<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
LAWTER INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MERRILL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
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:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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:
------------------------------------------------------------------------
<PAGE>
[LOGO]
LAWTER INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 28, 1994
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of Lawter
International, Inc., a Delaware corporation, will be held in the Auditorium on
the seventh floor of the Terra Museum of American Art, 664 North Michigan
Avenue, Chicago, Illinois on Thursday, April 28, 1994, at 10:00 A.M., Chicago
time, for the purpose of considering and taking action upon the following:
1. The election of six directors of the Company to hold office until the
Annual Meeting of Stockholders in 1995, or until their successors are
elected and qualified.
2. A proposal to approve an amendment to the 1992 Non-Qualified Stock Option
Plan.
3. 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 4, 1994, 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 of the Company for the year ended December 31, 1993 is
enclosed herewith.
Stockholders who do not expect to attend the meeting in person are requested
to mark, sign, date and return the enclosed form of Proxy in the business reply
envelope provided which requires no postage if mailed in the United States.
By Order of the Board of Directors.
WILLIAM S. RUSSELL
SECRETARY
March 21, 1994
<PAGE>
LAWTER INTERNATIONAL, INC.
990 SKOKIE BOULEVARD
NORTHBROOK, ILLINOIS 60062
PROXY STATEMENT
This Proxy Statement and the accompanying Proxy card are being mailed to
stockholders on March 21, 1994, 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 28, 1994, pursuant to the accompanying notice.
All proxies duly executed and returned to the Company will be voted. In the
absence of specific instructions to the contrary, proxies received by the
Company 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.
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
4, 1994. As of said date, there were issued and outstanding 44,815,251 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
PRINCIPAL HOLDERS OF COMMON STOCK
The following persons are known by the Company to be the beneficial owners
of more than 5% of the Company's outstanding Common Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNERS BENEFICIAL OWNERSHIP % OF CLASS
- ----------------------------------------------------------- -------------------- ----------
<S> <C> <C>
Daniel J. Terra............................................ 9,107,288 shares 20.3%
990 Skokie Boulevard
Northbrook, Illinois 60062
James D. Terra............................................. 2,244,137 shares 5.0%
990 Skokie Boulevard
Northbrook, Illinois 60062
GeoCapital Corporation..................................... 2,309,070 shares 5.2%
655 Madison Avenue
New York, New York 10021
Janus Capital Corporation.................................. 2,388,282 shares 5.3%
100 Fillmore Street, Suite 300
Denver, Colorado 80206
</TABLE>
ELECTION OF DIRECTORS
At the meeting, a full board of six directors is proposed to be elected.
Each of such directors will hold office until the annual meeting of stockholders
in 1995 or until the election and qualification of a successor. The Board of
Directors has nominated William P. Clark, Arthur A. Hartman, Leonard P. Judy,
Richard D. Nordman, Fred G. Steingraber and Daniel J. Terra 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
1
<PAGE>
cast by the holders of the Common Stock 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:
<TABLE>
<CAPTION>
YEAR FIRST
NAME, AGE, OCCUPATION ELECTED
AND BUSINESS EXPERIENCE A DIRECTOR
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
WILLIAM P. CLARK, 62.................................................................................. 1985
Chief Executive Officer, Clark Company, private investments since 1985. Attorney, Of Counsel to the
law firm of Rogers & Wells, Washington, D.C. and Los Angeles, California, 1985-1990. He is a
director of Pacific Telesis Corporation and Dulles Access Rapid Transit (DART).(1) (2)
ARTHUR A. HARTMAN, 67................................................................................. 1994
Senior Consultant, APCO Associates, Inc., public relations, since 1989. Independent Consultant
1987-1989. He is a director of ITT Hartford Insurance Group, Dreyfus Funds and Ford Meter Box
Co.(1) (2)
LEONARD P. JUDY, 54................................................................................... 1993
Chief Executive Officer, since 1988, and Chairman of the Board and Chief Executive Officer
1988-1993, Rust-Oleum Corporation, manufacturer and marketer of premium coatings. He is a director
of Bank One, Chicago N.A., Benefit Trust Life Insurance Co. and Rust-Oleum Corporation.(1) (2)
RICHARD D. NORDMAN, 47................................................................................ 1982
President and Chief Operating Officer of the Company, since 1986. He is a director of Kemper
Corporation.
FRED G. STEINGRABER, 55............................................................................... 1993
Chairman of the Board and Chief Executive Officer, since 1986, and Chief Executive Officer, since
1983, 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)
DANIEL J. TERRA, 82................................................................................... 1958
Chairman of the Board and Chief Executive Officer of the Company, since 1958; Chairman of the Board,
Mercury Finance Company, consumer finance/insurance, since 1989 and U.S. Ambassador-at-Large for
Cultural Affairs 1980-1989. He is a director of Mercury Finance Company.(2)
<FN>
- ------------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
</TABLE>
The Board of Directors of the Company held eight meetings during 1993. The
Board has two committees, the Audit Committee and the Compensation Committee,
which held two meetings each during 1993. All of the directors attended at least
75% of the aggregate of such Board and Committee meetings. The Board does not
have a nominating committee.
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 result 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.
2
<PAGE>
Each director and officer of the Company is required to report to the
Securities and Exchange Commission, by a specified date, his or her transactions
in the Common Stock of the Company. During 1993, Mr. Judy, Mr. O'Mahoney and Mr.
Steingraber each filed their initial report and Mr. Clark filed two such reports
which reported two transactions, after the respective specified dates.
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.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of February 14, 1994
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:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY % OF
NAME OWNED(2) CLASS
- ------------------------------------------------------------ --------------- -----
<S> <C> <C>
William P. Clark............................................ 2,000 (1)
Arthur A. Hartman........................................... -- --
John P. Jilek............................................... 62,441 (1)
Leonard P. Judy............................................. -- --
Hermann Mueller............................................. -- --
Richard D. Nordman.......................................... 578,623 1.3%
William S. Russell.......................................... 84,623 (1)
Fred G. Steingraber......................................... -- --
Daniel J. Terra............................................. 9,107,288(3)(4) 20.3%
All current directors and executive officers as a group..... 9,971,712 22.3%
<FN>
- ------------------------
(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 14, 1994 had been exercised as
follows: Mr. Jilek -- 56,441; Mr. Nordman -- 133,333; Mr. Russell --
57,057; and all current directors and executive officers as a group --
324,605. Such persons and the members of such group disclaim any
beneficial ownership of the shares subject to such options.
(3) Does not include 847,000 shares beneficially owned by the Terra Foundation
for the Arts, which shares were gifted to the Foundation by Mr. Terra and
of which Mr. Terra is a Director and Chairman, and as to which beneficial
ownership of such shares is disclaimed by Mr. Terra.
(4) Mr. Terra's wife owns 8,366 shares in which Mr. Terra disclaims any
beneficial interest.
</TABLE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee was composed of Mr. Clark, Mr. Judy and Mr.
Steingraber, the three independent, non-employee directors, and Mr. Terra,
Chairman and Chief Executive Officer of the Company, at the time of the actions
covered by this report. Mr. Hartman has since been appointed to the Compensation
Committee. 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 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.
3
<PAGE>
There are two elements to the Company's executive compensation: 1) Base
Salary Compensation and 2) Stock Option Grants. The Compensation Committee does
not establish specific objective targets for the measures used in evaluating
executive performance and in setting executive compensation. 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.
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,
as appropriate. The relative weights of corporate and individual performance may
vary among individuals, and from year to year for the same individual. None of
the executive officers listed in the Summary Compensation Table ("Named
Officers") received an increase in their base salary during 1993 over that in
effect since at least June 1992.
The Compensation Committee has determined, effective January 1, 1994, to
increase the salaries of the Named Officers by amounts ranging from 4% to 6%.
This determination was based on the lack of any increase since June 1992
(January 1992 for Mr. Nordman and Mr. Russell) for any of such officers, as well
as the Compensation Committee's subjective evaluation of the factors identified
above, giving particular attention, with respect to corporate performance, to
the sales volume increases over the last two years, earnings (before the effect
of fourth quarter charges and foreign exchange), return on equity and return on
sales, and the Company's implementation of its modernization program.
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. 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
1993, based upon the subjective evaluation referred to above. The Compensation
Committee, in making such evaluation, noted the increase in sales in 1992, solid
earnings, continued strong return on equity and return on sales.
CHIEF EXECUTIVE OFFICER
Mr. Terra, the Chairman and Chief Executive Officer of the Company, founded
the Company and continues to be a significant shareholder of the Company. Mr.
Terra has been authorized to receive but has waived his annual salary from the
Company since 1982. In addition, Mr. Terra does not receive grants of stock
options under the Company's stock option plan. Accordingly, the Compensation
Committee has not specifically evaluated Mr. Terra's performance against
corporate performance during 1993. If Mr. Terra, in the future, decides not to
waive his annual salary, the Compensation Committee will, at that time, evaluate
Mr. Terra's performance against corporate performance.
<TABLE>
<C> <S> <C>
Compensation Committee: Daniel J. Terra, Leonard P. Judy
Chairman Fred G.
William P. Clark Steingraber
</TABLE>
4
<PAGE>
COMPENSATION OF DIRECTORS
Directors of the Company who are not officers were paid an annual fee of
$11,000 plus $750 for each Board or Committee meeting attended in 1993. Also,
pursuant to the 1992 Non-Qualified Stock Option Plan (the "1992 Plan") approved
by the stockholders at the April 28, 1992 Annual Meeting, Mr. Judy and Mr.
Steingraber were each granted a stock option for 10,000 shares of Common Stock
at an exercise price of $12.875 per share upon their election as directors on
April 27, 1993.
The Board of Directors has adopted, subject to stockholder approval, an
amendment (the "Amendment") to the 1992 Non-Qualified Stock Option Plan. See
"Proposal to Approve an Amendment to the 1992 Non-Qualified Stock Option Plan."
At the time of the adoption of the Amendment, Messrs. Clark, Judy and
Steingraber each received a grant of options covering 10,000 shares and Mr.
Hartman received a grant of an option covering 20,000 shares, of Common Stock
under the 1992 Plan at an exercise price of $12.25 per share, subject to
stockholder approval of the Amendment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of Mr. Clark, Mr. Judy and Mr.
Steingraber, the three independent, non-employee directors, and Mr. Terra,
Chairman and Chief Executive Officer of the Company.
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,
1993 of those persons who were (1) the Chief Executive Officer and (2) the other
four most highly compensated executive officers of the Company in 1993 (the
Named Officers):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
AWARDS
-------------
ANNUAL SECURITIES
COMPENSATION UNDERLYING
------------- OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY SARS(#) COMPENSATION (2)
- --------------------------------------------------------- --------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Daniel J. Terra ......................................... 1993 $ --(1) -- $ --
Chairman and Chief Executive Officer 1992 --(1) -- --
1991 --(1) -- --
Richard D. Nordman ...................................... 1993 354,000 40,000 24,780
President and Chief Operating Officer 1992 354,000 -- 24,780
1991 322,000 133,333 22,540
John P. Jilek ........................................... 1993 145,000 20,000 10,150
Vice President 1992 139,583 -- 9,771
1991 123,000 26,666 8,610
Hermann Mueller ......................................... 1993 150,000 15,000 10,500
Vice President 1992 147,083 -- 10,296
1991 135,000 20,000 9,450
William S. Russell ...................................... 1993 130,000 15,000 9,100
Vice President, Treasurer & Secretary 1992 130,000 -- 9,100
1991 122,000 20,000 8,540
<FN>
- ------------------------
(1) Mr. Terra was authorized to receive but waived cash compensation of
$450,000 for each of the past three years.
(2) The total amounts shown in this column consist of Company contributions
for the Growth Sharing Plan (the Company's defined contribution retirement
plan).
</TABLE>
5
<PAGE>
STOCK OPTIONS
Options are granted to officers and other key employees under the Company's
1992 Non-Qualified Stock Option Plan which is administered by the Compensation
Committee. Shown below is information with respect to the grant and exercise of
options during 1993 and the unexercised options held as of December 31, 1993 by
the Named Officers.
OPTION/SAR GRANTS IN 1993
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR OPTION TERM (3)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) 1993(2) ($/SH) DATE 5%($) 10%($)
- ---------------------------------- ------------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Nordman................ 40,000 11.7% $ 12.25 2-22-2003 $ 308,000 $ 780,800
John P. Jilek..................... 20,000 5.8% 12.25 2-22-2003 154,000 390,400
Hermann Mueller................... 15,000 4.4% 12.25 2-22-2003 115,500 292,800
William S. Russell................ 15,000 4.4% 12.25 2-22-2003 115,500 292,800
<FN>
- ------------------------
(1) The option grants were non-qualified stock options. These options become
exercisable two years after the grant date, which was February 22, 1993.
(2) The percentages shown in the table are based on total options granted in
1993 of 342,050 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.
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN
1993 AND YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS
SHARES AT DECEMBER 31, 1993(#) AT DECEMBER 31, 1993 (1)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Nordman.............. -- $ -- 133,333 40,000 $ 428,666 $ 55,000
John P. Jilek................... 20,000 146,643 56,441 20,000 288,426 27,500
Hermann Mueller................. 90 704 -- 15,000 -- 20,625
William S. Russell.............. -- -- 57,057 15,000 316,993 20,625
<FN>
- ------------------------
(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, 1993 (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.
</TABLE>
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 1993, the Company's weighted average interest rate on borrowed funds was
3.78%. The stock purchased is held as collateral by the Company. The loans are
repayable within eighteen months. During 1993, Mr. Nordman had a maximum amount
borrowed of $3,339,136, which was still outstanding as of February 14, 1994.
6
<PAGE>
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, 1989 and
ending December 31, 1993. The Specialty Chemicals Peer Group is composed of the
following companies: Baroid Corp., Betz Laboratories, Inc., Cabot Corp., Chemed
Corp., Ferro Corp., Grow Group, Inc., Guardsman Products, Inc., Intersystems,
Inc/DE, Lawter International, Inc., Learonal, Inc., Locite Corp., Morton
International, Inc., Nalco Chemical Co., Pengo Industries, Inc., PPG Industries,
Inc., Pratt & Lambert, Inc., Sherwin-Williams Co., Specialty Chem Res, Univar
Corp. and Valspar Corp.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG LAWTER INTERNATIONAL, INC., S&P 500 INDEX & SPECIALTY CHEMICALS INDEX**
[GRAPHIC]
Assumes $100 invested on January 1, 1989 in
Lawter International, Inc. Common Stock, S&P 500 Index & Specialty Chemicals
Peer Group Index
*Total return assumes reinvestment of dividends
**Fiscal year ended December 31
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has employment agreements with certain employees that are
activated only on a change in control and, until then, these employees remain
subject to termination at will. The terms of the employment agreement with each
of Messrs. Hacker, Jilek, Mueller and Russell, provide that the agreement 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 or (ii) certain changes in
membership of the Board of Directors). Providing the employee is still serving
as such at the time of such a change in control, the agreement provides that the
Company will continue to employ the employee for a period of two years after
such change in control at a guaranteed minimum salary equal to the employee's
salary at the time thereof. The agreement also provides that the employee may
participate without discrimination in all of the Company's benefit plans
available to its officers, prohibits the employee from disclosing confidential
information during or after employment and prohibits the employee
7
<PAGE>
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 25 miles, or employee's position
and duties are changed following the agreement becoming effective upon a change
in control, the employee may terminate the agreement, whereupon the employee's
salary and benefits for the remainder of the term will become payable in a lump
sum. In addition, if an excise tax is imposed pursuant to the applicable
provisions of the Internal Revenue Code upon any payments to the employee by the
Company, the agreement provides that the employee will be paid an additional
amount calculated so as to provide the employee with the same compensation he
would have received had no excise tax been imposed. The Company also entered
into a comparable agreement with Mr. Nordman, except that this latter agreement
is for a period of four years, and the Company has agreed to use its best
efforts to cause Mr. Nordman to be elected a director of the Company throughout
the agreement's term. The agreement with Mr. Nordman also provides that upon a
change in control of the Company, Mr. Nordman may terminate his employment at
any time not less than six months nor more than one year following such change
in control, in which event, Mr. Nordman's remaining salary also would become due
and payable.
PROPOSAL TO APPROVE AN AMENDMENT TO THE
1992 NON-QUALIFIED STOCK OPTION PLAN
On February 15, 1994, the Board of Directors of the Company adopted an
amendment (the "Amendment") to the Lawter International, Inc. 1992 Non-Qualified
Stock Option Plan (the "Plan"). The Amendment would increase the number of
shares covered by options received under the Plan by non-employee directors
elected on or after February 15, 1994 upon their election as directors from
10,000 to 20,000. The Amendment also provides that subject to stockholder
approval of the Amendment, effective February 15, 1994, each director in office
prior to that date was granted an option covering 10,000 shares (giving each of
such directors options covering a total of 20,000 shares). A description of the
Plan, as proposed to be amended, is set forth below.
The purpose of the Plan is to encourage ownership of Common Stock of the
Company by key employees and directors of the Company and its subsidiaries and
to provide incentive for superior performance by such persons. The Board of
Directors is of the opinion that the Plan advances the interests of the Company,
its subsidiaries and stockholders of the Company by enhancing the ability of the
Company to attract and retain employees and directors of the highest caliber.
The principal features of the Plan are summarized below.
The Plan is administered by a committee (the "Committee") of the Board of
Directors of the Company. Except for grants of options under the provisions
providing for fixed grants to non-employee directors, no member of the Committee
is eligible to participate in the Plan or any other stock option, stock purchase
or stock participation plan of the Company. The Committee designates the
employees, including officers and directors who are employees of the Company, to
receive options and determines the number of shares to be optioned to each and
such other provisions of the options as it may deem necessary or desirable,
subject to the limitations contained in the Plan. In addition, each non-employee
director elected on or after February 15, 1994 will receive a one time grant of
an option for 20,000 shares of Common Stock (and, subject to approval of the
Amendment by stockholders, each non-employee director who has been in office
prior to February 15, 1994 received a grant of an option for 10,000 shares) at
100% of the then fair market value of such stock. Subject to the approval of the
Amendment by the stockholders of the Company, the non-employee directors in
office prior to February 15, 1994 received their grant on February 15, 1994.
A maximum of 2,500,000 shares of Common Stock may be issued pursuant to
options granted under the Plan at a per share price of not less than 100% of the
fair market value thereof on the date options are granted. Appropriate
adjustments in the number of shares available for issuance or subject to
outstanding options under the Plan and in the purchase price for which such
options may be exercised shall be made to give effect to any stock split, stock
dividend, recapitalization, reclassification of shares or similar change in the
capital structure of the Company. Notwithstanding the foregoing, no options may
be granted under the Plan to any employee who owns, at the time the option is
granted, Common Stock representing more than 10% of the voting power of all
classes of stock of the Company, unless the option price per share is at least
110% of the fair market value of the optioned shares at the time the option is
granted.
8
<PAGE>
Options granted under the Plan shall be exercisable in whole or in part
after the expiration of two years following the date of grant or upon the lapse
of such additional period of time as the Committee shall determine, provided
that no option granted under the Plan shall be exercisable after the expiration
of ten years from the date of grant. The duration of the option may be reduced
only upon termination of employment by the Company or the death of the optionee.
Options shall not be transferable other than by will or the laws of descent and
distribution. Upon the death of an optionee while in the employ of the Company,
his or her options shall be exercisable only within a period of six months
following death and then only by the person or persons to whom the deceased
optionee's rights have passed by will or the laws of descent and distribution
and if and to the extent that the optionee was entitled to exercise the option
at the date of death.
Options granted under the Plan shall be exercisable by the payment of the
exercise price in cash, and loans may be provided by the Company to optionees at
the discretion of the Committee for the purpose of financing the options and the
payment of related expenses and taxes, subject to the terms and conditions as
the Committee shall determine.
Under present Federal income tax laws and regulations, the granting of an
Option will not result in Federal income tax consequences to either the Company
or the recipient. However, upon exercise of the Option, a Participant will
recognize ordinary income measured by the excess of the then fair market value
of the shares acquired upon exercise of the Option over the option price.
The amount of income recognized by the Participant will be deductible by the
Company in the taxable year in which ordinary income is recognized by the
employee, if the applicable withholding requirements are met.
The Participant's basis in the stock acquired will be the option price plus
any amount includable in the employee's gross income. If the employee retains
the shares for the requisite holding period prescribed by the Internal Revenue
Code, the gain or loss upon a subsequent sale or exchange will be long-term
capital gain or loss. Currently, the requisite holding period is more than one
year. This holding period will generally commence on the date of the exercise of
the Option. For purposes of determining gain or loss realized upon a subsequent
sale or exchange, the Participant's tax basis will be equal to the sum of the
option price paid and the amount of ordinary income recognized on the date of
exercise.
The Plan may be suspended, discontinued or amended by the Board of Directors
of the Company although certain amendments are subject to stockholder approval.
The Plan will terminate under the terms thereof on February 18, 2002, if not
sooner terminated by the Board of Directors.
As of February 15, 1994, options for an aggregate of 50,000 shares of Common
Stock at an exercise price of $12.25 per share (the fair market value of the
Common Stock on the date of the grant) had been granted to non-employee
directors as a result of the adoption of the Amendment, subject to stockholder
approval. The following table sets forth certain information with respect to
such options:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------- -----------
<S> <C>
William P. Clark..................................................... 10,000
Leonard P. Judy...................................................... 10,000
Fred G. Steingraber.................................................. 10,000
Arthur A. Hartman.................................................... 20,000
All non-employee directors as a group (4 persons).................... 50,000
</TABLE>
Proxies will be voted for or against approval of the proposed Amendment in
accordance with the specification marked thereon, and will be voted in favor of
approval if no specification is made. Approval requires a favorable vote of the
holders of a majority of the shares of common stock present at the meeting in
person or by proxy, assuming that a quorum is present. Abstentions will have the
effect of a vote against approval and non-voted shares will have no effect,
assuming that a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSED
AMENDMENT TO THE 1992 NON-QUALIFIED STOCK OPTION PLAN.
9
<PAGE>
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 & Co. 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 & Co. 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 judgement.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1995
annual meeting of stockholders must be received by the Company not later than
November 21, 1994 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.
WILLIAM S. RUSSELL
SECRETARY
10
<PAGE>
APPENDIX A
LAWTER INTERNATIONAL, INC.
AMENDMENT TO
1992 NON-QUALIFIED STOCK OPTION PLAN
Pursuant to a resolution duly adopted by the Board of Directors of Lawter
International, Inc. (the "Company") on February 15, 1994, the Company's 1992
Non-Qualified Stock Option Plan (the "Plan") is hereby amended as follows,
subject to approval of this amendment (the "Amendment") by the Company's
stockholders.
1. Section 4.2 of the Plan is hereby amended to read in its entirety as
follows:
"4.2 DIRECTORS
Subject to adoption by the Company's stockholders of the February 15,
1994 Amendment to the Plan with respect to this Section 4.2, effective
February 15, 1994 each non-employee director who has been in office since
prior to February 15, 1994 shall be granted an option for 10,000 shares at
100% of the then fair market value of the Common Stock. Each person who
becomes a non-employee director on or after February 15, 1994 shall, at the
time he or she becomes a director, receive a one-time grant of an option for
20,000 shares at 100% of the then fair market value of the Common Stock.
Such options shall be exercisable in accordance with Section 7 hereof and
shall be subject to the provisions of the Plan. A person receiving an option
as a director shall not be subject to the termination provisions of Section
9 if, having ceased to be a director he or she immediately becomes an
employee or consultant of the Company or a subsidiary of the Company, in
which case termination shall occur thereunder when he or she ceases to be an
employee or consultant."
This Amendment shall be deemed to have become effective on February 15, 1994
if it is approved by the affirmative vote of the holders of a majority of the
voting stock of the Company voting in person or by proxy at a duly held
stockholders' meeting.
Adopted by the Board of Directors of
the Company on February 15, 1994
<PAGE>
<TABLE>
<S> <C>
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
LAWTER INTERNATIONAL, INC. The undersigned hereby appoints Daniel J. Terra, Richard D.
ANNUAL MEETING OF STOCKHOLDERS Nordman and William P. Clark, and each of them, as proxies,
APRIL 28, 1994 with power of substitution in each, to represent the
undersigned at the annual meeting of stockholders of Lawter
International, Inc. on April 28, 1994, or any adjournment
thereof, and to vote all of the shares of Common Stock which
the undersigned would be entitled to vote at said meeting if
then personally present:
</TABLE>
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) / / to vote for all nominees listed below
/ /
W. Clark, A. Hartman, L. Judy, R. Nordman, F. Steingraber, D. Terra
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED
BELOW.)
----------------------------------------------------------------------------
2. Proposal to amend the 1992 Non-Qualified Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
<PAGE>
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting and, in the event any of
the foregoing nominees is unable to serve or for good cause will not
serve, for a substitute nominee designated by the Board of Directors.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
PLEASE SIGN AS YOUR NAME
APPEARS HEREON. IF STOCK IS
HELD JOINTLY, EACH JOINT
OWNER SHOULD SIGN. EXECUTORS,
ADMINISTRATORS AND TRUSTEES
SHOULD GIVE FULL TITLE.
CORPORATE SIGNATURES SHOULD
BE BY DULY AUTHORIZED
OFFICER.
<TABLE>
<S> <C>
----------------------------------
Signature
Dated: , 1994
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY ----------------------------------
USING THE ENCLOSED ENVELOPE. Signature if held jointly
</TABLE>
