<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:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
[LOGO]
LAWTER INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 29, 1999
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, Pleasant Prairie,
Wisconsin on Thursday, April 29, 1999, at 10:00 A.M., Central 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 2000 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 5, 1999, 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, 1998 are enclosed herewith.
By Order of the Board of Directors.
MARK W. JOSLIN
SECRETARY
March 26, 1999
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
PLEASANT PRAIRIE, WISCONSIN
PROXY STATEMENT
This Proxy Statement and the accompanying Proxy card are being mailed to
stockholders on or about March 26, 1999, 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 29, 1999, 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
5, 1999. As of said date, there were issued and outstanding 33,068,076 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>
FMR Corp................................................... 4,088,900 shares 12.4%
82 Devonshire Street
Boston, Massachusetts 02109
Societe Generale Asset Management Corp. ................... 2,380,000 shares 7.2%
1221 Avenue of the Americas
New York, New York 10020
Geocapital, Corp. ......................................... 2,117,448 shares 6.4%
767 Fifth Ave.
45th Floor
New York, New York 10153
Ryback Management Group.................................... 2,000,000 shares 6.0%
7711 Carondelet Ave.
Box 16900
St. Louis, MO 63105
</TABLE>
1
<PAGE>
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 2000 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, 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, 67.................................................................................. 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. (1)(2)(3)
ARTHUR A. HARTMAN, 72................................................................................. 1994
Senior Consultant, APCO Associates, Inc., international business consultant since 1989. He is a
director of Ford Meter Box, Co., Dreyfus Funds, and Chairman, First NIS Investment Fund.(1)(2)(3)
LEONARD P. JUDY, 59................................................................................... 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)(3)
RICHARD D. NORDMAN, 52................................................................................ 1982
Consultant, 1996-1997. President and Chief Operating Officer of the Company, 1986-1995, Chairman,
Crown Financial Group, Inc., investment advisors, since 1996.(1)(3)
JOHN P. O'MAHONEY, 42................................................................................. 1996
Chairman, since July 1996 and Chief Executive Officer, since January 1996, Vice President,
1993-1995, of the Company.
FRED G. STEINGRABER, 60............................................................................... 1993
Chairman of the Board and Chief Executive Officer, 1986-1995 and 1999, 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)(3)
</TABLE>
- ------------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Nominating Committee.
The Board of Directors of the Company held ten meetings during 1998. The
Board has three committees, the Audit Committee, which held two meetings during
1998, the Compensation Committee,
2
<PAGE>
which held three meetings during 1998, and the Nominating Committee, which did
not meet during 1998. Each director attended at least 75% 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. During 1998, all reports were filed on a timely basis.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of William P. Clark, Arthur A.
Hartman, Leonard P. Judy and Fred G. Steingraber, the four independent,
non-employee directors.
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 that time, at a price of $11.375 per
share, for a total purchase price of $130,848,104. Consummation of the
transaction was completed on April 1, 1998.
COMPENSATION OF DIRECTORS
Directors of the Company who are not officers were paid an annual fee of
$15,000 plus $1000 for each Board or Committee meeting attended.
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
23, 1998, 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 $10.375 per share.
3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of February 12, 1999
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 directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY % OF
NAME OWNED(2) CLASS(2)
- ------------------------------------------------------------ ------------------ -----
<S> <C> <C>
Jack Baarends............................................... 61,571 (1)
William P. Clark............................................ 55,000 (1)
Arthur A. Hartman........................................... 1,383,487(3) 4.1%
John P. Jilek............................................... 271,000 (1)
Mark W. Joslin.............................................. 95,350 (1)
Leonard P. Judy............................................. 64,000 (1)
Richard D. Nordman.......................................... 222,857 (1)
John P. O'Mahoney........................................... 423,767 1.2%
Fred G. Steingraber......................................... 55,000 (1)
All directors and executive officers as a group............. 2,660,603 7.8%
</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 12, 1999 had been exercised as
follows: Mr. Baarends 33,000, Mr. Clark 55,000; Mr. Hartman 55,000; Mr.
Jilek 255,000, Mr. Joslin 59,350; Mr. Judy 55,000; Mr. Nordman 200,000; Mr.
O'Mahoney 325,000; Mr. Steingraber 55,000; and all current directors and
executive officers as a group 1,092,350. Such persons and the members of
such group disclaim any beneficial ownership of the shares subject to such
options.
(3) 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.
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
4
<PAGE>
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 capital, 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 March 1, 1998, to increase
the salaries of the executive officers (excluding the Chief Executive Officer)
listed in the Summary Compensation Table ("Named Officers") by 3.6% to 4.4%.
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
strategic plan. In addition, Mr. Baarends received an additional increase of
3.8%, effective November 1, 1998, based on the additional responsibilities he
assumed as a result of his promotion to Vice President of Research and
Development.
INCENTIVE BONUS PLAN
The compensation committee has established 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 1998, no incentive awards were granted
to executive officers 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
1998 based upon the process referred to above.
5
<PAGE>
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 March 1, 1998, to
increase the salary of Mr. O'Mahoney by 4.7%. This increase was 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
strategic plan. The Compensation Committee granted stock options to Mr.
O'Mahoney in 1998 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).
<TABLE>
<S> <C> <C>
Compensation Committee: William P. Clark Leonard P. Judy
Arthur A. Hartman Fred G. Steingraber
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has employment agreements with Mr. O'Mahoney, Mr. Baarends 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. Baarends 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, 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 for a period of three years, and Mr. Baarends 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. Baarends and Mr. Joslin may participate without discrimination in
all of the Company's benefit plans available to its officers, prohibits Mr.
O'Mahoney, Mr. Baarends and Mr. Joslin from disclosing confidential information
during or after employment and prohibits Mr. O'Mahoney, Mr. Baarends and Mr.
Joslin from working for a competitor of the Company during employment and for a
period of eighteen months following 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. Baarends 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 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.
Baarends 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>
On September 17, 1998, the Company entered into a settlement agreement and
release with Mr. Jilek, the Company's former president and chief financial
officer. Under the terms of this agreement, Mr. Jilek agreed to make himself
available a maximum of two and one half days per month through March 31, 2000 to
provide information and assistance regarding operating and administrative
matters. Mr. Jilek also agrees to release the Company and all related parties
from all present and future claims. In exchange, Mr. Jilek is to receive
payments, at his salary level at the time his employment terminated, through
March 31, 2000, retain his rights through September 30, 2000 under Non-Qualified
Stock Option Agreements granted prior to September 8, 1998 and receive a payment
of an amount not to exceed $15,000 for outplacement services.
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,
1998 of those persons who were (1) the Chief Executive Officer and (2) the other
three most highly compensated executive officers of the Company in 1998 (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......................... 1998 $ 332,495 $ -- 120,000 $ 25,746
Chairman and 1997 320,000 -- 35,000 22,400
Chief Executive Officer 1996 246,000 16,400(3) -- 17,220
Jack Baarends (2)......................... 1998 122,077 -- 39,200 9,497
Vice President 1997 115,489 -- 6,000 9,265
1996 125,336 -- 4,000 10,606
Mark W. Joslin............................ 1998 157,083 -- 56,250 11,921
Chief Financial Officer and Treasurer 1997 152,500 -- 15,600 11,026
1996 70,000 -- 25,000 7,100
John P. Jilek............................. 1998 184,627(4) -- 30,000 108,627
President and 1997 225,000 -- 25,000 15,750
Chief Operating Officer 1996 192,000 -- -- 13,440
</TABLE>
- ------------------------
(1) For Mr. O'Mahoney, Mr. Joslin and Mr. Jilek, the amounts in this column for
1998 consist of Company contributions to the Company's 401K Profit Sharing
Plan of $18,771, $9,208 and $2,000, respectively, and the Company's
Nonqualified Deferred Compensation Plan of $6,975, $2,713 and $3,238,
respectively. For Mr. Baarends, the amount in this column for 1998
represents the Company's contribution for pension insurance in Belgium. For
Mr. Jilek, an additional amount of $103,390 in this column for 1998
represents payments made in accordance with the Settlement Agreement and
Release between Mr. Jilek and the Company.
(2) In 1996, 1997 and a portion of 1998, Mr. Baarends' salary was paid in
Belgian Francs. The U.S. dollars shown here are affected by exchange rates.
(3) This amount represents educational expenses paid by the Company for Mr.
O'Mahoney's children who attended private schools as a result of being
transferred from Belgium to the United States in 1996.
(4) Represents salary paid to Mr. Jilek through the date of his separation from
the Company.
7
<PAGE>
STOCK OPTIONS
Options are granted to officers and other key employees under the Company's
1992 Non-Qualified Stock Option Plan which is administered by the Compensation
Committee. Shown below is information with respect to the grant and exercise of
options during 1998 and the unexercised options held as of December 31, 1998 by
the Named Officers.
OPTION/SAR GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR OPTION
UNDERLYING GRANTED OR TERM(3)
OPTIONS/SARS TO EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED(#)(1) 1998(2) ($/SH) DATE 5%($) 10%($)
- -------------------------- ------------------- --------------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
John P. O'Mahoney......... 40,000(4) 7.4% $ 11.8125 2-24-08 $ 297,153 $ 753,043
80,000(6) 14.7% 8.5625 12-14-08 430,793 1,091,714
Jack Baarends............. 14,200(4) 2.6% 11.8125 2-24-08 105,489 267,330
10,000(5) 1.8% 10.0625 7-30-08 63,279 160,362
15,000(6) 2.8% 8.5625 12-14-08 80,774 204,696
Mark W. Joslin............ 18,750(4) 3.5% 11.8125 2-24-08 139,290 352,989
37,500(6) 6.9% 8.5625 12-14-08 201,934 511,741
John P. Jilek............. 30,000(4) 5.5% 11.8125 2-24-08 222,865 564,782
</TABLE>
- ------------------------
(1) The option grants were non-qualified stock options. These options become
exercisable one year after the grant date.
(2) The percentage shown in the table is based on total options granted to
officers and other key employees in 1998 of 543,415 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.
(4) The date of grant for these options was February 24, 1998.
(5) The date of grant for these options was July 30, 1998.
(6) The date of grant for these options was December 14, 1998.
AGGREGATED OPTION/SAR EXERCISES IN
1998 AND YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT DECEMBER OPTIONS/SARS
SHARES 31, 1998(#) AT DECEMBER 31, 1998(1)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John P. O'Mahoney............... -- -- 285,000 120,000 $ 93,750 $ 245,000
Jack Baarends................... -- -- 33,000 39,200 1,500 61,568
Mark W. Joslin.................. -- -- 40,600 56,250 9,375 114,844
John P. Jilek................... -- -- 225,000 30,000 62,500 --
</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, 1998 (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.
8
<PAGE>
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 1998, 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 were originally repayable within eighteen months. The Board of
Directors extended these loans for an additional eighteen months. During 1998,
Mr. Jilek had a maximum amount borrowed of $322,851 and Mr. O'Mahoney had a
maximum amount borrowed of $158,079. Mr. Jilek paid off his loan in December
1998. As of February 28, 1999, the amount of the loan outstanding for Mr.
O'Mahoney was $159,422.
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, 1994 and
ending December 31, 1998, assuming the investment of $100 on January 1, 1994 and
the full reinvestment of all dividends. The Specialty Chemicals Peer Group is
composed of the following companies: Cabot Corp., Chemed Corp., Ferro Corp.,
Hercules Inc., 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 GRAPHIC
<TABLE>
<CAPTION>
LAWTER INTERNATIONAL,
INC S&P 500 SPECIALTY CHEMICALS PEER GROUP
<S> <C> <C> <C>
1993 100 100 100
1994 92 98.5 99.2
1995 91.2 132 121.4
1996 102.6 158.8 138.1
1997 91.5 208 158.7
1998 101.9 263.5 130.4
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Lawter International, Inc....................................... 100.0 92.0 91.2 102.6 91.5 101.9
S&P 500......................................................... 100.0 98.5 132.0 158.8 208.0 263.5
Specialty Chemicals Peer Group.................................. 100.0 99.2 121.4 138.1 158.7 130.4
</TABLE>
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 that time, at a price of $11.375 per
share, for a total purchase price of $130,848,104. Consummation of the
transaction was completed on April 1, 1998.
On November 17, 1998, the Named Officers and other key employees purchased
349,972 shares of Lawter Common Stock through the Company's Key Employee
Investment Plan at the then market price of $8.75 per share. The number of
shares purchased by Mr. O'Mahoney, Mr. Baarends and Mr. Joslin were 76,571,
28,571 and 36,000, respectively. Under the terms and conditions of the plan, the
employees took out personal loans that are guaranteed by the Company to purchase
the stock, and must hold the stock for a period of three years unless the
employee separates from the Company or there is a change in control of the
Company.
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 Company's 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, and execution of the accompanying form of proxy will confer such
discretionary authority.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 2000
annual meeting of stockholders must be received by the Company not later than
November 26, 1999 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. If a stockholder who intends to present a proposal at
the annual meeting of stockholders in 2000, other than through the proxy
materials, does not notify the Company of the proposal on or before February 10,
2000, management proxies may use their discretionary authority to vote on the
proposal if and when presented at the annual meeting without the Company
advising in its 2000 proxy materials on the nature of the proposal or how the
proxies intend to exercise their discretion.
MARK W. JOSLIN
SECRETARY
10
<PAGE>
LAWTER INTERNATIONAL, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
1. ELECTION OF DIRECTORS --
Nominees: W. Clark, A. Hartman, L. Judy, A. Nordman, J. O'Mahoney,
F. Steingraber.
For Withhold For All
All All Except Nominee(s) listed below.
[ ] [ ] ____________________________________________________
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement.
Dated:_______________________, 1999
- -----------------------------------------------
Signature(s)
- -----------------------------------------------
Please sign exactly as your name appears. Joint owners should each sign
separately. Where applicable, indicate your official position or
representative 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 29, 1999
The undersigned appoints Mark W. Joslin and John P. O'Mahoney or either
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 29, 1999, 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.)
