<PAGE>
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:
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(4) Date Filed:
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<PAGE>
[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.
<PAGE>
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:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNERS BENEFICIAL OWNERSHIP % OF CLASS
- ----------------------------------------------------------- -------------------- -------------
<S> <C> <C>
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
</TABLE>
- ------------------------
(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
<PAGE>
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:
<TABLE>
<CAPTION>
YEAR FIRST
NAME, AGE, OCCUPATION ELECTED
AND BUSINESS EXPERIENCE A DIRECTOR
- ------------------------------------------------------------------------------------------------------ -------------
<S> <C>
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)
</TABLE>
- ------------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Nominating Committee.
2
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY % OF
NAME OWNED(2) CLASS
- ------------------------------------------------------------ ------------------ -----
<S> <C> <C>
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%
</TABLE>
- ------------------------
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
----------------
AWARDS
ANNUAL COMPENSATION ----------------
------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS/SARS(#) COMPENSATION(1)
- ------------------------------------------ --------- ---------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
- ------------------------
(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
<PAGE>
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
<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) 1997(2) ($/SH) DATE 5%($) 10%($)
- ---------------------------------- ------------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- ------------------------
(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
<TABLE>
<CAPTION>
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
- -------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
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 -- --
</TABLE>
- ------------------------
(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
<PAGE>
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
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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)
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