings per share, sales, profits, return on equity, return on sales, and the Company's performance relative to both other companies in its industry and the general economy. The Compensation Committee also considers additional factors, including competitive market pay, as appropriate. The relative weights of corporate and individual performance may vary among individuals, and from year to year for the same individual. The Compensation Committee determined, effective January 1, 1997 (March 1, 1997 for Mr. Joslin), to increase the salaries of the executive officers (excluding the Chief Executive Officer) listed in the Summary Compensation Table ("Named Officers") by 9 to 17%. These increases were based on the Compensation Committee's subjective evaluation of the factors identified above, versus outside industry data obtained from a consultant, giving particular attention, with respect to corporate performance (since the date of the last increase), to the sales volume increases, earnings, return on equity and return on sales and the Company's implementation of its modernization program and strategic plan. INCENTIVE BONUS PLAN In 1997, the compensation committee developed an incentive bonus plan (the "Plan") for executive officers and other key employees of the Company. The Plan is designed to provide Plan participants with a potential cash award based on the achievement of annual financial objectives. Each year, objectives are approved by the Compensation Committee during the first quarter of the year. A performance threshold benchmark is established, which must be attained before any award can be earned and a target benchmark is established which provides a limit on the award payable. Each participant's award opportunity is based on that individual's potential contribution to the achievement of a particular financial goal. Awards are paid in cash in the year after the year of performance. Based on the company's performance in 1997, no incentive awards were granted under this plan. STOCK OPTION GRANTS The Compensation Committee believes that stock options are very beneficial to aligning management's and shareholders' interest in the enhancement of shareholder value. In keeping with that philosophy, stock options are granted under the 1992 Non-Qualified Stock Option Plan to executive officers and other key employees of the Company based on a subjective evaluation of individual performance and corporate performance. In doing so, the Compensation Committee reviews the existing options held by each of the executive officers. The grant of stock options is intended to encourage ownership of the Company's Common Stock by officers and other key employees of the Company, to provide incentive for superior performance by such individuals, to attract and maintain employees of the highest caliber and, as a result, enhance shareholder value. Stock options are granted at the fair market value of the Company's Common Stock on the date of grant and will only have value if the Company's stock price increases. The Compensation Committee granted stock options to the Named Officers in 1997 based upon the process referred to above. CHIEF EXECUTIVE OFFICER Mr. O'Mahoney, the Chairman and Chief Executive Officer of the Company, is evaluated based on the same criteria as other executive officers, as described above. The Compensation Committee determined, effective January 1, 1997, to increase the salary of Mr. O'Mahoney by 30%. This increase reflects a 5 salary realignment as additional responsibilities were taken on by Mr. O'Mahoney. During 1996, Mr. O'Mahoney was promoted from Vice Chairman to Chairman of the Board of Directors. This increase was also based on the Compensation Committee's subjective evaluation of the factors identified above, giving particular attention, with respect to industry data and corporate performance (since his last increase), to the sales volume increases, earnings, return on equity and return on sales and the Company's implementation of its modernization program and strategic plan. The Compensation Committee granted stock options to Mr. O'Mahoney in 1997 based upon the process referred to above. SECTION 162(M) OF THE INTERNAL REVENUE CODE The Company's Compensation Committee has been advised of the effect of Section 162(m) of the Code, imposing a limitation on the deductibility for federal income tax purposes of compensation paid to certain executive officers. The Company believes its 1992 Non-Qualified Stock Option Plan, qualifies as a "performance-based" compensation plan that would not be subject to such limitations. The other compensation currently paid to the Company's executive officers is not expected to exceed the limitation in Section 162(m). Compensation Committee: William P. Clark Leonard P. Judy Arthur A. Hartman Fred G. Steingraber COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee is composed of Mr. Clark, Mr. Hartman, Mr. Judy and Mr. Steingraber, the four independent, non-employee directors. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS The Company has employment agreements with Mr. O'Mahoney, Mr. Jilek and Mr. Joslin that are activated only on a change in control. Until then, these employees remain subject to termination at will. The employment agreements with Mr. O'Mahoney, Mr. Jilek and Mr. Joslin will become effective upon a "change in control" (defined as (i) an event that would be required to be reported as such pursuant to Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934; (ii) certain changes in membership of the Board of Directors; or (iii) for Mr. O'Mahoney and Mr. Jilek, upon failure to be re-elected as a director following the occurrence of either (i) or (ii) above). Providing that each individual is still serving as an officer at the time of such a change in control, the agreements provide that the Company will continue to employ Mr. O'Mahoney and Mr. Jilek for a period of three years, and Mr. Joslin for a period of two years, after such change in control at a guaranteed minimum salary equal to his salary at the time thereof. The agreements also provide that Mr. O'Mahoney, Mr. Jilek and Mr. Joslin may participate without discrimination in all of the Company's benefit plans available to its officers, prohibits Mr. O'Mahoney, Mr. Jilek and Mr. Joslin from disclosing confidential information during or after employment and prohibits Mr. O'Mahoney, Mr. Jilek and Mr. Joslin from working for a competitor of the Company during and for a period of eighteen months following the termination of employment. In the event that the location of the Company's office is changed by more than 150 miles, or their positions and duties are changed following the agreement becoming effective upon a change in control, Mr. O'Mahoney, Mr. Jilek and Mr. Joslin may terminate their agreements, whereupon their salary and benefits for the remainder of the term will become payable in a lump sum. Mr. O'Mahoney and Mr. Jilek may also terminate the agreement upon a change in control by submitting written notice of such termination not less than six months nor more than 12 months from the change in control. In addition, if an excise tax is imposed pursuant to the applicable provisions of the Internal Revenue Code upon any payments to Mr. O'Mahoney, Mr. Jilek or Mr. Joslin by the Company, the agreements provide that they will be paid an additional amount calculated so as to provide them with the same compensation they would have received had no excise tax been imposed. 6 Pursuant to an agreement entered into in 1997, Mr. Horn is employed by the Company at a minimum salary of $110,000 per year for a period of one year with an automatic renewal for an additional year unless a written notice of termination is given at least thirty days prior to the termination of the period of contract employment. Under the terms of the agreement, Mr. Horn was paid an additional $10,000 signing bonus. The agreement prevents Mr. Horn from competing with the Company during and for two years following his employment with the Company. Mr. Horn has also signed a confidentiality agreement. The Company may terminate the agreement for cause. EXECUTIVE COMPENSATION The table below sets forth the annual, long term and other compensation for services in all capacities to the Company for the three years ended December 31, 1997 of those persons who were (1) the Chief Executive Officer and (2) the other three most highly compensated executive officers of the Company in 1997 (the Named Officers): SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ---------------- AWARDS ANNUAL COMPENSATION ---------------- ------------------------- SECURITIES OTHER ANNUAL UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS/SARS(#) COMPENSATION(1) - ------------------------------------------ --------- ---------- ------------- ---------------- ---------------- John P. O'Mahoney (2)..................... 1997 $ 320,000 $ -- 35,000 $ 22,400 Chairman and Chief 1996 246,000 16,400(3) -- 17,220 Executive Officer 1995 168,475 25,615(3) 150,000 11,793 John P. Jilek............................. 1997 225,000 -- 25,000 15,750 President and Chief 1996 192,000 -- -- 13,440 Operating Officer 1995 157,250 -- 100,000 11,008 Mark W. Joslin............................ 1997 152,500 -- 15,600 11,026 Chief Financial Officer 1996 70,000 -- 25,000 7,100 and Treasurer Ludwig P. Horn............................ 1997 110,000 10,000(4) 7,500 7,700 Vice President 1996 100,000 20,000(4) 10,000 7,000 1995 100,000 20,000(4) -- 7,000
- ------------------------ (1) The total amounts shown in this column consist of Company contributions for the Growth Sharing Plan (the Company's defined contribution retirement plan). (2) In 1995, Mr. O'Mahoney's salary was paid in Belgian Francs. The U.S. dollars shown here are affected by exchange rates. (3) These amounts represent educational expenses paid by the Company for Mr. O'Mahoney's children who attended private schools as a result of being transferred from Ireland to Belgium in 1994 and to the United States in 1996. (4) This represents the amount earned by Mr. Horn pursuant to his 1992 and 1997 employment contracts with the Company. STOCK OPTIONS Options are granted to officers and other key employees under the Company's 1992 Non-Qualified Stock Option Plan which is administered by the Compensation Committee. Shown below is information 7 with respect to the grant and exercise of options during 1997 and the unexercised options held as of December 31, 1997 by the Named Officers. OPTION/SAR GRANTS IN 1997
INDIVIDUAL GRANTS POTENTIAL REALIZABLE -------------------------------------------------------- VALUE AT ASSUMED NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK SECURITIES OPTIONS/ SARS EXERCISE PRICE APPRECIATION FOR UNDERLYING GRANTED TO OR OPTION TERM(3) OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------- NAME GRANTED(#)(1) 1997(2) ($/SH) DATE 5%($) 10%($) - ---------------------------------- ------------- --------------- ----------- ----------- ---------- ---------- John P. O'Mahoney................. 35,000 18.9% $ 12.00 2-19-2007 $ 264,136 $ 601,286 John P. Jilek..................... 25,000 13.5% 12.00 2-19-2007 188,668 429,490 Mark W. Joslin.................... 15,600 8.4% 12.00 2-19-2007 117,729 268,002 Ludwig P. Horn.................... 7,500 4.1% 12.00 2-19-2007 56,601 128,847
- ------------------------ (1) The option grants were non-qualified stock options. These options become exercisable one year after the grant date, which was February 19, 1997. (2) The percentage shown in the table is based on total options granted to officers and other key employees in 1997 of 185,000 shares of the Company's Common Stock. (3) The potential realizable values shown in the table are based on assumed annual rates of stock price appreciation compounded annually. The actual value of the options will depend on the market value of the Company's Common Stock on the dates the options are exercised. No realization of value from the options is possible without an increase in the price of the Company's Common Stock, which would benefit all stockholders commensurately. AGGREGATED OPTION/SAR EXERCISES IN 1997 AND YEAR END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING IN-THE-MONEY UNEXERCISED OPTIONS/SARS OPTIONS/SARS SHARES AT DECEMBER 31, 1997(#) AT DECEMBER 31, 1997(1) ACQUIRED ON VALUE -------------------------- -------------------------- NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - -------------------------------- ----------- ----------- ----------- ------------- ----------- ------------- John P. O'Mahoney............... -- -- 250,000 35,000 $ -- $ -- John P. Jilek................... -- -- 200,000 25,000 -- -- Mark W. Joslin.................. -- -- 25,000 15,600 -- -- Ludwig P. Horn.................. -- -- 35,000 7,500 -- --
- ------------------------ (1) The amounts reported here represent the mathematical differences before taxes between the aggregate exercise price and the market value on the actual dates of exercise or December 31, 1997 (if unexercised) rather than any actual net gain. Such amounts do not take into consideration the cost of funds used for purchase or additional taxes. INDEBTEDNESS OF MANAGEMENT Under the terms of the stock option plan, officers may borrow funds from the Company in order to exercise their stock options. Interest is charged on the loans at the Company's effective rate to borrow funds, adjusted quarterly. During 1997, the Company's weighted average interest rate on borrowed funds domestically was 5.7%. The stock purchased is held as collateral by the Company. The loans are repayable within eighteen months. During 1997, Mr. Jilek had a maximum amount borrowed of $307,896 and 8 Mr. O'Mahoney had a maximum amount borrowed of $150,176. As of February 28, 1998, the amounts of the loans outstanding were $310,513 and $151,453 for Mr. Jilek and Mr. O'Mahoney, respectively. SHAREHOLDER RETURN PERFORMANCE GRAPH Shown below is a line graph comparing the yearly percentage change in the cumulative total shareholder return on the Company's Common Stock against the cumulative total return of the S&P Composite--500 Stock Index and a Specialty Chemicals Peer Group for the period of five years commencing January 1, 1993 and ending December 31, 1997, assuming the investment of $100 on January 1, 1993 and the full reinvestment of all dividends. The Specialty Chemicals Peer Group is composed of the following companies: Betz Laboratories, Inc., Cabot Corp., Chemed Corp., Ferro Corp., Imperial Chemical Industries, PLC, Intersystems, Inc./DE, Lawter International, Inc., Learonal, Inc., Morton International, Inc., Nalco Chemical Co., PPG Industries, Inc., Sherwin-Williams Co., Specialty Chemical Res. and Valspar Corp. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG LAWTER INTERNATIONAL, INC., S&P 500 INDEX & SPECIALTY CHEMICALS INDEX EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHICS
1992 1993 1994 1995 1996 1997 --------- --------- --------- --------- --------- --------- Lawter International, Inc...................................... 100.0 100.2 92.1 91.4 102.8 91.6 S&P 500........................................................ 100.0 110.1 111.5 153.5 188.7 251.7 Specialty Chemicals Peer Group................................. 100.0 114.7 113.1 141.4 156.3 187.3
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On December 31, 1995, Mr. Nordman resigned as President and Chief Operating Officer of the Company. He remains a Director and was a Consultant to the Company from January 1, 1996 to December 31, 1997. Under the terms of the Consulting Agreement, Mr. Nordman provided information, advice, and assistance concerning operating, financial and administrative matters as requested by the Board of Directors or the Chief Executive Officer of the Company. Mr. Nordman was available to provide these services an average of one and one-half days per week, and was paid a fee of $100,000 per year. The Consulting Agreement was for two years. 9 Mr. Arthur A. Hartman, a Director of the Company, also serves as the Chairman and President of the Terra Foundation For The Arts, which is the sole remainder beneficiary of the estate of Daniel J. Terra (the "Estate"). On March 19, 1998, the Company agreed to repurchase all 11,503,130 shares of Company Common Stock held by the Estate, representing approximately 25.4% of the Company's outstanding Common Stock, at a price of $11.375 per share, for a total purchase price of $130,848,104. Consummation of the transaction is expected to be completed by April 17, 1998 and is subject to customary closing conditions. EXPENSES OF SOLICITATION The costs and expenses of solicitation of proxies will be paid by the Company. In addition to the use of the mails, proxies may be solicited personally by telephone or telegram by directors, officers and other employees of the Company. No arrangements have been made or are presently contemplated for the assistance of any professional proxy solicitors. The Company will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy material to the beneficial owners of the Common Stock of the Company. OTHER MATTERS The Company expects to select the firm of Arthur Andersen LLP as its independent public accountants for the next fiscal year. The selection is normally based upon the Audit Committee's recommendation to the Board of Directors. Representatives of Arthur Andersen LLP are expected to be present at the stockholders' meeting to make a statement if they so desire and to be available to respond to appropriate questions. The management is not aware of any other matters to be presented for action at the meeting. If any other matters properly come before the meeting, it is the intention of the persons named in the accompanying form of Proxy to vote the shares represented thereby in accordance with their best judgment. STOCKHOLDER PROPOSALS Proposals of stockholders intended to be presented at the Company's 1999 annual meeting of stockholders must be received by the Company not later than November 26, 1998 for inclusion in the issuer's proxy statement and form of proxy relating to that meeting. Any such proposal must relate to a matter which is proper for consideration at such a meeting and not of the type which the Company is specifically permitted to omit by the regulations of the Securities and Exchange Commission. MARK W. JOSLIN SECRETARY IMPORTANT WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, MANAGEMENT URGES YOU TO DATE, SIGN AND MAIL THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED STAMPED ENVELOPE. YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO ITS EXERCISE. 10 LAWTER INTERNATIONAL, INC. PLEASE MARK VOTE IN OVAL ON THE FOLLOWING MANNER USING DARK INK ONLY. /X/ 1. Election of Directors -- Nominees: W. Clark, A. Hartman, FOR WITHHOLD J. Jilek, L. Judy, R. Nordman, ALL ALL FOR ALL (Except Nominee(s) J. O'Mahoney, F. Steingraber. written below) / / / / / / ----------------------- The undersigned acknowledges receipt of the Notice of Annual Meeting of Stockholders and of the Proxy Statement. Dated: , 1998 -------------------- Signature(s) --------------------------------- --------------------------------------------- Please sign exactly as your name appears. Joint owners should each sign personally. Where appropriate, indicate your official position or representation capacity. - -------------------------------------------------------------------------------- - FOLD AND DETACH HERE - YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. PROXY PROXY LAWTER INTERNATIONAL, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 23, 1998 The undersigned appoints Mark W. Joslin, John P. O'Mahoney and John P. Jilek, or any of them, proxies for the undersigned, each with full power of substitution, to attend the Annual Meeting of Stockholders of Lawter International, Inc., to be held on April 23, 1998, at 10:00 a.m., Central time, and at any adjournments or postponements of the Annual Meeting, and to vote as specified in this Proxy all the Common Stock of the Company which the undersigned would be entitled to vote if personally present. This Proxy when properly executed will be voted in accordance with your indicated directions. If no direction is made, this Proxy will be voted FOR the election of Directors. The Board of Directors recommends a vote FOR the election of Directors. YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----