SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
AMCOL INTERNATIONAL CORPORATION
(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):
[ ] 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:
Common Stock, par value $.01 per share
(2) Aggregate number of securities to which transactions applies:
______________ (as of April ___, 2000)
(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): Value of
Transaction: $656.5 million, consisting of (i) $628 million, less the
amount of any outstanding intercompany indebtedness of the SAP
Business as of the closing, subject to certain additional adjustments,
as the purchase price under an Asset and Stock Purchase Agreement
dated November 22, 1999, and (ii) $28.5 million, as consideration for
entering into an Acrylic Acid Supply Agreement.
(4) Proposed maximum aggregate value of transaction:
$656.5 million (See line 3 above)
(5) Total fee paid:
$131,300
[X] 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:
AMCOL INTERNATIONAL CORPORATION
One North Arlington
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On May __, 2000
To Our Shareholders:
The special meeting of shareholders of AMCOL International Corporation, or
AMCOL, will take place on __________, May __, 2000, at 10:00 a.m., Chicago time,
at _______________, for the following purposes:
1. To consider and vote upon a proposal to approve the sale of our
superabsorbent polymers business, or SAP business, to BASF
Aktiengesellschaft, or BASF, pursuant to the terms of an Asset and
Stock Purchase Agreement dated November 22, 1999. The purchase
agreement provides for the sale of the following to BASF:
- all of the shares of capital stock of AMCOL's indirect
subsidiaries Chemdal Corporation and Chemdal Asia Ltd.; and
- all other assets of AMCOL and its subsidiaries related
primarily to the SAP business.
A copy of the purchase agreement is attached as Annex A to the
accompanying proxy statement.
2. To consider and vote upon a proposal to approve amendments to
AMCOL's 1993 Stock Plan and 1998 Long-Term Incentive Plan.
3. To transact any other business which properly comes before the
special meeting.
Only shareholders of record of AMCOL's common stock as of the close of
business on April ___, 2000 will be entitled to notice of and to vote at the
special meeting and at any adjournments of the special meeting.
AMCOL's Board of Directors has unanimously approved the purchase agreement
and the sale transaction, and believes that the purchase agreement and the sale
transaction are fair to, and in
the best interests of, AMCOL and its shareholders. The Board of Directors
recommends that you vote "FOR" approval of the sale transaction and the plan
amendments.
Whether or not you plan to attend the special meeting, please complete,
sign, date and mail the proxy card in the enclosed self-addressed, postage-paid
envelope, or vote by telephone in accordance with the instructions provided.
Please do not submit a proxy card if you have voted by telephone. If you attend
the special meeting, you may revoke your proxy and, if you wish, vote your
shares in person. Thank you for your interest and cooperation.
By Order of the Board of Directors,
Clarence O. Redman
Secretary
Arlington Heights, Illinois
April __, 2000
TABLE OF CONTENTS
PAGE
INTRODUCTION................................................................8
SUMMARY.....................................................................10
FORWARD LOOKING STATEMENTS / RISK FACTORS...................................16
Narrowed Focus of Business.........................................16
Significant Increase In Shares Subject To Outstanding Options......16
Use of Proceeds....................................................17
Competition........................................................17
Reliance on Metalcasting and Construction Industries...............17
Contingent Liabilities.............................................18
Regulatory and Legal Matters.......................................18
Risks of International Operations..................................18
Stock Price........................................................19
SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA.19
THE COMPANY.................................................................22
THE SPECIAL MEETING.........................................................22
General............................................................22
Record Date........................................................22
Purpose of the Special Meeting; Recommendation of the Board of
Directors..........................................................22
Proxies; Vote Required.............................................23
Proxy Solicitation and Expenses....................................23
PROPOSAL 1: THE SALE TRANSACTION...........................................24
General............................................................24
The SAP Business...................................................24
Background of the Sale Transaction.................................25
Opinion of Schroders...............................................31
Recommendation of the Board........................................36
Reasons for the Sale Transaction...................................36
Use of Proceeds....................................................38
Accounting Treatment...............................................39
Certain Federal Income Tax Consequences............................39
Interests of Certain Persons.......................................41
No Appraisal Rights................................................42
THE PURCHASE AGREEMENT......................................................42
Purchased Shares and Assets........................................42
Assumed Liabilities................................................43
Purchase Price.....................................................44
The Closing........................................................44
Representations and Warranties.....................................44
Conduct of Business................................................45
No Solicitation....................................................46
Non-Competition....................................................47
Employee Matters...................................................48
Tax Matters........................................................49
Closing Conditions.................................................49
Survival of Representations and Warranties; Indemnification........50
Termination........................................................52
Expenses 53
Ancillary Agreements...............................................53
MARKET PRICE DATA; DIVIDENDS................................................54
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIESUNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION.......................................................55
UNAUDITED FINANCIAL STATEMENTS OF THE SAP BUSINESS..........................62
PROPOSAL 2: THE PLAN AMENDMENTS............................................67
General............................................................67
The 1993 Plan and the 1998 Plan....................................68
The Plan Amendments................................................72
Board Recommendation...............................................73
SECURITY OWNERSHIP..........................................................74
Security Ownership of Five Percent Beneficial Owners...............74
Security Ownership of Directors and Executive Officers.............75
NAMED OFFICERS' COMPENSATION................................................77
Summary Compensation Table.........................................77
Option Grants in Last Fiscal Year..................................78
Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values......................................................................78
Pension Plans......................................................79
Change In Control Arrangements.....................................80
Director Compensation..............................................81
Compensation Committee Report on Executive Compensation............81
Compensation Committee Philosophy..................................82
Components of Compensation.........................................82
Base Pay 83
Annual Incentives..................................................83
Long-Term Incentives...............................................83
Stock Performance Graph............................................84
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS....................................85
SHAREHOLDER PROPOSALS.......................................................85
OTHER MATTERS...............................................................85
ADDITIONAL INFORMATION......................................................86
ANNEXES:
A Asset and Stock Purchase Agreement
B Opinion of Schroders
AMCOL INTERNATIONAL CORPORATION
One North Arlington
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
To Be Held On May __, 2000
INTRODUCTION
We are furnishing this proxy statement to you in connection with the
solicitation of proxies by the Board of Directors of AMCOL International
Corporation, or AMCOL, for use at our special meeting of shareholders to be held
on _________, May ___, 2000, at 10:00 a.m., Chicago time, at _______________,
and at any adjournment of the special meeting. This proxy statement and the
accompanying proxy card are first being mailed or delivered to AMCOL
shareholders on or about April __, 2000.
At the special meeting, you will be asked to consider and vote upon the
following matters:
1. A proposal to approve the sale of our superabsorbent polymers
business,or SAP business, to BASF Aktiengesellschaft, or BASF,
pursuant to the terms of an Asset and Stock Purchase Agreement
dated November 22,1999. The purchase agreement provides for the sale
of the following to BASF:
- all of the shares of capital stock of AMCOL's
indirect subsidiaries Chemdal Corporation and
Chemdal Asia Ltd.; and
- all other assets of AMCOL and its subsidiaries
related primarily to the SAP business.
A copy of the purchase agreement is attached as Annex A to this proxy
statement.
2. A proposal to approve amendments to AMCOL's 1993 Stock Plan
and 1998 Long-Term Incentive Plan.
3. Any other business which properly comes before the special meeting.
AMCOL's Board of Directors has unanimously approved the purchase agreement
and the sale transaction, and believes that the purchase agreement and the sale
transaction are fair to, and in
the best interests of, AMCOL and its shareholders. The Board of Directors
recommends that you vote"FOR" approval of the sale transaction and the plan
amendments.
In connection with the sale transaction, AMCOL currently intends to adopt a
plan of partial liquidation pursuant to which AMCOL will distribute pro rata to
its shareholders a significant portion of the net proceeds from the sale
transaction. AMCOL currently expects to distribute between $14.00 and $14.50 per
share. AMCOL currently expects to make this distribution in the second quarter
of 2000. We cannot assure you that any plan of partial liquidation will be
adopted or that any distribution will be made. The Board of Directors will
consider the facts and circumstances existing after completion of the sale
transaction to determine whether a distribution in partial liquidation is in the
best interests of AMCOL's shareholders at that time and the timing and amount of
any such distribution. Any plan of partial liquidation must be approved by the
Board, but does not require the approval of AMCOL's shareholders. You are not
being asked to vote on or approve any plan of partial liquidation.
Whether or not you plan to attend the special meeting, please complete,
sign, date and mail the proxy card in the enclosed self-addressed, postage-paid
envelope, or vote by telephone in accordance with the instructions provided.
Please do not submit a proxy card if you have voted by telephone. If you attend
the special meeting, you may revoke your proxy and, if you wish, vote your
shares in person.
The date of this proxy statement is April ___, 2000.
SUMMARY
This summary highlights information contained in other places in this proxy
statement. You should read the entire proxy statement carefully, including the
"Risk Factors" section and the annexes to this proxy statement.
THE SPECIAL MEETING
Time, Date and Place: The special meeting will be held on ___________,
May ___, 2000, at 10:00 a.m., Chicago
time, at _______________.
Record Date: Shareholders of record of AMCOL's common stock as of
the close of business on April ___, 2000 will be entitled
to vote at the special meeting.
Purpose: 1. To approve the sale of the SAP business to
BASF pursuant to the terms of the purchase agreement. The
purchase agreement provides for the sale of the following to
BASF:
- all of the shares of capital stock of AMCOL's indirect
subsidiaries Chemdal Corporation and Chemdal Asia Ltd.;
and
- all other assets of AMCOL and its subsidiaries related
primarily to the SAP business.
A copy of the purchase agreement is attached as Annex A to
this proxy statement.
2. To approve amendments to AMCOL's 1993 Stock Plan and 1998
Long-Term Incentive Plan.
3. To transact such any other business which properly comes
before the special meeting.
Board Recommendations:
AMCOL's Board of Directors has unanimously approved the
purchase agreement and the sale transaction, and believes
that the purchase agreement and the sale transaction are
fair to, and in the best interests of, AMCOL and its
shareholders. The Board of Directors recommends that you
vote "FOR" approval of the sale transaction and the plan
amendments.
Required Vote:
The sale transaction must be approved by the holders of a
majority of the outstanding shares of AMCOL's common stock.
The plan amendments must be approved by the holders of a
majority of the shares of AMCOL's common stock represented
at the special meeting.
PROPOSAL 1: THE SALE TRANSACTION
The Sale Transaction:
Under the purchase agreement, AMCOL or its subsidiaries will
transfer to BASF or its subsidiaries the following:
- all of the outstanding shares of the capital stock of
AMCOL's indirect subsidiaries Chemdal Corporation and
Chemdal Asia Ltd.; and
- all other assets of AMCOL and its subsidiaries related
primarily to the SAP business.
The Purchase Price:
Subject to post-closing adjustments, the total amount BASF
will pay AMCOL for the SAP business is $656.5 million, less
any outstanding intercompany indebtedness of the SAP
business as of the closing. The purchase price consists of:
- subject to post-closing adjustments, $628 million, less
any outstanding intercompany indebtedness of the SAP
business as of the closing, as the purchase price under
the purchase agreement; and
- $28.5 million, as consideration for entering into an
Acrylic Acid Supply Agreement.
See "The Purchase Agreement - Purchase Price."
Opinion of Schroders:
Schroder & Co. Inc., our financial advisor in connection
with the sale transaction, delivered a written opinion to
AMCOL's Board of Directors that, as of the date of the
opinion, the cash consideration to be paid to AMCOL by BASF
for the SAP business was fair to AMCOL from a financial
point of view. A copy of Schroders' opinion, which sets
forth the assumptions made, the matters considered and the
scope of its review, is attached as Annex B hereto. See
"Proposal 1: The Sale Transaction - Opinion of Schroders."
Reasons for the Sale Transaction
In reaching its decision to recommend and approve the
purchase agreement, our Board of Directors considered, among
other things, the financial performance and future
prospects of the SAP business, current economic and market
conditions in the superabsorbent polymers industry, and the
price and other terms of the sale transaction. For a more
detailed review of the reasons for the sale transaction, see
"Proposal 1: The Sale Transaction - Reasons for the Sale
Transaction."
Use of Proceeds:
We expect to receive approximately $656.5 million in gross
proceeds from the sale transaction. See "The Purchase
Agreement - Purchase Price." From these gross proceeds,
AMCOL intends to repay indebtedness of the SAP business
(totaling approximately $44.3 million as of December 31,
1999) and will pay various transaction related costs,
including estimated legal, accounting and advisory fees of
$7.5 million, estimated employee bonuses of $3.6 million,
estimated filing, printing and other costs of $1.3 million,
estimated penalties for the prepayment of debt of $1.3
million, and estimated corporate income taxes of $208.4
million.
In connection with the sale transaction, the Board of
Directors currently intends to adopt a plan of partial
liquidation pursuant to which we will distribute pro rata to
our shareholders a significant portion of the net proceeds
from the sale transaction after paying the expenses
described above. AMCOL currently expects to distribute
between $14.00 and $14.50 per share in the second quarter of
2000. We cannot assure you that any plan of partial
liquidation will be adopted or that any distribution will be
made. The Board of Directors will consider the facts and
circumstances existing after completion of the sale
transaction to determine whether a distribution in partial
liquidation is in the best interests of AMCOL's shareholders
at that time and the timing and amount of any such
distribution. Any plan of partial liquidation must be
approved by the Board, but will not require the approval of
AMCOL's shareholders. You are not being asked to vote on or
approve any plan of partial liquidation. See "Risk Factors -
Use of Proceeds" and "Proposal 1: The Sale Transaction - Use
of Proceeds."
Certain Federal Income
Tax Consequences:
AMCOL will recognize a gain on the sale of the SAP business
in the sale transaction, but no gain will be recognized by
you in the sale transaction.
Any distribution to you in connection with the sale
transaction will be treated as a partial liquidation of
AMCOL for federal income tax purposes. A distribution in
partial liquidation made to non-corporate shareholders will
be treated as an exchange of a portion of the shareholder's
common stock for the cash distributed rather than a
dividend. The distribution will be a dividend in the hands
of corporate shareholders to the extent of current and
accumulated earnings and profits of AMCOL. The amount of any
dividend not subject to federal income tax due to the
corporate dividends received deduction will reduce a
corporate shareholder's basis in its AMCOL common stock.
For a more detailed discussion of the federal income tax
consequences of the sale transaction and the distribution to
AMCOL's shareholders, see "Proposal 1: The Sale Transaction
- Certain Federal Income Tax Consequences." All descriptions
of federal income tax consequences in this proxy statement
are general and do not address all of the tax consequences
of the proposed distribution that may be relevant to
particular shareholders. Each shareholder is urged to obtain
advice from his or her own tax advisor regarding the tax
consequences of the proposed distribution to them.
No Appraisal Rights:
Under Delaware law, you are not entitled to appraisal rights
as a result of the sale transaction.
THE PURCHASE AGREEMENT
The Closing:
The closing of the sale transaction will take place on the
tenth business day following the date on which all of the
conditions to each party's obligations under the purchase
agreement have been satisfied or waived, or on another date
as the parties may mutually agree. It is currently
anticipated that the closing will occur in the second
quarter of 2000.
Closing Conditions:
The closing is conditioned upon approval of the sale
transaction by AMCOL's shareholders and is also subject to
the satisfaction of other conditions, including United
States antitrust regulatory review, and the absence of any
material adverse change in the SAP business. See "The
Purchase Agreement - Closing Conditions."
Termination:
The purchase agreement may be terminated in some
circumstances, including:
- the breach of any representation, warranty, covenant or
agreement on the part of AMCOL or BASF which prevents
closing conditions to the purchase agreement from being
satisfied;
- a vote by AMCOL's shareholders against approval of the
purchase agreement;
- the issuance of an order by a governmental authority
restraining or enjoining the purchase agreement; or
- the failure to complete the transaction by May 31,
2000.
See "The Purchase Agreement - Termination."
Expenses:
The purchase agreement requires AMCOL to pay BASF a
termination fee of $20 million plus expenses if the purchase
agreement is terminated under certain circumstances. See
"The Purchase Agreement - Expenses."
PROPOSAL 2: THE PLAN AMENDMENTS
General:
The purchase agreement requires AMCOL to cause each unvested
stock option to purchase shares of AMCOL common stock held
by employees of the SAP business to become fully vested and
exercisable on or before the closing of the sale
transaction. However, AMCOL is unable to accelerate the
vesting of the options granted to employees who reside in
the United Kingdom which were issued under a scheme approved
by United Kingdom Inland Revenue because the necessary
approvals were not received from United Kingdom Inland
Revenue. Pursuant to the purchase agreement, AMCOL will
either replace the options held by these employees in the
United Kingdom or pay a special cash bonus to these
employees. AMCOL intends to vest the options held by all
other employees.
Your Board of Directors has decided to vest these options
prior to the closing in order to provide these employees
with the opportunity to exercise their options and sell the
underlying shares of AMCOL common stock prior to the closing
and the termination of their employment with AMCOL. The
vesting of these options will be contingent
upon the receipt of shareholder approval of the purchase
agreement but will not be contingent upon closing the sale
transaction or the termination of the employment with AMCOL
of the employees of the SAP business.
The Plan Amendments:
In order to accelerate the vesting of these options, the
Board of Directors has adopted, subject to shareholder
approval, amendments to AMCOL's 1993 Stock Plan and AMCOL's
1998 Long-Term Incentive Plan which:
- provide for the acceleration of vesting of all options
held by employees who will become employees of BASF
except for nonvested options held by employees whose
options were issued under a scheme approved by United
Kingdom Inland Revenue; and
- eliminate the $100,000 cap on the aggregate fair market
value of an employee's incentive stock options, or
ISOs, which become exercisable in any calendar year
pursuant to the 1998 Plan.
The acceleration of vesting will become effective
immediately upon receipt of shareholder approval of the plan
amendments at the special meeting.
FORWARD LOOKING STATEMENTS / RISK FACTORS
Some of the statements made in this proxy statement and the documents
incorporated by reference in this proxy statement that are not historical fact
are forward-looking statements made in reliance upon the safe harbor contained
in Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements include statements relating to AMCOL or its
operations that are preceded by terms such as "expects," "believes,"
"anticipates," "intends" and similar expressions, and statements relating to
anticipated growth, levels of capital expenditures, future dividends, expansion
into global markets and the development of new products. These forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties. Our actual results, performance or achievements could differ
materially from the results, performance or achievements expressed in, or
implied by, these forward-looking statements as a result of various factors,
including without limitation, the following:
Narrowed Focus of Business
After the sale of the SAP business, AMCOL will be substantially smaller.
AMCOL will focus on its minerals and environmental businesses while continuing
to operate its transportation business. The minerals business mines, processes
and distributes clays and similar products. The environmental business processes
and distributes clays and similar products for use in a variety of industrial
and commercial applications. AMCOL's transportation business provides long-haul
trucking and freight brokerage services for AMCOL's plants and for certain
customers. The following table sets forth historical financial information for
these remaining businesses and for the SAP business for the years ended December
31, 1998 and 1999.
(In millions)
Net Sales Gross Profit Operating Profit (Loss)
1999 1998 1999 1998 1999 1998
Remaining Businesses $299.1 $300.4 $68.9 $64.7 $(8.5) $8.9
SAP Business $252.9 $221.1 $68.9 $46.5 $51.9 $33.3
The operating loss of the remaining businesses in 1999 reflects a one-time
charge taken in the fourth quarter totaling $14.6 million.
Significant Increase In Shares Subject To Outstanding Options
If the Board of Directors approves the proposed distribution in partial
liquidation, the Compensation Committee will be required pursuant to the
Internal Revenue Code, or Code, to adjust the number of shares subject to
incentive stock options outstanding under AMCOL's 1983 Incentive Stock Option
Plan, 1993 Stock Plan and 1998 Long-Term Incentive Plan, and their exercise
price. These adjustments are intended to preserve the ratio of the exercise
price of the option to the fair market value of AMCOL's common stock. In
accordance with the requirements
of the Code, the number of shares subject to incentive stock options would be
increased to the product of (A) the ratio of the pre-distribution price of AMCOL
common stock to the post-distribution price of AMCOL common stock, and (B) the
number of shares subject to incentive stock options, rounded down to the next
whole number. The exercise price would be reduced to the product of (A) the
ratio of the post-distribution price of AMCOL common stock to the
pre-distribution price of AMCOL common stock, and (B) the original option price,
rounded down to the next whole cent. The Compensation Committee intends to make
similar adjustments to non-qualified stock options outstanding under those plans
or under AMCOL's 1987 Non-Qualified Stock Option Plan. As an example, if the
pre-distribution price of AMCOL common stock were $____ per share and the
post-distribution price of AMCOL common stock were $____ per share and there
were ______ stock options outstanding on the distribution date, then the number
of options outstanding would be increased to the product of ________ and
_________, or ________ shares. If the exercise price were $___, the exercise
price would be reduced to the product of ___ and ___, or $___. Once these
adjustments are made, the shares subject to outstanding options will constitute
a significant portion of AMCOL's outstanding shares of common stock. Assuming
the stock prices set forth above immediately after the distribution and the
required adjustment, shares subject to outstanding options would constitute
_____________ out of ___________ outstanding shares of AMCOL common stock, or
__%.
Use of Proceeds
AMCOL expects to receive approximately $656.5 million in gross proceeds
from the sale transaction. From these gross proceeds, AMCOL intends to repay
certain indebtedness of the SAP business and pay various transaction related
costs. In connection with the sale transaction, the Board of Directors currently
intends to adopt a plan of partial liquidation pursuant to which AMCOL will
distribute pro rata to its shareholders a significant portion of the net
proceeds from the sale transaction after paying the expenses described above.
AMCOL currently expects to distribute between $14.00 and $14.50 per share in the
second quarter of 2000. We cannot assure you that any plan of partial
liquidation will be adopted or that any distribution will be made. The Board of
Directors will consider the facts and circumstances existing after completion of
the sale transaction to determine whether a distribution in partial liquidation
is in the best interest of AMCOL's shareholders at that time and the timing and
amount of any such distribution. Any plan of partial liquidation must be
approved by the Board, but does not require the approval of AMCOL's
shareholders. You are not being asked to vote on or approve any plan of partial
liquidation. See "Proposal 1: The Sale Transaction - Use of Proceeds."
Competition
The minerals market is very competitive. We believe competition is
essentially a matter of product quality, price, delivery, service and technical
support. Several of our competitors in the United States market are larger and
have substantially greater financial resources. If we fail to compete
successfully based on these or other factors, we may lose customers or fail to
recruit new customers and our business and future financial results could be
materially and adversely affected.
Reliance on Metalcasting and Construction Industries
Approximately 48% of our minerals segment's sales and 31% of our
environmental business' sales in 1999 were to the metalcasting and construction
markets, respectively. The metalcasting and construction markets depend heavily
upon the strength of the domestic and international economies. If these
economies weaken, demand for products from our minerals business by the
metalcasting market and from our environmental business for the construction
markets may decline and our business or future financial results could be
materially and adversely affected.
Contingent Liabilities
Under the purchase agreement, AMCOL has agreed to indemnify BASF for the
breach of its representations and warranties contained in the purchase agreement
and other matters. See "The Purchase Agreement - Survival of Representations and
Warranties; Indemnification." If the proceeds of the sale transaction are
distributed to AMCOL's shareholders, AMCOL would be required to fund the payment
of any indemnification claims by BASF under the purchase agreement or otherwise
out of its then existing working capital and cash flows from its continuing
businesses. For example, an indemnification claim by BASF might result if
representations by AMCOL about the SAP business made in the purchase agreement
are later proved to be materially incorrect. Significant indemnification claims
by BASF could materially and adversely affect AMCOL's financial condition and
profitability.
Regulatory and Legal Matters
Our operations are subject to various federal, state, local and foreign
laws and regulations relating to the environment and to health and safety
matters. Substantial penalties may be imposed if we violate these laws and
regulations. If these laws or regulations are changed or interpreted differently
in the future, it may become difficult or expensive for us to comply. In
addition, investigations or evaluations of our products by government agencies
may require us to adopt additional safety measures or precautions. If our costs
to comply with such laws and regulations in the future materially increase, our
business and future financial results could be materially and adversely
affected. AMCOL may be subject to adverse litigation results, as well as, future
changes in laws and regulations which may negatively impact its operations and
profits.
Risks of International Operations
After the sale transaction, we expect our business outside of the United
States to represent approximately 26% of our consolidated sales. Our
international operations will be subject to various risks, including the
following:
- currency exchange or price control laws;
- currency translation adjustments;
- political and economic instability;
- unexpected changes in regulatory requirements;
- tariffs and other trade barriers;
- longer accounts receivable collection cycles; and
- potentially adverse tax consequences.
The events listed above could result in sudden, and potentially prolonged,
changes in demand for AMCOL's products. Also, we may have difficulty enforcing
agreements and collecting accounts receivable through a foreign country's legal
system. At December 31, 1999, approximately 47% of our gross accounts receivable
from our continuing businesses were due from customers outside of the United
States and Canada. Stock Price
In connection with the sale transaction, AMCOL currently intends to adopt a
plan of partial liquidation pursuant to which AMCOL will distribute pro rata to
its shareholders a significant portion of the net proceeds from the sale
transaction. See "Proposal 1: The Sale Transaction - Use of Proceeds." After the
record date of any distribution, the market price of AMCOL's common stock will
significantly decrease to reflect the payment of this distribution to AMCOL's
shareholders.
The stock market has been extremely volatile in recent years. These broad
market fluctuations may adversely affect the market price of our common stock.
In addition, factors such as the following may have a significant effect on the
market price of our common stock:
- fluctuations in our financial results;
- our introduction of new services or products;
- announcements of acquisitions, strategic alliances or
joint ventures by us, our customers or our competitors;
- changes in analysts' recommendations regarding our common
stock; and
- general economic conditions.
There can be no assurance as to the price our common stock will trade at
after the sale of the SAP business and the record date for any distribution to
AMCOL's shareholders in connection with the sale transaction.
SELECTED CONSOLIDATED HISTORICAL AND
PRO FORMA FINANCIAL AND OPERATING DATA
The following tables set forth the selected financial data as of and for
the twelve months ended December 31, 1995, 1996, 1997, 1998 and 1999. The
financial data in the "Historical" table insofar as it relates to the years
ended December 31, 1995, 1996, 1997, 1998 and 1999 has been derived from AMCOL's
audited consolidated financial statements, which are incorporated by reference
in this Proxy Statement. The financial data in the "Pro Forma" table gives
effect to the consummation of the sale transaction and the proposed use of
proceeds as consummated: on December 31, 1995, 1996, 1997, 1998 and 1999, in the
case of the respective Pro Forma Balance Sheet financial data; and on January 1,
the first day of AMCOL's fiscal year, in the case of the Pro Forma Statement of
Operations Data for the fiscal years ended December 31, 1995, 1996, 1997,
1998 and 1999, and are derived from AMCOL's Unaudited Pro Forma Consolidated
Financial Information and notes thereto included elsewhere in this Proxy
Statement.
The selected consolidated pro forma financial and operating data is
presented for illustrative purposes only and does not necessarily reflect what
our financial position and results of operation would have been if the sale
transaction and the proposed use of proceeds had been consummated on the above
referenced dates, and may not be indicative of our future performance.
The selected consolidated historical and pro forma financial and operating
data is qualified in its entirety by, and should be read in conjunction with,
AMCOL's audited consolidated financial statements and the notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations which are incorporated by reference to this Proxy Statement and
AMCOL's Unaudited Pro Forma Consolidated Financial Information and notes thereto
which are included elsewhere in this Proxy Statement.
SUMMARY OF OPERATIONS DATA - HISTORICAL
(In thousands, except ratios and share and per share amounts)
Year Ended December 31,
PER SHARE 1999 1998 1997 1996 1995
Stockholders' equity (1) $6.94 $6.44 $6.18 $5.87 $5.42
Basic earnings (2) 0.83 0.79 0.74 0.53 0.62
Diluted earnings (3) 0.82 0.78 0.72 0.52 0.60
Dividends 0.27 0.23 0.21 0.19 0.17
Shares outstanding (3) 27,199,263 28,385,860 29,125,168 29,294,489 29,519,220
INCOME DATA
Sales $552,052 $521,530 $477,060 $405,347 $347,688
Gross profit 137,796 111,171 100,741 84,311 76,562
Operating profit 43,433 42,220 41,469 32,337 32,397
Net income 22,234 22,085 21,044 15,225 17,771
BALANCE SHEET DATA
Current assets $164,770 $164,076 $150,270 $147,773 $126,337
Net property, plant and equipment 172,408 171,478 175,324 180,876 175,211
Total assets 349,007 357,864 351,009 350,708 322,366
Current liabilities 59,715 74,083 67,241 51,870 35,882
Long-term debt 93,914 96,268 94,425 118,855 117,016
Stockholders' equity 186,440 172,914 175,943 167,404 155,494
SUMMARY OF OPERATIONS DATA - PRO FORMA
(In thousands, except ratios and share and per share amounts)
Year Ended December 31,
PER SHARE 1999 1998 1997 1996 1995
Stockholders' equity (1) $4.12 $4.63 $4.82 $4.70 $4.59
Basic earnings (2) (loss) (0.23) 0.19 0.28 0.24 0.31
Diluted earnings (3) (loss) (0.23) 0.18 0.28 0.24 0.30
Dividends 0.27 0.23 0.21 0.19 0.17
Shares outstanding (3) 27,199,263 28,385,860 29,125,168 29,294,489 29,519,220
INCOME DATA
Sales $299,144 $300,437 $281,116 $251,481 $226,926
Gross profit 68,894 64,713 59,780 53,893 50,724
Operating profit (loss) (7,160) 8,969 12,606 12,710 15,495
Net income (loss) (6,161) 5,187 8,228 6,982 8,999
BALANCE SHEET DATA
Current assets $99,888 $111,524 $99,603 $95,626 $85,062
Net property, plant and equipment 89,260 92,063 90,885 85,324 90,101
Total assets 200,977 225,887 215,902 202,303 195,974
Current liabilities 34,980 55,082 51,392 36,213 26,634
Long-term debt 49,625 37,274 16,927 21,407 25,199
Stockholders' equity 110,536 124,460 137,119 133,797 131,619
<FN>
(1) Based on the number of common shares outstanding at the end of the period.
(2) Based on the weighted average common shares outstanding for the period.
(3) Based on the weighted average common shares outstanding, including common stock equivalents, for the period.
</FN>
THE COMPANY
AMCOL International Corporation, or AMCOL, was originally incorporated in
South Dakota in 1924 as the Bentonite Mining & Manufacturing Company. Its name
was changed to American Colloid Company in 1927, and in 1959, it was
reincorporated in Delaware. In 1995, its name was changed to AMCOL International
Corporation.
AMCOL currently operates three major businesses: absorbent polymers,
minerals and environmental. We also operate a transportation business. The
absorbent polymers business produces and distributes superabsorbent polymers
primarily for use in consumer markets. The minerals business mines, processes
and distributes clays and products with similar applications to various
industrial and consumer markets. The environmental business processes and
distributes clays and products with similar applications for use in commercial
construction, landfill liners and in a variety of other industrial and
commercial applications. The transportation business includes a long-haul
trucking business and a freight brokerage business, which provide services to
both AMCOL's plants and outside customers.
We have entered into an agreement to sell our absorbent polymers business.
See "Proposal 1: The Sale Transaction."
THE SPECIAL MEETING
General
We are furnishing this proxy statement to you in connection with the
solicitation of proxies by the Board of Directors of AMCOL for use at the
special meeting to be held on __________, May ___, 2000, at 10:00 a.m., Chicago
time, at _______________ and at any adjournment of the special meeting.
Record Date
The Board of Directors has fixed the close of business on April ___, 2000
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the special meeting or any adjournment. Accordingly, only
holders of record of AMCOL's common stock at the close of business on the record
date will be entitled to vote at the special meeting, either by proxy, telephone
or in person. As of the record date, there were __________ shares of AMCOL's
common stock issued and outstanding. Each share of AMCOL's common stock entitles
the holder to one vote.
Purpose of the Special Meeting; Recommendation of the Board of Directors
At the special meeting, AMCOL's shareholders will be asked to consider and
vote upon the following matters:
- a proposal to approve the sale by AMCOL of the SAP business to
BASF;
- a proposal to approve certain amendments to AMCOL's 1993 Stock
Plan and 1998 Long-Term Incentive Plan; and
- any other business which properly comes before the special
meeting.
AMCOL's Board of Directors has unanimously approved the purchase agreement
and the sale transaction, and believes that the purchase agreement and the sale
transaction are fair to, and in the best interests of, AMCOL and its
shareholders. The Board of Directors recommends that you vote "FOR" approval of
the sale transaction and the plan amendments.
Proxies; Vote Required
Under Delaware law, the plan amendments must be approved by the holders of
a majority of the shares of AMCOL's common stock represented at the special
meeting. The affirmative vote of the holders of a majority of the outstanding
shares of AMCOL's common stock are required to approve the sale transaction.
All properly executed proxies received by AMCOL prior to the special
meeting and not revoked will be voted in accordance with the instructions marked
on those proxies. Unless contrary instructions are marked, proxies will be voted
"FOR" the sale transaction and the plan amendments. The Board of Directors knows
of no other business which will be presented for consideration at the special
meeting. If any other matter is properly presented, it is the intention of the
persons named in the enclosed proxy to vote in accordance with their best
judgment. Any shareholder may revoke his or her proxy at any time prior to the
exercise of the proxy by doing any of the following:
- giving written notice to the Secretary of AMCOL at One North
Arlington, 1500 West Shure Drive, Suite 500, Arlington Heights,
Illinois 60004-7803;
- submitting a duly executed proxy bearing a later date;
- voting by telephone on a later date; or
- attending the special meeting and voting in person.
Attendance at the special meeting will not, in itself, constitute
revocation of a proxy.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of AMCOL's common stock is necessary to constitute a quorum
at the special meeting. In deciding all questions, a holder of AMCOL's common
stock is entitled to one vote, in person or by proxy, for each share held in
such holders' name on the record date. Abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business but are not counted for purposes of determining whether
a proposal has been approved. Thus, abstentions and broker non-votes will have
the same effect as a vote against the plan amendments.
Proxy Solicitation and Expenses
The accompanying proxy is being solicited on behalf of the Board of
Directors of AMCOL. All expenses of this solicitation, including the cost of
preparing and mailing this proxy statement,
will be paid by AMCOL. Solicitation of holders of AMCOL's common stock by mail,
telephone, facsimile or by personal solicitation may be done by directors,
officers and regular employees of AMCOL, for which they will receive no
additional compensation. Brokerage houses and other nominees, fiduciaries and
custodians nominally holding shares of AMCOL's common stock as of the record
date will be requested to forward proxy soliciting material to the beneficial
owners of such shares, and will be reimbursed by AMCOL for their reasonable
out-of-pocket expenses.
PROPOSAL 1: THE SALE TRANSACTION
General
Under the purchase agreement, AMCOL will transfer to BASF the following:
- all of the outstanding shares of the capital stock of AMCOL's
indirect subsidiaries Chemdal Corporation, or Chemdal US, and
Chemdal Asia Ltd., or Chemdal Asia; and
- all other assets of AMCOL and its subsidiaries related primarily
to the SAP business.
Subject to certain post-closing adjustments, the total consideration to be
paid to AMCOL by BASF for the SAP business is $656.5 million, less any
outstanding intercompany indebtedness of the SAP business as of the closing. The
purchase price consists of, subject to certain post-closing adjustments, $628
million, less any outstanding intercompany indebtedness of the SAP business as
of the closing, as the purchase price under the purchase agreement, and $28.5
million, as consideration for entering into an Acrylic Acid Supply Agreement.
See "The Purchase Agreement - Purchase Price."
The sale transaction does not include the sale of AMCOL's Poly-Pore
business which includes the business of researching, manufacturing and selling
of microporous oil and/or water absorbent polymers capable of entrapping solids
and liquids. The Poly-Pore business was accounted for as part of the SAP
business.
The SAP Business
Substantially all of the SAP business is conducted through Chemdal US,
Chemdal Limited, and Chemdal Asia and includes manufacturing operations in the
United States, the United Kingdom and Thailand. Generally, the SAP business
produces superabsorbent polymers for use in disposable baby diapers, adult
incontinence and feminine hygiene products, and other absorbent personal care
items. The following table sets forth historical financial information for
AMCOL's remaining businesses and for the SAP business for the years ended
December 31, 1998 and 1999. See "Unaudited Financial Statements of the SAP
Business."
(In millions)
Net Sales Gross Profit Operating Profit (Loss)
1999 1998 1999 1998 1999 1998
SAP Business $252.9 $221.1 $68.9 $46.5 $51.9 $33.3
The following tables set forth the percentage of total assets of AMCOL
attributable to the SAP business and the remaining businesses as of December 31
of each of the last three calendar years, and the percentage contributions to
net sales of AMCOL attributable to the SAP business and the remaining businesses
for each of the last three calendar years.
Percentage of Total Assets as of
12/31/1999 12/31/1998 12/31/1997
SAP Business 42.4% 36.9% 38.5%
Remaining Businesses 57.6% 63.1% 61.5%
100.% 100.0% 100.0%
Percentage of Net Sales for the Year Ended
12/31/1999 12/31/1998 12/31/1997
SAP Business 45.8% 42.4% 41.1%
Remaining Businesses 54.2% 57.6% 58.9%
100.0% 100.0% 100.0%
Background of the Sale Transaction
We continually review our strategic focus in order to identify strategies
to enhance shareholder value. In reviewing our possible strategic alternatives,
we consider the changing competitive environment in the industries in which our
absorbent polymers, minerals and environmental businesses operate and the
financial performance, business operations, capital requirements and future
prospects of these businesses.
On April 1, 1999, Lawrence Washow, the President and Chief Operating
Officer of AMCOL, received an unsolicited inquiry from a representative of BASF
requesting a meeting with AMCOL relating to the SAP business.
In early April of 1999, an executive of Company A contacted Gary L.
Castagna, a Vice President of AMCOL and the President of Chemdal International
Corporation, to determine whether AMCOL was interested in pursuing a joint
venture combining Company A's superabsorbent polymer business with the SAP
business.
On April 15, 1999, Mr. Castagna and Mr. Washow met with an executive of
Company A to discuss a possible joint venture involving each party's
superabsorbent polymers business.
On April 19, 1999, John Hughes, the Chairman and Chief Executive Officer of
AMCOL, Mr. Washow, and Mr. Castagna met with Dr. Joseph Kohnle, President of the
Dispersions Group of BASF, and Cenan Ozmeral, Group Vice President of BASF
Corporation, at AMCOL's offices in Arlington Heights, Illinois. At this meeting,
BASF indicated to AMCOL that it was interested in acquiring the SAP business and
the parties held preliminary discussions regarding the possible sale of the SAP
business to BASF.
On April 28, 1999, AMCOL held a meeting of its Board of Directors. At this
meeting Mr. Hughes, Mr. Washow and Paul G. Shelton, a Senior Vice President and
the Chief Financial Officer of AMCOL, briefed the Board of Directors on
strategic alternatives for the SAP business, including the recent discussions
with BASF. After discussion, the Board of Directors instructed management to
continue discussions with BASF regarding a possible sale of the SAP business. On
the same date, Mr. Hughes sent a letter to Dr. Kohnle of BASF indicating AMCOL's
proposed valuation of the SAP business.
On May 6, 1999, Mr. Hughes and Mr. Washow met Dr. Kohnle, Dr. Harald
Schultheiss, Director, Dispersions of BASF and other BASF representatives, in
Frankfurt, Germany, to discuss the possible sale of the SAP business to BASF.
Discussions focused on the historical performance of the SAP business,
comparable acquisitions in the specialty chemical business and methods of
valuing the SAP business.
On May 11, 1999, AMCOL held its annual meeting of the Board of Directors.
At the meeting, AMCOL's management updated the Board of Directors as to the
status of discussions with BASF and the contact by Company A regarding a
possible joint venture.
On May 14, 1999, Mr. Hughes, Mr. Washow and Mr. Castagna met with an
executive of Company A to continue discussions regarding a possible joint
venture involving each party's superabsorbent polymers business. During these
discussions, AMCOL indicated to Company A that it would also consider selling
the SAP business and suggested that Company A consider making an offer. Company
A indicated that it was more interested in forming a joint venture, but agreed
to review a possible acquisition of the SAP business.
On May 17, 1999, AMCOL and BASF executed Secrecy Agreements obligating the
parties to maintain the confidentiality of shared confidential information. On
the same date, Mr. Castagna and Mr. Shelton met with Dr. Schultheiss and other
BASF representatives in Frankfurt, Germany. At these meetings, the parties
discussed BASF's initial valuation for the SAP business. The parties also
reviewed strategies for structuring the transaction, business synergies,
potential for new technologies, and possible risks associated with the proposed
transaction.
On May 20, 1999, Mr. Hughes and Mr. Washow met with Dr. Kohnle, Dr.
Schultheiss, and other BASF representatives in Frankfurt, Germany, to further
discuss the valuation of the SAP business.
On May 28, 1999, Company A informed AMCOL that it would not make an offer
to acquire the SAP business at that time, but reiterated its willingness to
discuss the formation of a joint venture consisting of the SAP business and
Company A's superabsorbent polymer business. However, the proposed joint venture
would not provide for the supply of acrylic acid.
On June 22, 1999, Mr. Hughes and Mr. Washow met with Dr. Kohnle and other
BASF representatives in Frankfurt, Germany. At this meeting, the parties
discussed various structures for BASF's proposed acquisition of the SAP
business, including the sale of the stock and assets of certain AMCOL
subsidiaries and a structure in which AMCOL would spin-off all of its businesses
other than the SAP business immediately prior to the acquisition of AMCOL (then
consisting of the SAP business) by BASF through a merger of AMCOL and a BASF
subsidiary. The spin-off/merger structure was favored by AMCOL over the sale of
the stock and assets of the subsidiaries since the spin-off/merger structure
provided the most tax efficient structure for AMCOL and its shareholders.
On June 28, 1999, Mr. Hughes, Mr. Washow and Mr. Castagna met with two
executives from Company A in Chicago, Illinois to further discuss the possible
formation of a joint venture. The parties also discussed preliminary valuations
of the SAP business.
On June 30, 1999, Mr. Shelton and Dr. Schultheiss of BASF discussed by
telephone various issues regarding the possible
acquisition of the SAP business by BASF.
On July 7, 1999, AMCOL and Company A executed a confidentiality agreement.
On the same date, AMCOL provided Company A with a copy of the business plan for
the SAP business.
On July 22, 1999, Mr. Shelton and Dr. Schultheiss of BASF participated in a
conference call with their respective legal and accounting advisors to discuss
alternative structures for the sale of the SAP business to BASF. The parties
discussed the federal income tax consequences of the proposed transaction to
AMCOL and its shareholders.
On July 26, 1999, AMCOL engaged Schroder & Co. Inc. to act as its exclusive
financial advisor in connection with a possible sale of the SAP business. After
its engagement, Schroders contacted four other likely potential buyers to
determine their level of interest in acquiring the SAP business. As a result of
these contacts, Schroders received an indication of interest from Company B
regarding a possible transaction.
On July 27 and 28, 1999, Mr. Shelton and AMCOL's legal counsel met with Dr.
Schultheiss, Dr. Wolf-Dieter Starp, Director of Subsidiary Financing and
Acquisitions of BASF, Dr. Jorg Buchmuller, director of BASF, Mr. Ozmeral, and
other BASF representatives in the New York office of BASF's legal counsel. The
parties discussed terms for a possible transaction, including price and
structure. BASF also requested that the directors and certain of their
affiliates agree to vote their shares of AMCOL common stock in favor of the
proposed transaction.
On July 29, 1999, Mr. Hughes and Dr. Kohnle of BASF discussed the proposed
transaction in a telephone call. Later that day, Mr. Hughes sent a follow-up
letter to Dr. Kohnle indicating that AMCOL would not consider an offer of less
than $540 million, excluding working capital, for the SAP business, using a
spin-off/merger structure.
On August 4, 1999, Mr. Hughes, Mr. Washow, Mr. Shelton and Mr. Castagna,
AMCOL's legal counsel and Schroders met with Dr. Kohnle, Dr. Schultheiss and
other BASF representatives at Schroders' offices in London, England. At this
meeting, the parties discussed a purchase price of approximately $555.5 million,
including working capital, for the SAP business, using a spin-off/merger
structure.
On August 9, 1999, Mr. Hughes met with representatives from Company A to
determine Company A's interest in pursuing a transaction and whether further
discussions were warranted. During this meeting, the parties also discussed
preliminary valuations for the SAP business. On August __, 1999, AMCOL
terminated discussions with Company A because Company A's preliminary indication
of the valuation of the SAP business was insufficient, and Company A was not
willing to discuss any increase in value.
On August 10, 1999, AMCOL held a meeting of its Board of Directors. At the
meeting, AMCOL's management advised the Board of Directors as to the status of
discussions with BASF and Company A. The Board discussed and considered its
fiduciary duties in connection with a possible sale of the SAP business. The
Board of Directors discussed current conditions in the superabsorbent polymer
industry and AMCOL's strategic alternatives. The Board of Directors approved the
retention of Schroders as AMCOL's financial advisor in connection with the sale
of the SAP business.
On September 1 and 2, 1999, Mr. Shelton, Mr. Castagna, and Mark Anderson,
the Vice President of Corporate Development of AMCOL and the Vice President of
Absorbent Technologies for Chemdal US, met with Dr. Schultheiss, Dr. Buchmuller,
Mr. Ozmeral and other BASF representatives in Chicago, Illinois. At these
meetings, BASF informed AMCOL that the proposed structure of the transaction as
a spin-off/merger was unacceptable to BASF and proposed to restructure the
transaction such that BASF would acquire the SAP business by purchasing the
assets and stock of certain of AMCOL's subsidiaries. BASF also indicated that it
would be willing to increase the purchase price for the SAP business to take
into account the greater tax benefits of the proposed structure to BASF.
On September 6, 1999, Mr. Hughes spoke by telephone with Dr. Kohnle
regarding BASF's proposed change in the transaction structure. On the same date,
Mr. Hughes sent a letter to BASF requesting additional information regarding
BASF's proposed transaction structure and advising BASF that AMCOL would need
time to review its new proposal.
On September 8, 1999, Dr. Kohnle provided a revised term sheet setting
forth its proposed terms for the purchase of the SAP business. In the term
sheet, BASF indicated that it would raise its offer for the SAP business to $650
million, using an asset/stock purchase structure. The term sheet included
information regarding the acquisition structure, the scope of the due diligence
review and the treatment of employees of the SAP business.
On September 14, 1999, Mr. Hughes and Dr. Kohnle discussed by telephone the
tax impact of BASF's proposed change in the transaction structure and various
other matters. Mr. Hughes and Dr. Kohnle discussed the fact that the asset/stock
purchase structure was more tax efficient for BASF and less tax efficient for
AMCOL and its shareholders. Dr. Kohnle and Mr. Hughes discussed an adjustment to
the purchase price based on using an asset/stock purchase structure instead of
the spin-off/merger structure. On September 16, 1999, Dr. Kohnle sent a letter
to Mr. Hughes informing AMCOL that BASF was raising its offer to acquire the SAP
business to $660 million, using an asset/stock purchase structure.
On September 22, 1999, Mr. Hughes, Mr. Washow and Schroders met with
representatives of Company B. During the meeting, Company B expressed an
interest in acquiring the SAP business, although a specific purchase price was
not discussed.
On October 1, 1999, Mr. Hughes and Mr. Shelton met Dr. Kohnle, Dr.
Schultheiss and other BASF representatives in Frankfurt, Germany to negotiate
various terms of the proposed transaction.
On October 5 and 6, 1999, Mr. Shelton, AMCOL's legal counsel and Schroders
met with Dr. Schultheiss and other BASF representatives in New York to negotiate
the terms of an acquisition agreement and discuss various other aspects of the
proposed transaction, including lock-ups and break-up fees.
On October 6, 1999, Mr. Shelton and AMCOL's legal counsel met with
representatives of Company C to discuss whether a sale of the SAP business to
Company C using a spin-off/merger structure could be arranged to take advantage
of certain tax benefits available to Company C.
On October 8, 1999, Company B orally advised Schroders of its preliminary
indication of value for the SAP business. This indication of value was lower
than the price offered by BASF.
On October 8, 1999, AMCOL held a meeting of its Board of Directors. At this
meeting, Mr. Hughes advised the Board that Company B had withdrawn their
consideration of an acquisition of the SAP business. Company B indicated that
its interest in purchasing the SAP business at that time was not high because of
other pending transactions. AMCOL's management also reported to the Board of
Directors on the status of its discussions with BASF regarding the sale of the
SAP business.
On October 14, 1999, AMCOL held a meeting of its Board of Directors. At the
meeting, AMCOL's management advised the Board of Directors on the status of
discussions with BASF and the preliminary discussions with Company C regarding a
possible transaction. Schroders also gave a presentation to the Board of
Directors in which it described the current structure of the proposed
transaction, and reviewed its analysis of the value of the SAP business. After
Schroders' presentation, the Board of Directors discussed the various terms of
the proposed transaction with BASF.
On October 14, 1999, Mr. Hughes, Mr. Shelton and Schroders met with
representatives of Company C in Chicago, Illinois, to further discuss the
possibility of selling the SAP business to Company C using a spin-off/merger
structure.
On October 15, 1999, Mr. Hughes met with Dr. Kohnle and other BASF
representatives in London, England and advised him of AMCOL's preliminary
discussions with Company C regarding a possible sale of the SAP business to
Company C using a spin-off/merger structure and the possible resale of the SAP
business by Company C to BASF.
On October 20, 1999, AMCOL received a preliminary indication of interest
from Company C to acquire the SAP business using a spin-off/merger structure for
a purchase price of $614 million. The indication of interest was subject to
Company C obtaining financing, satisfactory due diligence, minimum valuations
for the net assets to be acquired, and obtaining applicable regulatory
approvals.
On October 20, 1999, Mr. Shelton, AMCOL's legal counsel and Schroders met
with Dr. Schultheiss and other BASF representatives in New York to further
negotiate the terms of an acquisition agreement and discuss various other
aspects of the proposed transaction.
On October 28, 1999, Dr. Kohnle informed Mr. Hughes by telephone that the
BASF Supervisory Board approved the decision of BASF to make an offer of $660
million for the SAP business.
On November 2 and 3, 1999, Mr. Hughes, Mr. Shelton, AMCOL's legal counsel
and Schroders met with Dr. Kohnle and other BASF representatives in New York to
discuss the terms of the proposed transaction.
On November 4, 1999, AMCOL held a meeting of its Board of Directors. At the
meeting, the Board discussed the terms of the proposed sale of the SAP business
to BASF. The Board also reviewed the status of the discussions with Company C.
After discussion, the Board instructed management to terminate further
discussions with Company C based on the Board's concerns relating to potential
adverse tax consequences of the proposed transaction, timing issues and concerns
over Company C's ability to finance and close the proposed transaction.
On November 8, 1999, Mr. Hughes received a call from Dr. Kohnle requesting
a meeting in New York on the next day to discuss the transaction. Later that
day, AMCOL's Board of Directors met to review and discuss the proposed sale of
the SAP business to BASF. At the meeting, Mr. Hughes reported BASF's request for
a meeting the next day in New York. Schroders then reviewed its efforts to
identify other potential buyers of the SAP business and delivered a presentation
to the Board and its opinion that the consideration to be received by AMCOL
pursuant to the purchase agreement is fair, from a financial point of view, to
AMCOL. AMCOL's legal counsel gave a presentation to the Board on the terms of
the purchase agreement and related documents. The Board discussed the terms of
the proposed sale of the SAP business to BASF and asked questions of Schroders
and AMCOL's legal counsel. Following this discussion, the Board determined that
the purchase agreement and the sale transaction are fair to, and in the best
interests of, AMCOL and its shareholders, approved the purchase agreement and
the sale transaction, and recommended approval of the purchase agreement by
AMCOL's shareholders.
On November 9, 1999, Mr. Hughes, Mr. Washow, Mr. Shelton, AMCOL's legal
counsel and Schroders met with Dr. Kohnle, Dr. Schultheiss, Dr. Jorg Buchmuller,
and other BASF executives in New York. The purpose of the meeting was to discuss
an adjustment to the proposed purchase price for the SAP business based on
BASF's further analysis of future obligations of the SAP business under certain
acrylic acid supply contracts. On the next day, Mr. Hughes and Dr. Kohnle spoke
by telephone and agreed to a $3.5 million downward adjustment in the purchase
price for the SAP business.
On November 22, 1999, AMCOL held a meeting of its Board of Directors. At
this meeting, AMCOL's legal counsel reported to the Board of Directors that the
agreement with BASF for the sale of the SAP business had been finalized and
advised the Board of the changes in the terms of the proposed sale of the SAP
business, including a $3.5 million downward adjustment to the purchase price.
Schroders then reported to the Board that it had reviewed the purchase price
adjustment and reaffirmed its previous opinion regarding the fairness of the
transaction and delivered its written opinion that the consideration to be
received by AMCOL pursuant to the purchase agreement is fair, from a financial
point of view, to AMCOL. After discussion, the Board affirmed its approval of
the purchase agreement.
On November 22, 1999, AMCOL and BASF executed the purchase agreement. The
transaction was publicly announced prior to the opening of the New York Stock
Exchange on November 23, 1999.
Opinion of Schroders
On November 22, 1999, Schroders rendered its opinion to AMCOL's Board of
Directors that, as of the date of such opinion, the cash consideration to be
paid to AMCOL by BASF for the SAP business was fair to AMCOL from a financial
point of view.
A copy of the Schroders opinion, which sets forth the assumptions made,
matters considered and limitations on the scope of review undertaken by
Schroders, is attached as Annex B to this proxy statement. The Schroders opinion
is directed only to the fairness, from a financial point of view, of the cash
consideration to be paid to AMCOL by BASF for the SAP business. The Schroders
opinion was provided at the request and for the information of AMCOL's Board of
Directors in evaluating the consideration to be paid to AMCOL and does not
constitute a recommendation to any shareholder to vote in favor of the
transactions contemplated by the purchase agreement. AMCOL's shareholders should
read the Schroders opinion carefully and in its entirety for information with
respect to the procedures followed, assumptions made, matters considered and
limitations on the review undertaken by Schroders in rendering the Schroders
opinion. Schroders has consented to the references to Schroders and the
Schroders opinion in this proxy statement, and to the attachment of the
Schroders opinion to this proxy statement as an appendix.
In arriving at the Schroders opinion, Schroders:
- reviewed certain publicly available business and financial
information relating to the SAP business;
- reviewed certain unaudited historical financial and operating
information provided by AMCOL relating to the SAP business;
- reviewed certain other information, including financial and
operating forecasts of the SAP business, provided by AMCOL;
- held discussions with senior management and AMCOL representatives
regarding the business, operations and prospects of the SAP
business;
- reviewed a draft of the purchase agreement dated November 19,
1999;
- performed various financial analyses, as Schroders deemed
appropriate, using generally accepted analytical methodologies,
including:
(a) the application to the financial results of the
SAP business of the public trading multiples of companies which
Schroders deemed comparable;
(b) the application to the financial
results of the SAP business of the multiples reflected in recent
acquisition transactions which Schroders deemed comparable;
(c) a discounted cash flow analysis of the SAP business'
financial forecasts; and
(d) a leveraged buyout analysis of the SAP business'
financial forecasts;
- considered the results of solicitations of interest from third
parties regarding potential business combinations involving the
SAP business; and
- performed such other analyses, studies, inquiries and
investigations as Schroders deemed appropriate.
In its review and analysis and in formulating the Schroders opinion,
Schroders:
- assumed and relied upon the accuracy and completeness of all
information supplied or otherwise made available to it by AMCOL
or obtained by Schroders from other sources, and upon AMCOL's
assurance that it was not aware of any information or facts that
would make the information provided to Schroders incomplete or
misleading;
- did not attempt to independently verify any of such information;
- did not undertake an independent appraisal of the assets or
liabilities (contingent or otherwise) of AMCOL, nor was Schroders
furnished with any such appraisals;
- with respect to the projected financial information referred to
above, was advised by AMCOL, and Schroders assumed, without
independent investigation, that they were reasonably prepared and
reflected the best estimates and judgments of the expected future
financial performance of the SAP business; and
- expressed no opinion with respect to such projected financial
statements.
The Schroders opinion was necessarily based upon financial, economic,
market and other conditions as they existed and could be evaluated by Schroders
on the date thereof. Schroders disclaimed any undertaking or obligation to
advise any person of any change in any fact or matter affecting the Schroders
opinion which may come or be brought to its attention after that date of the
Schroders opinion unless specifically requested by AMCOL to do so.
The Schroders opinion does not constitute a recommendation as to any action
AMCOL's Board of Directors or any shareholder of AMCOL should take in connection
with the purchase agreement or any aspect thereof or alternatives thereto.
In rendering the Schroders opinion, Schroders was not engaged as an agent
or fiduciary of AMCOL's shareholders or of any other third party. The Schroders
opinion related solely to the fairness, from a financial point of view, of
consideration to be paid to AMCOL in the transaction. Schroders expressed no
opinion therein as to the structure, terms or effects of any other aspect of the
transactions contemplated by, or provisions of, the purchase agreement or any of
the agreements or instruments delivered pursuant thereto.
The following is a summary of the material financial analyses performed by
Schroders in arriving at the Schroders opinion and was provided by Schroders for
inclusion herein.
Selected Comparable Speciality Chemicals and Materials Companies Analysis.
Schroders compared selected historical and projected financial and operating
data of the SAP business to the corresponding data of a group of publicly traded
companies that Schroders deemed to be reasonably comparable to the SAP business.
In determining the appropriate comparable companies, Schroders considered a
variety of factors, including market capitalization, business focus and
end-markets, revenues, EBITDA and EBIT. These companies, or the Comparable
Companies, included AEP Industries; Applied Extrusion Technologies; BASF AG;
Cabot Corp.; Calgon Carbon Corp.; Polymer Group Inc.; and Tredegar Industries.
Schroders calculated multiples of enterprise value, which is defined in the
Schroders opinion as market value of equity plus total debt less cash and cash
equivalents, to latest twelve months, or LTM, earnings before interest, taxes,
depreciation, amortization, or EBITDA, 1999 estimated EBITDA and 2000 estimated
EBITDA. Schroders also calculated multiples of enterprise value to LTM earnings
before interest and taxes, or EBIT, 1999 estimated EBIT and 2000 estimated EBIT.
For each of these multiples, Schroders determined a selected multiple range
based on the mean, adjusted mean and range of values. The results of this
analysis are set forth in the tables below:
Multiple to
LTM EBITDA 1999E EBITDA 2000E EBITDA
Mean 7.4x 6.8x 6.1x
Mean excluding high/low 7.6x 6.8x 6.2x
Selected multiple range 6.5x - 8.5x 6.0x - 8.0x 5.0x - 7.0x
Multiple to
LTM EBIT 1999E EBIT 2000E EBIT
Mean 12.5x 10.8x 9.4x
Mean excluding high/low 11.3x 10.6x 9.3x
Selected multiple range 10.5x - 12.5x 9.5x - 11.5x 8.0x - 10.0x
As the above ranges represent trading multiples for publicly traded
companies, Schroders then applied control premiums of 30%, 35% and 40% to the
selected multiple ranges to determine the implied private market valuation for
the SAP business. This range of control premiums was based on a review of
premiums paid in recent public merger and acquisition transactions. The
following table sets forth the implied enterprise value ranges for the SAP
business based upon the foregoing analysis:
(% millions) Implied Valuation Based on
30% Control Premium 35% Control Premium 40% Control Premium
Selected Enterprise Value Range $550 - $700 $570 - $725 $590 - $750
Comparable Transactions Analysis. Schroders considered the terms, to the
extent publicly available, of selected transactions reasonably comparable to the
sale transaction, or the comparable transactions, and sought to compare the
consideration to be paid to AMCOL with the consideration involved in such
transactions. Schroders selected the comparable transactions based on a variety
of factors, including the date, size, profitability, range of product offerings
and types of end-use markets of the target companies. The comparable
transactions and their pertinent dates were as follows:
- The acquisition by Rhodia SA of Albright & Wilson plc (completed
July 1999).
- The acquisition by Suez Lyonnaise des Eaux of Imetal SA's Calgon
Water Treatment (completed June 1999).
- The acquisition by Eastman Chemical Company of Lawter
International, Inc. (completed June 1999).
- The Tredegar Industries' acquisition of Exxon Chemical Company's
Films Business (completed May 1999).
- Laporte plc's acquisition of Inspec Group plc (completed
September 1998)
- BBA Group plc's acquisition of International Paper Co.'s Veratec
Nonwovens Business (completed in August 1998).
- Huntsman Packaging Corporation's acquisition of Blessings
Corporation (completed in May 1998).
- B.F. Goodrich Company's acquisition of Freedom Chemical Company
(completed in March 1998).
- Polymer Group's acquisition of Dominion Textile Inc.'s Nonwovens
Business (completed in February 1998).
- Elementis plc's acquisition of Rheox Inc. from NL Industries
Inc.(completed in January 1998).
- Sentrachem Ltd.'s acquisition of Hampshire Chemical Co.
(completed in September 1995) .
- Witco Corporation's acquisition
of OSi Specialties Inc. (completed in October 1995).
Schroders calculated the multiple of enterprise value, which in this case
is defined in the Schroders opinion as the purchase price of equity plus debt
assumed less cash, to the target company's EBITDA for the twelve months
preceding the transaction. The mean enterprise value to LTM EBITDA multiple for
the comparable transactions was 9.7x. The consideration to be paid by BASF for
the SAP business implies transaction multiples of 10.6x LTM EBITDA and 9.9x 1999
estimated EBITDA. Schroders determined a selected multiple range of 9.0x to 11.0
x based upon the mean multiple and the range of multiples of the comparable
transactions. The following table sets forth the implied enterprise value ranges
for the SAP business based upon the foregoing analysis:
Multiple Range for Comparable Implied Enterprise Value
Transactions ($ millions)
LTM EBITDA 9.0x - 11.0x $555.3 - $678.7
1999E EBITDA 9.0x - 11.0x $595.8 - $728.2
Discounted Cash Flow Analysis. Schroders performed discounted cash flow
analyses of the projected free cash flows of the SAP business. Free cash flows
are defined as after-tax operating profit, plus depreciation and amortization,
less capital expenditures and changes in working capital. The discounted cash
flow analyses of the SAP business were determined by adding the present value of
the projected free cash flows of the SAP business, and the present value of the
estimated terminal value of the SAP business.
Schroders performed discounted cash flow analysis of the SAP business based
on projections provided by AMCOL's management, including sensitivity cases in
which adjustments were made to the financial forecast and terminal value
calculation as follows:
Projections Terminal Value / Discount Period
Management projections as provided Free cash flows were calculated using the SAP business
projections from 2000 to 2008. The terminal value of the SAP
business was determined by applying exit multiples ranging
from 6.0x to 8.0x to average EBITDA from 2004 through 2008
Alternative projections which incorporated a 10% Free cash flows were calculated using the SAP business
reduction in variable margin, or a 7.5% increase projections from 2000 to 2005. The terminal value of the SAP
in acrylic acid pricing, the key raw material for business was determined by applying exit multiples ranging
the SAP business from 6.0x to 8.0x to 2005 EBITDA
Estimated cash flows and terminal values were discounted at rates ranging
from 9.0% to 11.0%. These discount rates were based on the weighted average cost
of capital for AMCOL and the comparable companies. Based on such terminal value
multiples and discount rates, the implied
enterprise values for the SAP business are presented below:
Implied Enterprise Value Range
Description ($ millions)
Management case projections through 2008 $534.6 - $728.5
Alternative case projections through 2008 $418.7 - $578.0
Management case projections through 2005 $502.3 - $677.8
Alternative case projections through 2005 $391.1 - $534.6
Leveraged Buyout Analysis. Schroders performed a leveraged buyout analysis
on the SAP business to determine what a potential financial investor could
afford to pay for the SAP business. This analysis was based on assumed interest
rates of 8.75% for bank debt, 12.0% for senior subordinated debt and current
minimum acceptable debt coverage ratios. This analysis also assumed that a
financial investor would require a minimum internal rate of return, or IRR, of
20% to 25% over the term of its investment. Based upon these assumptions,
Schroders determined that a financial investor would be able to pay up to $483
million (assuming a 25% IRR) and $513 million (assuming a 20% IRR) for the SAP
business.
The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant quantitative and
qualitative methods of financial analysis and the application of those methods
to the particular circumstances and, therefore, is not readily susceptible to
partial analysis or summary description. In arriving at its opinion, Schroders
considered the results of all its analyses as a whole and did not attribute any
particular weight to any analysis or factor considered by it. Subject to the
matters set forth in the Schroders opinion, the judgments made by Schroders as
to its analyses and the factors considered by it caused Schroders to be of the
opinion, as of the date of the Schroders opinion, that the consideration to be
paid by BASF was fair, from a financial point of view, to AMCOL. Schroders'
analyses must be considered as a whole and considering any portion of such
analyses and of the factors considered, without considering all analyses and
factors, could create a misleading or incomplete view of the process underlying
the Schroders opinion.
Any estimates contained in Schroders' analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those contained in such analyses.
Estimated values do not purport to be appraisals or to reflect the prices at
which businesses or companies may be sold in the future, and such estimates are
inherently subject to uncertainty.
Schroders is an internationally recognized investment banking firm with
experience in the valuation of businesses and their securities in connection
with mergers; acquisitions; sales and distributions of listed and unlisted
securities; private placements; and valuations for corporate and other purposes.
The extensive experience of Schroders' chemical investment banking group in
providing corporate finance and advisory services to companies in the chemical
industry was a significant factor in AMCOL's decision to select Schroders to be
its financial advisor for the transaction.
Schroders, in the past, has performed financial advisory services for
AMCOL. Schroders may provide investment banking or financial advisory services
for AMCOL in the future.
Pursuant to a letter agreement dated July 26, 1999, AMCOL has paid to
Schroders a $150,000 retainer fee, and a fee of $850,000 for the Schroders
opinion furnished to AMCOL and has agreed to pay, contingent upon consummation
of the transaction, a cash success fee equal to 0.5% of the aggregate
consideration to be received by AMCOL in the transaction. The retainer fee and
the fairness opinion fee will be credited against this success fee. In addition,
AMCOL has agreed to indemnify Schroders against certain expenses and liabilities
in connection with its engagement. The fairness opinion fee was not conditioned
upon the conclusion reached by Schroders as to the fairness of the
consideration, nor upon the ultimate consummation of the transaction.
Recommendation of the Board
AMCOL's Board of Directors has unanimously approved the purchase agreement
and the sale transaction, and believes that the purchase agreement and the sale
transaction are fair to, and in the best interests of, AMCOL and its
shareholders. The Board of Directors recommends that you vote "FOR" the approval
of the sale transaction.
Reasons for the Sale Transaction
In reaching its decision to recommend and approve the purchase agreement,
AMCOL's Board of Directors consulted with its advisors and considered a number
of factors, including the following:
- Information regarding the financial performance, business operations,
capital requirements and future prospects of the SAP business. The
Board reviewed the likelihood of realizing a long-term value equal to
or greater than the value offered by BASF if the SAP business was not
sold. The Board determined that the ability to obtain such value would
depend on numerous factors, many of which were speculative or
uncertain. These factors included the investment of significant
amounts of capital and the continued availability of acrylic acid at
reasonable prices. In light of these uncertainties, the Board
determined that the interests of AMCOL's shareholders were better
served by the sale of the SAP business to BASF . - The terms of the
purchase agreement, including the price, the proposed structure of the
sale transaction and BASF's financial strength and the fact that
financing is not a condition to the sale transaction.
- The process engaged by AMCOL's management and Schroders which included
discussions with potential acquirors of the SAP business, and the view
of AMCOL's Board of Directors, based in part on Schroders'
presentation, that it was unlikely a superior offer for the SAP
business would arise and be consummated.
- Schroders' presentation and written opinion that, as of the date of
the opinion and based upon and subject to certain matters stated
therein, the cash consideration to be received by AMCOL pursuant to
the sale transaction is fair to AMCOL from a financial point of view.
The full text of Schroders' opinion is attached hereto as Annex B.
Shareholders are urged to read the opinion in its entirety.
- Current industry, economic and market conditions in the superabsorbent
polymers industry, including (a) the fact that AMCOL is one of several
superabsorbent polymers producers which does not also produce acrylic
acid, the primary raw material used in the production of
superabsorbent polymers, (b) the increasing vertical integration of
the superabsorbent polymers industry as competing manufacturers of
superabsorbent polymers have become suppliers of acrylic acid, and (c)
the decrease in available sources of acrylic acid which are not
competitors of the SAP business.
- AMCOL management's belief that, although acrylic acid production
presently exceeds demand, the SAP business may become increasingly
dependent upon its competitors for supplies of acrylic acid and that
in periods of low supply, such dependence may have a significant
negative impact on the profitability of the SAP business. Any decrease
in the profitability of the SAP business may decrease the value a
potential purchaser would assign to the SAP business.
- AMCOL's review of alternatives to a sale of the SAP business,
including (a) acquiring an acrylic acid supplier, (b) developing the
internal capacity to produce acrylic acid, or (c) entering into a
strategic relationship with an acrylic acid supplier, and the costs
and capital expenditures associated with each alternative. The Board
determined that significant capital expenditures would be required to
acquire an acrylic acid supplier or develop the capacity to produce
acrylic acid. In addition, the Board concluded that AMCOL did not
currently possess the technology or resources necessary to produce
acrylic acid.
- AMCOL's ability to adopt a plan of partial liquidation and to
distribute a substantial portion of the net proceeds from the sale
transaction to AMCOL's shareholders.
- That the purchase agreement permits AMCOL to furnish nonpublic
information to, and to participate in negotiations with, any third
party that has submitted an unsolicited acquisition proposal, if the
Board determines in good faith that such acquisition proposal is, or
may reasonably be expected to lead, to a superior proposal, and the
purchase agreement permits AMCOL's Board of Directors to change its
recommendation with respect to the sale transaction and to terminate
the purchase agreement in certain circumstances in the exercise of its
fiduciary duties.
- The absence of any lock-up arrangements requiring any shareholders of
AMCOL to vote in favor of the sale transaction.
- The termination provisions of the purchase agreement, which under
certain circumstances could obligate AMCOL to pay a termination fee of
$20 million to BASF and to reimburse BASF for its actual expenses
incurred in connection with the transaction, up to $3 million, and the
Board's belief that such fees and expense reimbursement provisions
would not deter a higher offer for the SAP business.
The Board also considered the following facts, risks and uncertainties
associated with the sale transaction:
- The asset/stock purchase structure of the sale transaction is not as
tax efficient to AMCOL as the spin-off/merger structure. AMCOL will
recognize gain on the sale of the SAP business and the AMCOL
shareholders will recognize a gain or loss on any distribution by
AMCOL of the proceeds from the sale transaction. The Board recognized
that BASF was not willing to agree to the spin-off/merger structure
and increased the purchase price to mitigate the adverse tax
consequences of the asset/stock purchase structure.
- Under the purchase agreement, AMCOL has agreed to indemnify BASF for
the breach of its representations and warranties contained in the
purchase agreement and other matters. If the proceeds of the sale
transaction are distributed to AMCOL's shareholders, AMCOL would be
required to fund the payment of any indemnification claims by BASF
under the purchase agreement or otherwise out of its then existing
working capital and cash flows from its continuing businesses.
The foregoing addresses the material information and factors considered by
AMCOL's Board of Directors in its consideration of the sale transaction. In view
of the variety of factors and the amount of information considered, AMCOL's
Board of Directors did not find it practicable to provide specific assessments
of, quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. The determination to recommend that
AMCOL's shareholders approve the purchase agreement was made after consideration
of all of the factors taken as a whole. In addition, individual members of the
Board may have given different weights to different factors.
Use of Proceeds
AMCOL expects to receive approximately $656.5 million in gross proceeds
from the sale transaction. See "The Purchase Agreement - Purchase Price." From
these gross proceeds, AMCOL intends to repay certain indebtedness of the SAP
business (totaling approximately $44.3 million as of December 31, 1999) and will
pay various transaction related costs, including estimated legal, accounting and
advisory fees of $7.5 million, estimated employee bonuses of $3.6 million,
estimated filing, printing and other costs of $1.3 million, estimated penalties
for the prepayment of debt of $1.3 million, and estimated corporate income taxes
of $208.4 million.
In connection with the sale transaction, AMCOL currently intends to adopt a
plan of partial liquidation pursuant to which AMCOL will distribute pro rata to
its shareholders a significant portion of the net proceeds from the sale
transaction after payment of the expenses described above. We cannot assure you
that any plan of partial liquidation will be adopted or that any distribution
will be made. The Board of Directors will consider the facts and circumstances
existing after the completion of the sale transaction to determine whether a
distribution in partial liquidation is in the best interests of AMCOL's
shareholders at that time and the timing and amount of any such distribution.
Any plan of partial liquidation must be approved by the Board, but does not
require the approval of AMCOL's shareholders. Shareholders are not being asked
to vote on or approve any plan of partial liquidation.
AMCOL currently expects to distribute between $14.00 and $14.50 per share.
See "Selected Consolidated Historical and Pro Forma Financial Data." This amount
is based upon the selected consolidated pro forma financial data, the expected
gross proceeds of the sale transaction, and estimated transaction related costs.
The actual amount of any distribution is expected to be determined after the
closing of the sale transaction. Accordingly, shareholders are advised that the
actual amount of any distribution to shareholders may be substantially different
from the amount indicated above.
If the sale transaction is consummated, AMCOL's shareholders will retain
their equity interest in AMCOL. The sale transaction will not result in any
changes in the rights of AMCOL's shareholders.
Accounting Treatment
Upon consummation of the sale transaction, the entities comprising the SAP
business will be treated as a discontinued operation of AMCOL. All prior periods
will be reclassified to show the operations of the entities comprising the SAP
business separately from the continuing operations of AMCOL. The gain on the
sale transaction will be calculated as the excess of the consideration received
by AMCOL plus liabilities assumed by BASF over the net book value of the assets
sold, net of transaction costs and applicable income taxes. The gain will be
recorded as a separate component of discontinued operations in AMCOL's
consolidated financial statements.
Certain Federal Income Tax Consequences
The following summary describes material United States federal income tax
consequences to AMCOL and its shareholders from the sale transaction and the
proposed distribution to AMCOL's shareholders, which would result if the plan of
partial liquidation were adopted. It is based upon the Code, Treasury
Regulations promulgated and proposed thereunder, administrative pronouncements
and judicial decisions, all of which are subject to change (either prospectively
or retroactively), which changes could materially affect the tax consequences
described herein.
No rulings have been or will be requested from the Internal Revenue
Service, or the IRS, as to the matters discussed herein and, as to some such
matters, such a ruling might not be obtainable even if requested. Accordingly,
no assurance can be given that the IRS will not challenge the federal income tax
treatment of certain matters discussed herein, which challenge, if any, might be
upheld by the courts.
This summary is necessarily general in nature, and does not address all of
the tax consequences that may be relevant to particular shareholders in light of
the personal circumstances, or to certain types of shareholders (such as certain
financial institutions, dealers in securities or commodities, insurance
companies, tax-exempt organizations, or persons who hold shares as a position in
a straddle). In particular, the discussion applies only to a shareholder who is
a United States resident for federal income tax purposes. This summary further
assumes that all shares of stock are held as "capital assets," and thus may not
be applicable as to shares acquired as compensation (including shares acquired
upon the exercise of options). This summary also does not address the state,
local or foreign tax consequences to a shareholder of the proposed transaction.
Accordingly, each shareholder is urged to consult with and to obtain the
advice of his or her own tax advisor as to the tax consequences of the proposed
transaction as to such shareholder.
Sale Transaction. AMCOL will recognize gain on the sale of the SAP business
in the sale transaction, but no gain will be recognized by AMCOL's shareholders
on the sale transaction. AMCOL and BASF will make a joint election under Code
Section 338(h)(10). Under this election, AMCOL will be deemed to have sold all
of the assets of the SAP business (rather than the shares of Chemdal US) to BASF
for the purchase price. AMCOL's gain or loss will be determined based upon the
amount of the sales price allocated to each asset and AMCOL's or its
subsidiary's tax basis for each asset. The sale transaction may also result in
foreign, state or local income, franchise or sales and use tax liabilities in
some or all of the foreign countries, states or local tax jurisdictions in which
AMCOL or a subsidiary files returns.
Shareholder Distribution. The proposed distribution by AMCOL of proceeds
from the sale transaction will be treated by AMCOL as a distribution in partial
liquidation of AMCOL under Code Section 302(b)(4). No shares will be exchanged
in the distribution, although non-corporate shareholders will be deemed to have
transferred a portion of their common stock to AMCOL in exchange for the amount
received in the distribution. For federal income tax purposes, a non-corporate
shareholder will recognize gain or loss on such redemption equal to the
difference between the amount of cash received, and such shareholder's tax basis
in the common stock considered to be redeemed. The number of shares considered
to be redeemed shall be determined by multiplying the number of shares held by
such non-corporate shareholder by the fraction that the total amount distributed
bears to the total value of the common shares immediately prior to the
distribution. Any gain or loss would be considered long term capital gain or
loss if the stock deemed to have been exchanged has been held for more than one
year and short-term gain or loss if the stock was owned for less than one year.
If the redemption does not qualify as one which is made in partial
liquidation of AMCOL, then the entire amount of the cash received by a
non-corporate shareholder will be treated as a dividend in the year of the
redemption to the extent that AMCOL has current or accumulated earnings and
profits. Such dividend will be includable in the shareholder's gross income as
ordinary income. If the amount of the distribution exceeds AMCOL's current and
accumulated earnings and profits, such excess will first be treated as a
non-taxable return of capital to the shareholder to the extent of the
non-corporate shareholder's basis in AMCOL shares, with any balance being
treated as capital gain from the sale or exchange of such shares.
Because "partial liquidation" treatment under Code Section 302(b)(4) only
obtains with respect to non-corporate shareholders, the deemed exchange
treatment described above will not apply to corporate shareholders. A domestic
corporate shareholder will be treated as having received a dividend to the
extent of the current and accumulated earnings and profits of AMCOL. However, to
the extent the distribution received by the corporate shareholder is treated as
a dividend, such dividend income will then generally be in part offset by the
corporate shareholder by a dividends-received deduction; subject, however, among
other limitations, to its having satisfied the minimum holding period
requirements, and possible reduction in the amount of such dividend-received
deduction in and to the extent that the common stock owned by it is considered
to be "debt financed."
In addition, and irrespective of a corporate shareholder's holding period
for its common stock, a dividend received in partial liquidation of AMCOL will
be characterized as an "extraordinary dividend" under Code Section 1059, with
the result that the portion of such dividend which qualifies for the
dividend-received deduction will reduce the corporate shareholder's tax basis in
its common stock (but not below zero). If the non-taxed portion of the dividend
exceeds the corporate shareholder's tax basis in the common stock, such excess
will be recognized as gain from the sale or exchange of the common stock in the
year the extraordinary dividend is received. If the amount of the distribution
exceeds AMCOL's current and accumulated earnings and profits, such excess will
first be treated as a non-taxable return of capital to the shareholder to the
extent of the shareholder's basis in AMCOL shares, with any balance being
treated as capital gain from the sale or exchange of such shares.
Interests of Certain Persons
The Compensation Committee of the Board of Directors has granted bonuses to
certain of AMCOL's employees in recognition of their contribution to the
development and success of the SAP business. The grant of these bonuses creates
a different and additional interest in the sale transaction for these employees
that could influence their support of the sale transaction. As a result of these
bonuses, these employees could be more likely to support the sale transaction
than if they were not granted the bonuses. The directors or executive officers
of AMCOL listed below were granted bonuses in the following amounts: John
Hughes, Chairman, Chief Executive Officer and Director, $_________; Lawrence E.
Washow, President, Chief Operating Officer and Director, $_________; Paul G.
Shelton, Senior Vice-President, Chief Financial Officer and Director,
$_________; and Gary L. Castagna, Vice President of AMCOL and President of
Chemdal International Corporation, $_________. In addition, seven key employees
of the SAP business were granted bonuses in the aggregate amount of $__________.
In order to be eligible to receive these bonuses, the relevant employees may not
terminate their employment with AMCOL prior to closing of the sale transaction.
In addition, these bonuses are contingent upon the closing of the sale
transaction.
In addition to approving the sale transaction, AMCOL's shareholders are
being asked to adopt amendments to AMCOL's 1993 Stock Plan and AMCOL's 1998
Long-Term Incentive Plan which provide for the acceleration of vesting of all
options held by employees who will become employees of BASF. If these amendments
are approved, as of April __, 2000, options to purchase___________ shares of
AMCOL's common stock held by Gary Castagna will become immediately vested. The
exercise prices of the relevant options held by Mr. Castagna range from
$__________ to $__________. Based on the closing sale price of AMCOL's common
stock on April __, 2000, as reported by the New York Stock Exchange, the
aggregate value of the benefit to be received by Mr. Castagna upon the
acceleration of the relevant options is $___________. The vesting of these
options is contingent upon the receipt of shareholder approval of the purchase
agreement, but is not contingent upon closing the sale transaction or the
termination of Mr. Castagna's employment with AMCOL. See "Approval of Amendments
to AMCOL's 1993 Stock Plan and 1998 Long-Term Incentive Plan - General."
If the Board of Directors approves the proposed distribution in partial
liquidation, the Compensation Committee will be required pursuant to the Code to
adjust the number of shares subject to incentive stock options outstanding under
AMCOL's 1983 Incentive Stock Option Plan, 1993 Stock Plan and 1998 Long-Term
Incentive Plan, and their exercise price. These adjustments are intended to
preserve the ratio of the exercise price of the option to the fair market value
of AMCOL's common stock. In accordance with the requirements of the Code, the
number of shares subject to incentive stock options would be increased to the
product of (A) the ratio of the pre-distribution price of AMCOL common stock to
the post-distribution price of AMCOL common stock, and (B) the number of shares
subject to incentive stock options, rounded down to the next whole number. The
exercise price would be reduced to the product of (A) the ratio of the
post-distribution price of AMCOL common stock to the pre-distribution price of
AMCOL common stock, and (B) the original option price, rounded down to the next
whole cent. The Compensation Committee intends to make similar adjustments to
non-qualified stock options outstanding under those plans or under AMCOL's 1987
Non-Qualified Stock Option Plan. As an example, if the pre-distribution price of
AMCOL common stock were $_________ per share and the post-distribution price of
AMCOL common stock were $_________ per share and there were ___________ stock
options outstanding on the distribution date, then the number of options
outstanding would be increased to the product of _____________ and
______________, or _____________ shares. If the exercise price were $________,
the exercise price would be reduced to the product of ________ and ________, or
$________. Once these adjustments are made, the shares subject to outstanding
options will constitute a significant portion of AMCOL's outstanding shares of
common stock. Assuming the stock prices set forth above immediately after the
distribution and the required adjustment, shares subject to outstanding options
would constitute _____________ out of ___________ outstanding shares of AMCOL
common stock, or _____%.
No Appraisal Rights
Under Delaware law, AMCOL's shareholders are not entitled to appraisal
rights with respect to the proposed sale of the SAP business or any transaction
contemplated by the purchase agreement.
THE PURCHASE AGREEMENT
The following discussion of the material terms and conditions of the
purchase agreement is qualified in its entirety by reference to the provisions
of the purchase agreement, which is attached to this proxy statement as Annex A
and incorporated herein by reference.
Purchased Shares and Assets
Under the terms of the purchase agreement, AMCOL and its subsidiaries, or
the sellers, will sell to BASF or one or more of its affiliates all of the
issued and outstanding capital stock of Chemdal US and Chemdal Asia, or the
shares, and, except for some excluded assets, all assets of the sellers which
are primarily related to the SAP business, or the SAP assets. The SAP assets
include the following:
- owned real property;
- furniture, fixtures, equipment and other tangible personal
property;
- inventories;
- receivables;
- books and records;
- intellectual property and other intangible personal property;
- customer lists and sales-related materials;
- contracts, licenses, leases, sales and purchase orders and
other similar commitments; and
- all permits and licenses.
Specifically excluded from the SAP assets are the following:
- all cash and cash equivalents;
- except as otherwise provided in the purchase agreement, all
assets and properties not primarily related to or used
in the conduct of the SAP business (including the assets used
primarily in the Poly-Pore business);
- the name "AMCOL" and all related trademarks, logos, and domain
names;
- all intellectual property rights which do not primarily relate
to the SAP business;
- certain tax refunds and credits for periods prior to the
closing; and
- rebates and refunds due to AMCOL and the other sellers
pursuant to some supply agreements.
Assumed Liabilities
BASF or one of its affiliates will assume all debts, obligations,
contracts, commitments, agreements and liabilities of the sellers primarily
related to the conduct of the SAP business. The sellers will retain
responsibility for the payment of any debts, obligations, contracts,
commitments, agreements or liabilities of the sellers not primarily related to
the conduct of the SAP business, including the following:
- taxes relating to periods prior to the closing;
- liabilities relating to assets excluded from the SAP assets;
- liabilities arising from the employment or termination of any
employees prior to the closing;
- any indebtedness for borrowed money other than any assumed
intercompany indebtedness;
- liabilities relating to the conduct of the SAP business
prior to the closing to the extent the existence of such
liability constitutes a breach by the sellers of any of
their representations and warranties under the purchase
agreement;
- any liabilities relating to the conduct of the businesses
conducted by AMCOL or its subsidiaries other than the SAP
business occurring or existing before or after the closing;
and
- subject to certain exceptions, any losses or liabilities
pursuant to any environmental law arising from or related
to any action, event, circumstance or condition related to
the SAP business and occurring or existing on or before
the closing.
Purchase Price
The purchase price for the shares and the SAP assets is $628 million in
cash, less the amount of any outstanding intercompany indebtedness of the SAP
business as of the closing, subject to certain additional adjustments as
described below. In addition, BASF will pay $28.5 million to Chemdal Limited as
consideration for entering into the Acrylic Acid Supply Agreement described
below.
The purchase price is subject to adjustment based on the aggregate amount
of the working capital of the SAP business as of the closing, consisting of the
amount of the accrued current trade accounts receivables (net of allowances),
Chemdal Asia value added tax receivables and inventories, less accounts payable
and accrued current liabilities of the SAP business. Within thirty business days
following the closing, AMCOL is required to deliver to BASF a statement of
working capital of the SAP business as of the closing. If the statement of
working capital is acceptable to BASF, the amount of the purchase price will be
adjusted by the amount of the difference between the amount of working capital
of the SAP business as of the closing and $34,175,000, and a cash payment in the
amount of such difference will be made by AMCOL or BASF, as the case may be, to
the other party within ten business days following the final determination of
the statement of working capital. If BASF objects to the statement of working
capital, the parties will attempt to resolve the dispute in good faith and if
they are unable to resolve the dispute, the matter will be submitted to an
independent accounting firm for binding resolution.
The Closing
Subject to the terms of the purchase agreement, the closing of the sale
transaction will take place on the tenth business day following the date on
which all of the conditions to each party's obligations under the purchase
agreement have been satisfied or waived, or on such other date as the parties
may mutually agree, or the closing date. It is currently anticipated that the
closing will occur in the second quarter of 2000.
Representations and Warranties
The purchase agreement contains various representations and warranties of
AMCOL and the other sellers regarding the SAP business, including
representations and warranties regarding the following:
- the organization, authority and qualification of the sellers,
Chemdal US and Chemdal Asia;
- capitalization and ownership of Chemdal US and Chemdal Asia;
- no conflicts;
- consents and approvals;
- accuracy of financial statements;
- absence of undisclosed liabilities;
- receivables and inventories;
- the absence of certain changes, events and conditions;
- material litigation;
- compliance with laws;
- environmental matters;
- material contracts;
- intellectual property;
- real property and tangible personal property;
- employee benefit matters;
- labor matters and key employees;
- taxes; and
- insurance.
The purchase agreement also contains representations and warranties of
BASF, including representations and warranties as to the organization and
authority of BASF; no conflicts; consents and approvals; material litigation;
and financial statements.
For a description of the survivability of the representations and
warranties and related indemnification, see "Survival of Representations and
Warranties; Indemnification."
Conduct of Business
During the period from the date of the purchase agreement to the closing
date, AMCOL will, and will cause Chemdal US, Chemdal Asia and the other sellers
to, conduct its business in the ordinary course and consistent with past
practice, including to
- continue its advertising and promotional activities, and pricing and
purchasing policies, in accordance with past practice;
- not intentionally shorten or lengthen the customary payment cycles for
any of its payables or receivables;
- use all reasonable efforts consistent with past practice to (A)
preserve intact its business organizations and the business
organization of the SAP business, (B) keep available to BASF the
services of the employees of the SAP business, (C) continue in force
without material modification all existing insurance policies, and (D)
preserve the current relationships with its customers and suppliers;
- exercise, subject to BASF's approval, any renewal rights under leases;
and
- not engage in any practice, take any action, fail to take any action
or enter into any transaction which could cause any representation or
warranty of the sellers in the purchase agreement to be untrue or
result in a breach of any covenant made by the sellers in the purchase
agreement.
AMCOL also agreed that, prior to closing, neither Chemdal US, Chemdal Asia
nor the sellers with respect to the SAP business will
- incur any indebtedness;
- redeem any of its capital stock or declare, make or pay any dividends
or distributions (whether in cash, securities or other property) to
the holders of capital stock of Chemdal US or Chemdal Asia;
- make any material changes in the customary methods of operations of
Chemdal US, Chemdal Asia or the sellers;
- merge with, enter into a consolidation with or acquire an interest in
any person or acquire a substantial portion of the assets or business
of any person or any division or line of business thereof, or
otherwise acquire any material assets other than in the ordinary
course of business consistent with past practice;
- except as directly related to the construction of the Chemdal Asia
facility in Thailand, issue any sales orders or otherwise agree to
make any purchases involving exchanges in value in excess of $500,000
individually;
- sell, transfer, lease, sublease, license or otherwise dispose of any
properties or assets, real, personal or mixed (including, without
limitation, leasehold interests and intangible assets), other than in
the ordinary course of business consistent with past practice;
- grant any increase, or announce any increase, in the wages, salaries,
compensation, bonuses, incentives, pension or other benefits payable
by Chemdal US, Chemdal Asia or any seller to any of the employees of
the SAP business or establish or increase or promise to increase any
benefits under any employee benefit plan, in either case except as
required by law, or any collective bargaining agreement, or involving
ordinary increases consistent with the past practices, or a
contractual obligation existing on the date of the purchase agreement;
or
- agree to employ any new hire on terms that would pay any such person
an annual base salary in excess of $50,000 or annual aggregate
compensation in excess of $75,000.
No Solicitation
AMCOL has agreed that between the date of the purchase agreement and the
earlier of the closing or the termination of the purchase agreement, none of
AMCOL, Chemdal US, Chemdal Asia, the other sellers, nor any of their affiliates,
officers, directors, representatives or agents will solicit, initiate, consider,
encourage or accept any acquisition proposals from any person, or except as
required by the fiduciary duties of AMCOL's Board of Directors, participate in
any discussions, conversations, negotiations or other communications regarding,
or furnish to any other person any information with respect to, or otherwise
cooperate in any way, assist or participate in, or facilitate or encourage any
effort or attempt by any other person to seek or to consummate an acquisition
proposal. Notwithstanding the above, prior to the consummation of the purchase
agreement, AMCOL's Board of Directors is permitted to furnish information to, or
enter into discussions or negotiations with, any person that after the date of
the purchase agreement makes an unsolicited acquisition proposal, if, and only
to the extent that, (A) AMCOL's Board of Directors determines in good faith,
after consultation with and based upon the advice of counsel and a financial
advisor of a nationally recognized reputation, that such acquisition proposal
is, or may reasonably be expected to lead to, a superior proposal, (B) AMCOL
provides written notice to BASF that it is furnishing information to, or
entering into discussions or negotiations with, such person, indicating in
reasonable detail the terms and conditions of such acquisition proposal, offer,
inquiry or other contact, and (C) information to be furnished has been
previously delivered to BASF, or to comply with Rule 14e-2 under the Securities
Exchange Act of 1934, as amended, with regard to an acquisition proposal.
AMCOL has agreed to notify BASF promptly if any such acquisition proposal
or offer, or any inquiry or other contact with any person with respect to an
acquisition proposal is made. AMCOL agrees not to, and to cause Chemdal US,
Chemdal Asia and each other seller not to, without BASF's prior written consent,
release any person from, or waive any provision of, any confidentiality or
standstill agreement, except in the event AMCOL's Board of Directors determines
in good faith, after consultation with and based upon the advice of counsel and
a financial advisor of a nationally recognized reputation, that such release or
waiver is reasonably expected to lead to a superior proposal. AMCOL has also
terminated all existing discussions, conversations, negotiations and other
communications with any persons conducted before the date of the purchase
agreement with respect to any acquisition proposal.
An acquisition proposal means any proposal or offer relating to the
following:
- any acquisition or purchase of all or any portion of the capital stock
of Chemdal US, Chemdal Asia or any other seller or all or a
substantial portion of the assets of Chemdal US, Chemdal Asia, any
other seller or the SAP business;
- any business combination with Chemdal US, Chemdal Asia or any other
seller;
- any other extraordinary business transaction involving or otherwise
relating to Chemdal US, Chemdal Asia, any other
seller or the SAP business; or
- any acquisition or purchase of, or tender offer or exchange offer for,
more than 20% of the equity securities of AMCOL, or any merger,
consolidation or business combination with AMCOL, or other
extraordinary business transaction involving or otherwise relating to
AMCOL that would result in any other person owning in excess of 20% of
the outstanding equity securities of AMCOL.
A superior proposal means any acquisition proposal on terms which AMCOL's
Board of Directors determines, in its good faith judgment (after having received
the advice of a financial adviser of nationally recognized reputation), to be
more favorable to AMCOL and its shareholders than the sale transaction and for
which financing, to the extent required, is then committed or, in the good faith
judgment of AMCOL's Board of Directors, based upon the written advice of its
financial adviser, is reasonably capable of being obtained by the third party
bidder.
Non-Competition
For a period of three years after the closing in the European Community and
a period of ten years after the closing in every other location or, in each
case, for such shorter period as may be required by applicable law, AMCOL and
its affiliates will not engage, directly or indirectly, in any business anywhere
in the world that researches, develops, manufactures, markets, distributes,
sells, produces or supplies products or services of the kind researched,
developed, manufactured, marketed, distributed, sold, produced or supplied by
the SAP business, Chemdal US or Chemdal Asia, in each case, for traditional SAP
market segments as of the closing date, or without BASF's prior written consent,
own, directly or indirectly, an interest in, manage, operate, join, control,
lend money or render financial or other assistance to or participate in or be
connected with, as an officer, employee, partner, stockholder, consultant or
otherwise, any person that competes with Chemdal US, Chemdal Asia or the SAP
business in researching, developing, manufacturing, marketing, distributing,
selling, producing or supplying products or services of the kind researched,
developed, manufactured, marketed, distributed, sold, produced or supplied by
Chemdal US, Chemdal Asia or the SAP business for traditional SAP market segments
as of the closing.
For a period of three years after the closing in the European Community and
a period of ten years after the closing in every other location or, in each
case, for such shorter period as may be required by applicable law, AMCOL
further agreed to not, and not permit any of its affiliates to, in any way,
directly or indirectly for the purpose of conducting or engaging in any business
that researches, develops, manufactures, markets, distributes, sells, produces
or supplies products or services of the kind researched, developed,
manufactured, marketed, distributed, sold, produced or supplied by the SAP
business, Chemdal US or Chemdal Asia, in each case, for traditional SAP market
segments as of the closing, call upon, solicit, advise or otherwise do, or
attempt to do, business in the traditional SAP market segments with any customer
of the SAP business with whom the SAP business had any dealings in the
traditional SAP market segments during the period of time in which the SAP
business, Chemdal US, and Chemdal Asia was owned by AMCOL, or take away or
interfere or attempt to interfere with any custom, trade, business or patronage
of the SAP business in the traditional SAP market segments.
Traditional SAP market segments mean disposable hygienics (such as diapers,
adult incontinence products, and feminine care products), cable wraps, fire
retardants, freezer packs and food packaging liquid absorption.
For a period of one year after the closing, neither AMCOL nor any of its
affiliates will solicit the employment of, attempt to employ, or employ any
employee of the SAP business hired or retained by BASF and not subsequently
terminated. For a period of one year after the closing, neither BASF nor any of
its affiliates will solicit the employment of, attempt to employ, or employ any
employee of AMCOL or its affiliates which has not been terminated. The foregoing
restrictions on hiring will not apply to general solicitations to the public or
general advertising.
Employee Matters
AMCOL has agreed to indemnify and hold harmless BASF against any severance
claim and against any loss, damage, liability or expense incurred in connection
with any claim for severance benefits brought by any employees or former
employees of AMCOL, Chemdal US, Chemdal Asia or the other sellers, except as
provided below. BASF will be responsible for any severance obligations incurred
pursuant to any severance plan, program arrangement or agreement of Chemdal US,
Chemdal Asia or any other seller with respect to the termination of a
transferred employee or a U.K. designated employee on or after the closing.
For a period of one year after the closing date, BASF has agreed to provide
the transferred employees who are employed by Chemdal US within the United
States, or the US transferred employees, with a level of employee benefit plans
and arrangements substantially comparable to the employee benefits provided to
similarly situated employees of BASF. For certain specified purposes, the US
transferred employees will be credited for service prior to the closing with
Chemdal US or the sellers to the extent that such service was recognized under a
comparable employee benefit plan, program or arrangement under which such
applicable US transferred employee was participating in immediately prior to the
closing. As of the closing date, each US transferred employee and their eligible
dependents who are participating in the sellers' welfare benefit plans shall
become entitled to participate in the welfare benefit plans sponsored by BASF or
its affiliates at the closing date. Additional agreements have also been made by
AMCOL and BASF regarding employee benefits to be provided to U.K. designated
employees and Thai transferred employees.
The purchase agreement requires AMCOL to cause each unvested stock option
to purchase shares of AMCOL's common stock held by transferred employees and
U.K. designated employees to become fully vested and exercisable on or before
the closing. For this reason, AMCOL's shareholders are being asked to approve
amendments to AMCOL's 1993 Stock Plan and 1998 Long-Term Incentive Plan to
provide for the acceleration of vesting of stock options held by employees of
the SAP business. See "Proposal 2: The Plan Amendments." AMCOL is unable to
accelerate the vesting of the options granted to the U.K. designated employees
which were issued under a scheme approved by United Kingdom Inland Revenue
because the necessary approvals were not received from United Kingdom Inland
Revenue. Pursuant to the purchase agreement, AMCOL may either replace the
options held by these U.K. designated employees or pay a special cash bonus to
these employees in an amount equal to the product of the number of shares of
AMCOL's common stock subject to an unvested stock option and the excess, if any,
of the closing price on the New York Stock Exchange of AMCOL's common stock on
the last trading day immediately prior to the closing over the exercise price
per share of AMCOL's common stock subject to such unvested stock option.
Tax Matters
AMCOL agreed to indemnify on an after-tax basis and hold harmless BASF,
each of its subsidiaries, Chemdal US and Chemdal Asia against the following
taxes and related expenses:
- taxes imposed on Chemdal US, Chemdal Asia or attributable to the
SAP assets or the SAP business with respect to taxable periods
ending on or before the closing date;
- with respect to taxable periods beginning before the closing date
and ending after the closing date, taxes imposed on Chemdal US,
Chemdal Asia or attributable to the SAP assets or the SAP
business which are allocable to the portion of such period ending
on the closing date;
- taxes imposed on any of the sellers, any of their subsidiaries or
any member of any affiliated group with which Chemdal US or
Chemdal Asia files or has filed a tax return on a consolidated,
unitary or combined basis for a taxable period (or portion of a
taxable period) ending on or before the closing date;
- taxes imposed on BASF, any of its subsidiaries, Chemdal US or
Chemdal Asia as a result of any breach of warranty or
misrepresentation by AMCOL regarding taxes; and
- taxes resulting from any 338(h)(10) election by the parties.
AMCOL agreed to join BASF in making an election under Section 338(h)(10) of
the Code with respect to the sale of Chemdal US to BASF.
Closing Conditions
Conditions to AMCOL's Obligations. AMCOL's obligations to consummate the
sale transaction are subject to the satisfaction of some conditions, including
the following:
- the representations and warranties of BASF being true and correct in
all material respects as of the closing date, as if those
representations and warranties were made at and as of such date,
subject to certain qualifications specified in the purchase agreement;
- BASF having complied in all material respects with all agreements and
covenants required by the purchase agreement to be complied with by it
on or before the closing date;
- the expiration or termination of any waiting period under the HSR Act;
- the purchase agreement having been approved by the affirmative vote of
AMCOL's shareholders; and
- BASF having executed and delivered to AMCOL the Acrylic Acid Supply
Agreement, the SAP subleases and certain other ancillary agreements.
Conditions to BASF's Obligations. BASF's obligations to consummate the sale
transaction are subject to the satisfaction of some conditions, including the
following:
- the representations and warranties of the sellers being true and
correct in all material respects as of the closing date, as if those
representations and warranties where made at and as of such date,
subject to certain qualifications specified in the purchase agreement;
- the sellers having complied in all material respects with all
agreements and covenants required by the purchase agreement to be
complied with by it on or before the closing date;
- the expiration or termination of any waiting period under the HSR Act;
- the purchase agreement shall have been approved by the affirmative
vote of AMCOL's shareholders;
- no events having occurred, which, individually or in the aggregate,
have, or are reasonably likely to have, a material adverse effect;
- AMCOL or one of its affiliates having executed and delivered to BASF
the Acrylic Acid Supply Agreement, the SAP subleases and certain other
ancillary agreements; and
- the facility being constructed by AMCOL and its affiliates in Thailand
being mechanically complete in accordance with certain specifications
described in the purchase agreement.
Survival of Representations and Warranties; Indemnification
All representations and warranties of the parties contained in the purchase
agreement will survive the closing for a period of fifteen months following the
closing date, except that the representations and warranties made by AMCOL
relating to employee benefits taxes, employment taxes and other applicable taxes
shall survive until the 120th day after the expiration of the applicable
statutes of limitations, and the representations and warranties made by AMCOL
relating to environmental matters shall survive for a period of four years
following the closing date.
AMCOL will indemnify BASF, its affiliates and their successors and assigns,
and the officers, directors, employees and
agents of such parties for losses arising out of or resulting from:
- the breach of any representation or warranty made by the sellers in
the purchase agreement (without giving effect to any qualifications or
limitations as to materiality except for representations and
warranties relating to material contracts);
- the breach of any covenant or agreement by the sellers contained in
the purchase agreement;
- the excluded liabilities;
- all liabilities arising from or relating to the any businesses
conducted by AMCOL and its subsidiaries other than the SAP business;
- any liabilities suffered by BASF, Chemdal US, Chemdal Asia or the SAP
business related to the operation of Chemdal US, Chemdal Asia or the
SAP business prior to the closing to the extent that such liability
constitutes a breach by the sellers of their representations and
warranties in the purchase agreement;
- the assets excluded pursuant to the purchase agreement;
- subject to certain exceptions, any losses or liabilities pursuant to
any environmental law arising from or related to any action, event,
circumstance or condition related to the SAP business and occurring or
existing on or before the closing date;
- the transfer or termination of any employees of Chemdal Limited prior
to or in connection with the closing or the breach by the sellers of
certain U.K. employment laws or employment contracts prior to the
closing;
- subject to certain qualifications, claims of patent infringement with
respect to certain patents; and
- expenditures or amounts payable in connection with construction of the
Thai facility.
BASF will indemnify AMCOL, its affiliates and their successors and assigns,
and the officers, directors, employees and agents of such parties for losses
arising out of or resulting from:
- the breach of any representation or warranty made by BASF in the
purchase agreement;
- the breach of any covenant or agreement by BASF contained in the
purchase agreement;
- any assumed liabilities;
- any third party claims arising primarily out of, or relating primarily
to, the conduct of the SAP business before or after the closing,
except to the extent that AMCOL is obligated to indemnify BASF with
respect to such claim or as otherwise contemplated in the purchase
agreement;
- any claims arising out of the employment or discharge of any
transferred employee at any time on or after the closing; or
- claims made by any U.K. designated employees against the sellers in
connection with the transfer of their employment pursuant to U.K.
regulations or from the termination of any U.K. designated employees
after the closing.
BASF will not be required to indemnify AMCOL for any such losses to
the extent AMCOL receives insurance proceeds under its applicable insurance
policies to cover such loss.
Each party will not be liable for any indemnification claim relating to a
breach of its representations and warranties and certain other specified matters
unless the amount of a loss resulting from such claim (or aggregated claims
arising out of the same event) exceeds $150,000 and the aggregate amount of all
losses incurred by the party seeking indemnification exceeds $5 million, after
which the indemnifying party will only be liable for those losses in excess of
$5 million. Each party's aggregate liability for indemnification claims relating
to a breach of its representations and warranties and certain other specified
matters is also limited to the amount of the purchase price.
Termination
The purchase agreement may be terminated (subject to a termination fee
under certain circumstances as described below) at any time prior to the closing
as follows:
(a) By BASF if before closing an event or condition occurs that has
resulted in or that is reasonably likely to result in a material
adverse effect to the SAP business or AMCOL, Chemdal US, Chemdal Asia
or any other seller makes a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against AMCOL,
Chemdal US or any seller seeking to adjudicate any of them a bankrupt
or insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its
debts under any law relating to bankruptcy, insolvency or
reorganization, and such proceeding is not dismissed within ninety
days; or
(b) By BASF, upon a breach of any representation, warranty, covenant or
agreement on the part of the sellers set forth in the purchase
agreement, or if any representation or warranty of the sellers has
become untrue, in either case, such that BASF's closing conditions
relating to AMCOL's representations and warranties and covenants would
not be satisfied; provided that if such a breach is curable by the
sellers through the exercise of their reasonable efforts and for so
long as the sellers continue to exercise such reasonable efforts, BASF
may not terminate the purchase agreement under this provision; or
(c) By AMCOL upon a breach of any representation, warranty, covenant or
agreement on the part of BASF set forth in the purchase agreement, or
if any representation or warranty of BASF has become untrue, in either
case, such that AMCOL's closing conditions relating to BASF's
representations and warranties and covenants would not be satisfied;
provided that if such breach is curable by BASF through the exercise
of its reasonable efforts and for so long as BASF continues to
exercise such reasonable efforts, AMCOL may not terminate the purchase
agreement under this provision; or
(d) By either AMCOL or BASF if the closing shall not have occurred by May
31, 2000; or
(e) By BASF or AMCOL if AMCOL's shareholders vote against approval of the
purchase agreement; or
(f) By either BASF or AMCOL in the event that any governmental authority
has issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the purchase agreement and such order, decree, ruling
or other action has become final and nonappealable; or
(g) By AMCOL in order to enter into a definitive agreement with respect to
a superior proposal; provided, however, that AMCOL must provide BASF
with written notice of such superior proposal, including a reasonable
description of the material terms thereof, and AMCOL will not take any
action in respect of such superior proposal, including terminating the
purchase agreement or entering into an agreement relating to the
superior proposal, for a period of five business days following
receipt of such notice by BASF and until such time as AMCOL's Board of
Directors has considered any response to such notice provided by BASF
to AMCOL during such five business day period; provided that such
termination will not be effective until AMCOL pays the fee (as defined
below) to BASF; or
(h) By the mutual written consent of AMCOL and BASF.
In the event of the termination of the purchase agreement as provided
above, there will be no liability on the part of either party, except for
provisions in the purchase agreement regarding confidential information and fees
and expenses and that nothing in the purchase agreement will relieve either
party from liability for any breach of the purchase agreement.
Expenses
In the event that (1) the purchase agreement is terminated because AMCOL's
shareholders vote against approval and adoption of the purchase agreement and at
or prior to the time of such vote an acquisition proposal has been made public
and AMCOL enters into an agreement with respect to an acquisition proposal, or
an acquisition proposal is consummated, in each case within twelve months after
such termination of this agreement; (2) the purchase agreement is terminated by
AMCOL in order to enter into a definitive agreement with respect to a superior
proposal; or (3) the purchase agreement is terminated for any reason, other than
items (a), (c), (f) or (h) described under "Termination" above, and AMCOL enters
into an agreement with respect to a superior proposal, or a superior proposal is
consummated, in each case within twelve months after such termination of the
purchase agreement; then AMCOL will be required to pay BASF a fee of $20
million, or the fee, plus all of BASF's out of pocket expenses up to $3 million,
or expenses. If the fee and expenses become payable pursuant to item (1) or (3)
above, AMCOL is required to pay such amounts no later than one business day
after consummation of the acquisition proposal or the superior proposal, as the
case may be, and if the fee and expenses become payable pursuant to item (2)
above, AMCOL is required to pay such amounts prior to termination of the
purchase agreement.
Ancillary Agreements
Acrylic Acid Supply Agreement. Immediately prior to the closing of the sale
transaction, Chemdal Limited and a BASF subsidiary will enter into a supply
agreement pursuant to which the BASF subsidiary will supply acrylic acid to
Chemdal Limited for a period of ten years. Upon the signing of such agreement,
the BASF subsidiary will pay a non-refundable signing premium of $28.5 million
to Chemdal Limited as consideration for entering into the supply agreement.
Immediately following the closing of the sale transaction, the supply agreement
will be assigned by Chemdal Limited to one of BASF's designated affiliates which
will assume Chemdal Limited's obligations under the supply agreement, and
Chemdal Limited will be released from any further liability under the supply
agreement.
SAP Subleases. At the closing, AMCOL and BASF will enter into subleases for
a portion of two facilities currently leased by AMCOL in Arlington Heights,
Illinois. The first sublease is for approximately 7,453 square feet currently
being used as Chemdal's corporate headquarters. The second sublease is for
approximately 14,610 square feet currently being used as a research laboratory.
The initial annual base rent under these subleases will be approximately $99,800
and $136,000, respectively, subject to annual escalations. This rent will cover
AMCOL's costs for the space being subleased. BASF will also be required to pay
its proportionate share of operating expenses, real estate taxes and certain
other expenses. The term of each sublease will expire on July 31, 2008.
One of AMCOL's subsidiaries and an affiliate of BASF will also enter into a
lease agreement for a portion of certain properties owned by such AMCOL
subsidiary in Birkenhead, Merseyside, U.K. The annual rent under the lease will
be determined by the parties after the closing of the sale transaction, but will
be between 70,000 and 100,000 Pounds. The term of the lease will be for seven
years.
MARKET PRICE DATA; DIVIDENDS
AMCOL's common stock trades on the New York Stock Exchange under the symbol
ACO. Prior to September 22, 1998, AMCOL's common stock traded on the Nasdaq
National Market tier of The Nasdaq Stock Market under the symbol ACOL. The table
below sets forth, for the calendar periods indicated, the high and low intra-day
sales price per share of AMCOL's common stock as reported by the relevant
organizations, and cash dividends declared per share.
Cash
Dividends
Declared
Stock Price Per Share
High Low
Fiscal Year Ended December 31, 2000: 1st Quarter.............. $ $ $
2nd Quarter (through
April , 2000).........
Fiscal Year Ended December 31, 1999: 1st Quarter.............. $11.375 $8.250 $.0600
2nd Quarter.............. 14.750 8.875 .0700
3rd Quarter.............. 15.125 13.250 .0700
4th Quarter.............. 17.750 12.000 .0700
Fiscal Year Ended December 31, 1998: 1st Quarter.............. $16.375 $12.125 $.0550
2nd Quarter.............. 16.375 11.500 .0550
3rd Quarter.............. 14.250 9.375 .0600
4th Quarter.............. 11.375 8.000 .0600
On November 22, 1999, the last full trading day before the public
announcement of the sale transaction, the high and low sales price per share of
AMCOL's common stock, as quoted on the NYSE Composite Tape, were $13.75 and
$13.4375, respectively.
The closing sales price for the shares of AMCOL's common stock as reported
on the NYSE Composite Tape on April __, 2000 (the latest practicable date prior
to mailing this proxy statement) was $________. As of the close of business on
the record date, there were __________ holders of record of AMCOL's common
stock, excluding shares held in street name.
In connection with the sale transaction, the Board of Directors currently
intends to adopt a plan of partial liquidation pursuant to which AMCOL will
distribute pro rata to its shareholders a significant portion of the net
proceeds from the sale transaction. AMCOL currently expects to distribute
between $14.00 and $14.50 per share in the second quarter of 2000. We cannot
assure you that any plan of partial liquidation will be adopted or that any
distribution will be made. The Board of Directors will consider the facts and
circumstances existing after completion of the sale transaction to determine
whether a distribution in partial liquidation is in the best interests of
AMCOL's shareholders at that time and the timing and amount of any such
distribution. Any plan of partial liquidation must be approved by the Board, but
does not require the approval of AMCOL's shareholders. You are not being asked
to vote on or approve any plan of partial liquidation. See "Proposal 1: The Sale
Transaction - Use of Proceeds."
After the closing of the sale transaction, the payment of dividends and the
amount and timing of such dividends will depend on AMCOL's earnings, capital
requirements, financial condition and other factors deemed relevant by AMCOL's
Board of Directors.
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Financial Information gives
effect to the consummation of the sale transaction and the proposed use of
proceeds as if consummated: on December 31, 1999, in the case of the Unaudited
Pro Forma Balance Sheet; and on January 1, 1997, the first day of AMCOL's fiscal
year, in the case of the Unaudited Pro Forma Statements of Operations for the
fiscal years ended December 31, 1997, 1998 and 1999.
The Unaudited Pro Forma Consolidated Financial Information is presented for
illustrative purposes only and does not necessarily reflect what our financial
position and results of operation would have been if the sale transaction and
the proposed use of proceeds had been consummated on the above referenced dates,
and may not be indicative of our future performance, nor does it give effect to
any transactions other than the sale transaction and the proposed use of
proceeds as described in the Notes to the Unaudited Pro Forma Consolidated
Financial Information or AMCOL's results of operations since December 31, 1999.
The Unaudited Pro Forma Balance Sheet at December 31, 1999 is based upon
AMCOL's financial position at December 31, 1999. The Unaudited Pro Forma
Statements of Operations for the fiscal years ended December 31, 1997, 1998 and
1999 are based upon AMCOL's results of operations for those years.
The Unaudited Pro Forma Consolidated Financial Information is qualified in
its entirety by, and should be read in conjunction with, AMCOL's audited
consolidated financial statements and the notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations which
are incorporated by reference to this Proxy Statement.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
BALANCE SHEET
December 31, 1999
(in thousands)
Reclassify SAP
Historical Discontinued Adjustment Pro Forma
Operations (E)
Current assets:
Cash and cash equivalents $ 3,815 $ 139 $ - $ 3,954
Accounts receivable:
Trade, net 98,943 (50,013) - 48,930
Other 7,873 (4,747) - 3,126
Inventories 40,680 (9,715) - 30,965
Prepaid expenses 6,571 (5) - 6,566
Current deferred tax asset 6,888 (541) - 6,347
Net current assets of discontinued operations - 40,147 (40,147) (H) -
Total current assets 164,770 (24,735) (40,147) 99,888
Investment in and advances to joint ventures 9,111 - - 9,111
Property, plant, equipment and mineral rights and
reserves:
Land and mineral rights and reserves 12,369 (2,401) 9,968
Depreciable assets 339,006 (153,652) - 185,354
351,375 (156,053) - 195,322
Less accumulated depreciation 178,967 (72,905) - 106,062
172,408 (83,148) - 89,260
Other assets:
Goodwill and other intangible assets, net 452 - - 452
Long-term prepayments and other assets 1,534 - - 1,534
Deferred tax asset 732 - - 732
2,718 - - 2,718
Net non-current assets of discontinued operations - 81,531 (81,531) (H) -
Total assets $ 349,007 $ (26,352) $ (121,678) $ 200,977
Current liabilities:
Current maturities of long-term obligations $ 509 $ - $ - $ 509
Accounts payable 20,656 (9,880) - 10,776
Accrued income taxes 7,564 (5,263) - 2,301
Accrued liabilities 30,986 (9,592) - 21,394
Total current liabilities 59,715 (24,735) - 34,980
Long-term debt 93,914 - (44,289) (C) 49,625
Deferred income tax liabilities - (2,781) - (2,781)
Other liabilities 8,938 (321) - 8,617
8,938 (3,102) - 5,836
Stockholders' equity:
Common stock 320 - - 320
Additional paid-in-capital 76,440 - - 76,440
Foreign currency translation adjustment (2,607) 1,485 - (1,122)
Retained earnings 142,270 - 312,673 (B) 454,943
Distribution to stockholders - - (390,062) (A) (390,062)
Treasury stock (29,983) - - (29,983)
Total stockholders' equity 186,440 1,485 (77,389) 110,536
Total liabilities and stockholders' equity $ 349,007 $ (26,352) $ (121,678) $ 200,977
=============== ================ =============== =============
UNAUDITED PRO FORMA FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
(in thousands)
Reclassify SAP
Business to Pro Forma
Historical Discontinued Adjustment Pro Forma
Operations
Net sales $ 552,052 $ (252,908) (E) $ - $ 299,144
Cost of sales 414,256 (184,006) (E) - 230,250
Gross profit 137,796 (68,902) - 68,894
General, selling and administrative expenses 79,834 (17,052) (E) (1,257) (M) 61,525
Write down of impaired assets 14,529 - - 14,529
Operating profit 43,433 (51,850) 1,257 (7,160)
Other income (expense):
Interest expense, net (6,396) 111 (E) 3,687 (F) (2,598)
Other, net (1,338) 269 (E) - (1,069)
Total other income (expense) (7,734) 380 3,687 (3,667)
Income before income taxes and joint ventures 35,699 (51,470) 4,944 (10,827)
Income taxes 13,913 (20,058) (N) 1,927 (G) (4,218)
Income before joint ventures 21,786 (31,412) 3,017 (6,609)
Equity interests in income of joint ventures 448 - - 448
Income from continuing operations $ 22,234 $ (31,412) $ 3,017 $ (6,161)
Weighted average common shares 26,772,569 26,772,569
Weighted average common and common equivalent shares 27,199,263 27,199,263
Earnings per share:
Basic $ 0.83 $ (0.23)
Diluted $ 0.82 $ (0.23)
=============== =============
UNAUDITED PRO FORMA FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
Year ended December 31, 1998
(in thousands)
Reclassify SAP
Business to Pro Forma
Historical Discontinued Adjustment Pro Forma
Operations
Net sales $ 521,530 $ (221,093) (E) $ - $ 300,437
Cost of sales 410,359 (174,635) - 235,724
(E)
Gross profit 111,171 (46,458) - 64,713
General, selling and administrative expenses 68,951 (13,207) - 55,744
(E)
Operating profit 42,220 (33,251) - 8,969
Other income (expense):
Interest expense, net (7,933) 1,345 5,541 (I) (1,047)
(E)
Other, net 140 16 - 156
(E)
(7,793) 1,361 5,541 (891)
Income before income taxes and minority interest 34,427 (31,890) 5,541 8,078
Income taxes 12,350 (11,439) (N) 1,988 (J) 2,899
Income before minority interest 22,077 (20,451) 3,554 5,179
Minority interest 8 - - 8
Income from continuing operations $ 22,085 $ (20,451) $ 3,554 $ 5,187
Weighted average common shares 27,918,391 27,918,391
Weighted average common and common equivalent shares 28,385,860 28,385,860
Earnings per share:
Basic $ 0.79 $ 0.19
Diluted $ 0.78 $ 0.18
=============== =============
UNAUDITED PRO FORMA FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
Year ended December 31, 1997
(in thousands)
Reclassify SAP
Business to Pro Forma
Historical Discontinued Adjustment Pro Forma
Operations
Net sales $ 477,060 $ (195,944) $ - $ 281,116
(E)
Cost of sales 376,319 (154,983) - 221,336
(E)
Gross profit 100,741 (40,961) - 59,780
General, selling and administrative expenses 59,272 (12,098) - 47,174
(E)
Operating profit 41,469 (28,863) - 12,606
Other income (expense):
Interest expense, net (8,628) 1,531 7,114 (K) 17
(E)
Other, net (398) 459 - 61
(E)
(9,026) 1,990 7,114 78
Income before income taxes and minority interest 32,443 (26,873) 7,114 12,684
Income taxes 11,399 (9,443) (N) 2,500 (L) 4,456
Income before minority interest 21,044 (17,430) 4,614 8,228
Minority interest - - - -
Income from continuing operations $ 21,044 $ (17,430) $ 4,614 $ 8,228
Weighted average common shares 28,488,527 28,488,527
Weighted average common and common equivalent shares 29,125,168 29,125,168
Earnings per share:
Basic $ 0.74 $ 0.29
Diluted $ 0.72 $ 0.28
=============== =============
<FN>
Notes to Unaudited Pro Forma Consolidated Financial Information
(A) For pro forma purposes at December 31, 1999, the total distribution to stockholders is calculated below. The sales price
is net of estimated transaction costs of $13,700,000.
-----------------------------------------------------------------
Sales price, net of estimated transaction costs $ 642,800
-----------------------------------------------------------------
-----------------------------------------------------------------
Less intercompany indebtedness 44,289 (C)
-----------------------------------------------------------------
-----------------------------------------------------------------
Net cash proceeds 598,511
-----------------------------------------------------------------
-----------------------------------------------------------------
Income taxes 208,449
-----------------------------------------------------------------
-----------------------------------------------------------------
Distribution to stockholders 390,062
------------------------------------------------=============----
-----------------------------------------------------------------
Common stock outstanding 26,852,081
-----------------------------------------------------------------
-----------------------------------------------------------------
Distribution per share $ 14.53
------------------------------------------------=============----
The distribution per share was calculated based on common stock and
intercompany indebtedness outstanding at December 31,1999. The actual
amount of any distribution will be determined after the closing of the
sale transaction and will be based on the amount of indebtedness of
the SAP business to be repaid and the number of shares of common stock
outstanding at such time. The number of shares of common stock
outstanding will increase in the event an AMCOL director or employees
exercise vested outstanding options prior to the record date of the
distribution. The actual amount of any distribution will likely be
different from the amount indicated above.
(B) For pro forma purposes at December 31, 1999, gain on sale of SAP
business and resulting effect on equity is calculated below.
-----------------------------------------------------------------
Sales price, net of estimated transaction costs $ 642,800
-----------------------------------------------------------------
-----------------------------------------------------------------
Net investment in SAP business 121,678
-----------------------------------------------------------------
-----------------------------------------------------------------
Gain before income taxes 521,122
-----------------------------------------------------------------
-----------------------------------------------------------------
Income taxes 208,449 (D)
-----------------------------------------------------------------
-----------------------------------------------------------------
Net gain on sale 312,673
-----------------------------------------------------------------
-----------------------------------------------------------------
Distribution to stockholders 390,062
-----------------------------------------------------------------
-----------------------------------------------------------------
Net decrease in equity $ (77,389)
------------------------------------------------=============----
(C) The intercompany indebtedness as of the date of closing will reduce the cash received on the date of sale but will be
paid by BASF the day following the closing date. This amount will be used to repay a portion of AMCOL's long-term debt
and could vary based on the indebtedness level at the date of closing. As of December 31, 1999 the intercompany
indebtedness was $44,289,000. Increases or decreases in this amount from the pro-forma amount to the actual amount
will proportionately effect interest expense in future periods, as this amount will directly reduce long-term debt.
For every $1,000,000 of additional debt as of the date of closing annual interest expense in future periods will decrease
by $62,500.
(D) Tax expense for federal and state purposes is calculated at the effective statutory rate at December 31, 1999 of 40%.
(E) To reclassify the SAP business as a discontinued operation as a result of the proposed sale of the business.
(F) To record reduction in interest expense arising from the repayment of indebtedness using the funds received from
BASF to settle the intercompany liability, as discussed in Note C. The indebtedness repaid had an average interest
rate of 6.25% for the year ended December 31, 1999.
(G) To record income tax benefit attributable to adjustment (F) at the 1999 effective rate of 38.97%.
(H) To remove the net assets of the SAP business.
(I) To record reduction in interest expense arising from the repayment of indebtedness using the funds received from BASF
to settle the intercompany liability, as discussed in Note C. The indebtedness repaid had an average interest rate of
7.15% for the year ended December 31, 1998.
(J) To record income tax benefit attributable to adjustment (I) at the 1998 effective rate of 35.87%.
(K) To record reduction in interest expense arising from the repayment of indebtedness using the funds received from
BASF to settle the intercompany liability, as discussed in Note C. The indebtedness repaid had an average interest
rate of 7.30% for the year ended December 31, 1997.
(L) To record income tax benefit attributable to adjustment (K) at the 1997 effective rate of 35.14%.
(M) To reclassify acquisition costs expensed up through the third quarter to discontinued operations as a result of the
proposed sale of the SAP business.
(N) To reclassify the SAP business as a discontinued operation as a result of the proposed sale of the SAP business.
The difference in the income taxes of the SAP business in the unaudited statements of operations is due to the
additional expenses related to intercompany royalties, intercompany interest, corporate allocations and the use of a
different tax rate. The tax rate used in the pro-forma financial statements is a consolidated effective tax rate
whereas the tax rate used in the unaudited financial statements of the SAP business is the effective tax rate for the SAP
business.
</FN>
UNAUDITED FINANCIAL STATEMENTS OF THE SAP BUSINESS
The following are the unaudited comparative financial statements of the SAP
business. The unaudited financial statements have been derived from historical
financial data of AMCOL and include balance sheets of the SAP business as of
December 31, 1999 and 1998, and the related statements of operations and cash
flows for each of the years in the three year period ending December 31, 1999.
This financial information does not necessarily reflect what the financial
position and results of operation of the SAP business would have been if such
business were operated as a separate, stand-alone entity for the periods
presented, and may not be indicative of the future performance of the SAP
business.
The unaudited financial statements of the SAP business are qualified in its
entirety by, and should be read in conjunction with, AMCOL's audited
consolidated financial statements and the notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations which
are incorporated by reference to this Proxy Statement.
SAP BUSINESS
BALANCE SHEETS
(Unaudited)
(in thousands)
ASSETS December 31
1999 1998
Current assets:
Cash and cash equivalents $ (139) $ (3,448)
Accounts receivable:
Trade, less allowance for doubtful accounts of $1,876 and $1,393 50,013 41,155
Other 4,747 2,354
Inventories 9,715 11,479
Prepaid expenses 5 491
Current deferred tax asset 541 521
Total current assets 64,882 52,552
Investment in and advances to joint ventures - 10
Property, plant, equipment and mineral rights and reserves:
Land and mineral rights and reserves 2,401 2,461
Depreciable assets 153,652 134,104
156,053 136,565
Less accumulated depreciation 72,905 57,150
83,148 79,415
Total assets $ 148,030 $ 131,977
--------------------
LIABILITIES AND STOCKHOLDERS' EQUITY December 31
1999 1998
Current liabilities:
Notes payable and current maturities of long-term obligations $ - $ 1,577
Accounts payable 9,880 8,023
Accrued income taxes 5,263 -
Accrued liabilities 9,592 9,401
Due to AMCOL 44,289 58,994
Total current liabilities 69,024 77,995
Deferred income tax liabilities 2,781 5,213
Other liabilities 321 315
3,102 5,528
Stockholders' equity:
Common stock 13,135 13,135
Additional paid-in-capital 2,235 2,235
Retained earnings 62,019 33,507
Cumulative translation adjustment (1,485) (423)
75,904 48,454
Total liabilities and stockholders' equity $ 148,030 $ 131,977
- - ---------------------------------------------------------------------------------===============----================
See accompanying notes to financial statements.
SAP BUSINESS
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
Years Ended December 31,
-------------------------------------------------------
1999 1998 1997
Net sales $ 252,908 $ 221,093 $ 195,944
Cost of sales 184,006 174,635 154,983
Gross profit 68,902 46,458 40,961
General, selling and administrative expenses 17,052 13,207 12,098
Write down of intangible and long-term assets - - -
Operating profit 51,850 33,251 28,863
Other income (expense):
Intercompany interest expense (2,845) (3,591) (5,756)
Other interest expense (111) (1,345) (1,531)
Intercompany royalties (2,053) (1,844) (4,679)
Other, net (269) (16) (459)
(5,278) (6,796) (12,425)
Income before allocations 46,572 26,455 16,438
Corporate allocations (2,489) (1,778) (1,585)
Income before income taxes and minority interest 44,083 24,677 14,853
Income taxes 15,571 8,838 5,340
Net income $ 28,512 $ 15,839 $ 9,513
Retained earnings at the beginning of the year 33,507 23,668 14,155
Dividends paid - (6,000) -
Retained earnings at the end of the year $ 62,019 $ 33,507 $ 23,668
- - -------------------------------------------------------------===============-----===============----================
See accompanying notes to financial statements.
SAP BUSINESS
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Years Ended December 31,
-------------------------------------------------------
1999 1998 1997
Cash flows from operating activities:
Net income $ 28,512 $ 15,839 $ 9,513
Adjustment to reconcile net income to net cash
provided by
operating activities:
Depreciation and amortization 17,356 14,840 14,362
Loss on sale or transfer of depreciable assets 49 13 --
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (11,251) (5,708) (3,233)
Inventories 1,764 408 4,732
Prepaid expenses 486 583 (819)
Deferred income taxes (2,452) 2,741 1,336
Accounts payable 1,857 2,103 (5,273)
Accrued income taxes 5,263 -- --
Accrued liabilities 191 1,039 5,525
Other liabilities 6 (95) (119)
Net cash used in operating activities 41,781 31,763 26,024
Cash flows from investing activities:
Acquisition of depreciable assets (22,639) (9,614) (4,842)
Investment in/advance to subsidiary 10 (10) --
Foreign currency 439 (423) (2,700)
Net cash used in investing activities (22,190) (10,047) (7,542)
Cash flows from financing activities:
Payment of cash dividends -- (6,000) --
Issuance of notes payable -- 10 --
Payment of notes payable (1,577) -- (60)
Net payments to AMCOL (14,705) (18,504) (19,950)
Net cash provided by financing activities (16,282) (24,494) (20,010)
Net increase in cash and cash equivalents 3,309 (2,778) (1,528)
Cash and cash equivalents at the (3,448) (670) 858
beginning of year
Cash and cash equivalents at the end of $ (139) $ (3,448) $ (670)
year
See accompanying notes to financial statements.
SAP BUSINESS
NOTES TO FINANCIAL STATEMENTS
(in thousands)
Note 1: BASIS OF PRESENTATION
The financial information included herein has been prepared by management
without audit. The information furnished herein includes all adjustments which
are, in the opinion of management, necessary for a fair statement of the
financial position and operating results and all such adjustments are of a
normal recurring nature.
Note 2: INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
by the first-in, first-out method. The composition of inventories at December
31, 1999 and December 31, 1998, was as follows:
1999 1998
Finished Product Inventory $ 5,899 $ 8,468
Stores Inventory 3,816 3,011
$ 9,715 $ 11,479
PROPOSAL 2: THE PLAN AMENDMENTS
General
The Board of Directors has adopted, subject to shareholder approval,
amendments to AMCOL's 1993 Stock Plan, or the 1993 plan, and AMCOL's 1998
Long-Term Incentive Plan, or the 1998 plan, which provide for the acceleration
of vesting of all options held by employees who will become employees of BASF
except for nonvested options held by employees whose options were issued under a
scheme approved by United Kingdom Inland Revenue. This acceleration of vesting
will become effective immediately upon receipt of shareholder approval of the
vesting amendments at the special meeting. In addition, the Board of Directors
has adopted, subject to shareholder approval, an amendment to the 1998 plan
which deletes the $100,000 cap on the aggregate fair market value of an
employee's incentive stock options, or ISOs, which become exercisable in any
calendar year.
The 1993 plan and the 1998 plan were approved by AMCOL's shareholders at
AMCOL's annual meeting of shareholders held in 1993 and 1998, respectively. As
of April __, 2000, options to purchase ___________ shares of AMCOL's common
stock held by _______ employees will become immediately vested upon the approval
of the plan amendments by AMCOL's shareholders. This includes options to
purchase ___ shares of AMCOL's common stock held as of April __, 2000 by Gary
Castagna, an executive officer of AMCOL. The exercise prices of the options held
by the Chemdal employees range from $_______ to $________. The exercise prices
of the options held by Mr. Castagna range from $___ to $_____. Based on the
closing sale price of AMCOL's common stock on April __, 2000 as reported by the
New York Stock Exchange, the aggregate value of the benefit to be received by
Mr. Castagna upon the acceleration of the options held by him is $___________.
The purchase agreement requires AMCOL to cause each unvested stock option
to purchase shares of AMCOL's common stock held by employees who are to become
employees of BASF to become fully vested and exercisable on or before the
closing. However, AMCOL is unable to accelerate the vesting of the options
granted to employees who reside in the United Kingdom which were issued under a
scheme approved by United Kingdom Inland Revenue because the necessary approvals
were not received from United Kingdom Inland Revenue. Pursuant to the purchase
agreement, AMCOL may either replace the options held by these employees in the
United Kingdom or pay a special cash bonus to these employees in an amount equal
to the product of the number of shares of AMCOL's common stock subject to an
unvested stock option and the excess, if any, of the closing price on the New
York Stock Exchange of AMCOL's common stock on the last trading day immediately
prior to the closing over the exercise price per share of AMCOL's common stock
subject to such unvested stock option.
The 1998 Plan contains a provision which prohibits the aggregate fair
market value of an employee's ISOs which become exercisable in any calendar year
to exceed $100,000. Due to the acceleration of vesting of the options held by
these employees, the aggregate fair market value of certain employees' ISOs
which will become exercisable will exceed $100,000. Therefore, the Board of
Directors has decided to delete this restriction from the 1998 plan.
The 1993 Plan and the 1998 Plan
Purpose. The purpose of the 1993 plan and 1998 plan is to provide officers,
directors and employees who have substantial responsibility for the direction
and management of AMCOL with an additional incentive to promote the success of
AMCOL's business, to encourage such persons to remain in the service of AMCOL
and to enable them to acquire proprietary interests in AMCOL. The following is a
summary of the 1993 plan and the 1998 plan. You are encouraged to read the 1993
plan and the 1998 plan in their entirety. These documents have been filed with
the SEC and are publicly available. See "Additional Information."
Awards. Both the 1993 plan and the 1998 plan provide for the granting of
awards of restricted stock, ISOs within the meaning of Section 422 of the Code,
nonqualified stock options, or NSOs, and stock appreciation rights, or SARs. In
addition, the 1993 plan provides for the granting of awards of phantom stock.
The 1993 plan and the 1998 plan permit a total of 1,260,000 and 1,900,000 shares
of AMCOL's common stock to be awarded to participants, respectively. However, as
of March 1, 1998, no further awards may be made pursuant to the 1993 plan. As of
April __, 2000 the closing sale price of AMCOL's common stock was $______ per
share as reported by the New York Stock Exchange.
The Committee. Both the 1993 plan and the 1998 plan are administered by a
committee composed of two or more individuals elected by the Board of Directors
from time to time. The committee administering the 1998 plan must be composed of
directors. Currently, both the 1993 plan and the 1998 plan are administered by
the Compensation Committee of the Board of Directors. The Compensation Committee
from time to time grants awards under the 1998 plan to selected eligible
directors and employees, without payment by the participant. As set forth above,
awards are no longer made pursuant to the 1993 plan.
Restricted Stock Awards. The 1993 plan and the 1998 plan permit the
granting of awards of restricted stock to any participant. Awards of restricted
stock may be issued to participants without payment. Upon completion of a
vesting period and the fulfillment of any required conditions, restrictions upon
the restricted stock expire and new certificates representing unrestricted
shares of common stock are issued to the participant. Generally, the participant
will have all of the rights of a shareholder of AMCOL with respect to his shares
of restricted stock including, but not limited to, the right to vote such shares
and the right to receive dividends payable with respect to the shares of
restricted stock.
Incentive Stock Options. Both the 1993 plan and the 1998 plan provide for
the granting of ISOs to any employee of AMCOL. The committee has the authority
to determine the terms and conditions of each ISO grant, including without
limitation, the number of shares subject to each ISO and the option period. The
ISO exercise price is also determined by the committee and may not be less than
the fair market value of AMCOL's common stock on the date of grant. The exercise
price may not be less than 110% of such fair market value if the participant was
the holder of more than 10% of AMCOL's outstanding voting securities. Unless the
committee otherwise determines, the option period for ISOs granted under the
1993 plan expire upon the earliest of:
- ten years after the date of grant (five years in the case of a
holder of more than 10% of AMCOL's outstanding voting
securities);
- three months after termination of employment for any reason other
than death;
- twelve months after death; or
- such other date or event as specified by the committee.
Unless the committee otherwise determines, the option period for ISOs
granted under the 1998 plan will expire upon the earliest of:
- ten years after the date of grant (five years in the case of a
holder of more than 10% of AMCOL's outstanding voting
securities);
- three months after termination of employment for any reason other
than cause, death or total and permanent disability;
- immediately upon termination of employment for cause;
- twelve months after death or termination of employment on account
of total and permanent disability; or
- such other date or event as specified by the committee.
Nonqualified Stock Options. The 1993 plan and the 1998 plan provide for the
granting of NSOs to any participant. The committee has the authority to
determine the terms and conditions of each grant including the number of shares
subject to each NSO, the option period and the option exercise price. The NSO
exercise price may not be less than 85% of the fair market value of the common
stock on the date of grant. Unless the committee otherwise determines, the
option period for NSOs granted pursuant to the 1993 plan will expire upon the
earliest of:
- three months after termination of employment for any reason other
than death;
- twelve months after death; or
- such other date or event as specified by the committee.
Unless the committee otherwise determines, the option period for NSOs
granted pursuant to the 1998 plan will expire upon the
earliest of:
- ten years after the date of grant;
- three months after termination of employment for any reason other
than cause, death, total and permanent disability or retirement
after age 65 (nonemployee directors will be treated as being
terminated when they cease to serve on the Board);
- immediately upon termination of employment for cause;
- sixty months after termination of employment on account of
retirement after age 65;
- twelve months after death or termination of employment on account
of total and permanent disability; or
- such other date or event as specified by the committee.
Stock Appreciation Rights. Both the 1993 plan and the 1998 plan provide for
the granting of SARs to any participant. SARs granted by the committee pursuant
to the 1993 plan or the 1998 plan may relate to and be associated with all or
any part of a specific ISO or NSO. An SAR shall entitle the participant to
surrender any then exercisable portion of the SAR and, if applicable, the
related ISO or NSO. In exchange, the participant would receive from AMCOL an
amount equal to the product of the excess of the fair market value of a share of
common stock on the date of surrender over the fair market value of the common
stock on the date the SARs were issued, or, if the SARs are related to an ISO or
an NSO, the per share exercise price under such option and the number of shares
of common stock subject to such SAR, and, if applicable, the related option
which is surrendered. SARs may be exercisable during a period established by the
committee and, if related to an ISO or NSO, shall terminate on the same date as
the related option. Upon exercise, participants may be paid in shares of common
stock or cash, as determined by the committee.
Phantom Stock. The 1993 plan provided for awards of phantom stock to a
participant. Subject to any limitations imposed by the committee, an award of
phantom stock entitles the participant to surrender any vested portion of the
phantom stock in exchange for the fair market value of the common stock to which
the surrendered phantom stock relates. No awards of phantom stock were made
pursuant to the 1993 plan.
The Manner of Exercise. The committee may permit the exercise price for
options granted under the 1993 plan or the 1998 plan to be paid in cash or
shares of common stock, including shares of common stock which the participant
received upon the exercise of one or more options. The committee may also permit
the option exercise price to be paid by the participant's delivery of an
election directing AMCOL to withhold shares of common stock from the common
stock otherwise due upon exercise of the option or any method permitted by law.
Vesting. Unless the committee establishes a different vesting schedule at
the time of grant, awards generally vest 40% after two years, 60% after three
years, 80% after four years and 100% after five years. A participant may not
exercise an option or SAR or transfer shares of restricted stock until the award
has vested.
Under the 1993 plan, if a participant's employment with AMCOL is terminated
due to retirement on or after the age of 65 (or 55 with AMCOL's consent),
retirement at any age on account of disability, or death, all Awards become
fully vested. If a participant's employment with or service to AMCOL is
terminated for any other reason, any Awards that are not yet vested are
forfeited.
Under the 1998 plan, generally, if a participant's employment with AMCOL or
service on the Board is terminated due to retirement, death, disability or a
change in control of AMCOL (as determined by the committee), the committee may,
in its discretion, accelerate vesting. If a participant's employment with or
service to AMCOL is terminated for any other reason, any awards that are not yet
vested are forfeited.
Nontransferability. Awards are not transferable other than by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code; provided, however, that under the 1998 plan NSOs,
SARs and restricted stock are transferable in the committee's discretion after
vesting. During a participant's lifetime, his ISOs and any NSOs granted under
the 1993 plan may be exercised only by him.
Withholding Tax. AMCOL shall have the right to withhold in cash or shares
of common stock with respect to any payments made to participants, any taxes
required by law to be withheld because of such payments.
Amendment; Termination. The Board of Directors may amend the 1993 plan and
the 1998 plan at any time, but may not impair the rights of participants with
respect to any outstanding awards without the consent of participants, and
provided further that the Board of Directors may not amend the 1993 plan so as
to extend the period in which a participant may exercise an ISO and may not, in
the absence of shareholder approval, change the aggregate number of shares that
may be issued pursuant to the options granted, change the class of eligible
employees, adopt any amendment affecting the exercise price, or materially
increase benefits accruing to the participants.
The 1998 plan will terminate ten years after its adoption by the Board of
Directors; provided, however, that the Board of Directors may terminate the 1998
plan at any time. The 1993 plan was terminated effective March 1, 1998.
Termination of the 1993 plan and the 1998 plan will not affect the rights of
participants with respect to any awards granted before the termination date.
Federal Tax Consequences-Incentive Stock Options. Provided a participant is
an employee of AMCOL during the period beginning on the date of grant of the ISO
and ending on the day three months before the date of exercise, neither the
grant nor the exercise of an ISO has an immediate tax consequence to the
participant or AMCOL. If subsequent to the exercise of an ISO the participant
does not dispose of the acquired common stock within two years after the date of
the grant of the ISO, or within one year after the date of the transfer of the
common stock to the participant, or the holding period, AMCOL is not entitled to
a tax deduction, the participant realizes no ordinary income, and any gain or
loss that is realized on the subsequent sale or taxable exchange of the common
stock is treated as a long-term capital gain or loss. Some tax deductions and
exclusions, known as "tax preference items," give rise to an "alternative
minimum tax" enacted to recapture some of the tax savings provided by such tax
preference items. The tax benefits associated with an ISO are tax preference
items that may affect the alternative minimum tax that must be paid by certain
high income individuals.
If a participant exercises an ISO and disposes of the acquired common stock
before the end of the holding period, the participant realizes ordinary income
in an amount equal to the lesser of the fair market value of the common stock on
the date of exercise over the option price of the common stock, or the amount
realized on disposition over the adjusted basis of the common stock. Any
remaining gain will be considered capital gain to the participant. AMCOL will be
entitled to a corresponding tax deduction in the same amount and at the same
time, subject to the limitations imposed by Code Section 162(m).
Code Section 162(m) denies a deduction to any publicly held corporation for
compensation paid to certain "covered employees" in a taxable year to the extent
that such compensation exceeds $1,000,000. "Covered employees" are a
corporation's chief executive officer on the last day of the taxable year and
any other individuals whose compensation is required to be reported to
shareholders under the Exchange Act by reason of being among the four most
highly compensated officers (other than the chief executive officer) for the
taxable year and who are employed on the last day of the taxable year.
Compensation paid under some qualified performance-based compensation
arrangements, which (among other things) provide for compensation based on
pre-established performance goals established by a compensation committee that
is composed solely of two or more "outside directors," is not considered in
determining whether a "covered employee's" compensation exceeds $1,000,000.
Federal Tax Consequences-Non-Qualified Stock Options. Generally, the
recipient of an NSO realizes no taxable income at the time of grant. Similarly,
AMCOL is not entitled to a deduction with respect to the grant of an NSO.
Upon the exercise of an NSO, a participant realizes income at ordinary
income tax rates. The amount included in income is the excess of the fair market
value of the common stock acquired (as of the date of exercise) over the
exercise price. AMCOL will generally be entitled to a corresponding deduction
equal to this amount for AMCOL's taxable year that ends with or includes the end
of the participant's taxable year of income inclusion, subject to the
limitations imposed by Code Section 162(m).
A participant's basis in the common stock acquired upon the exercise of an
NSO will be the exercise price, plus any amount includable in the participant's
gross income upon the exercise of the NSO. The gain or loss realized by the
participant upon a subsequent sale or exchange of the shares will be a capital
gain or loss.
Federal Tax Consequences-Restricted Stock. Generally, because of the risk
of forfeiture prior to vesting (and certain other restrictions that may be
imposed by the committee), no taxable income will be recognized by the
participant upon an award of restricted stock. Absent an election under Section
83(b) of the Code, the participant is deemed to receive ordinary income at the
time the restrictions on the restricted stock lapse. The amount of the
participant's taxable income is equal to the fair market value of the restricted
stock, less any amount paid by the participant for the restricted stock.
However, a participant may make an election under Section 83(b) of the Code,
within thirty days of the date of issuance of the restricted stock, to be taxed
at the time of issuance. Any participant who makes such an election recognizes
ordinary income on the date of issuance of the restricted stock equal to its
fair market value at that time, less any amount paid by the participant for the
restricted stock. The participant's basis in this stock will be increased by the
amount includable in his or her gross income under Code Section 83.
AMCOL is entitled to a deduction equal to the amount includable in the
participant's gross income for AMCOL's tax year in which or with which ends the
participant's taxable year in which
the amount is included in the participant's gross income. AMCOL's deduction is
also subject to the limitations imposed by Code Section 162(m) mentioned above.
If the participant subsequently disposes of the restricted stock after it
becomes substantially vested, the participant will recognize capital gain or
loss equal to the difference between the amount realized and the participant's
basis in the restricted stock, assuming the restricted stock is held as a
capital asset.
Unless an election under Code Section 83(b) is made, dividends paid to a
participant while the restricted stock remains subject to restrictions are
treated as compensation for federal income tax purposes. Any dividends paid on
the restricted stock subsequent to a Code Section 83(b) election are treated as
dividend income, rather than compensation, for federal income tax purposes.
The Plan Amendments
In order to implement the plan amendments, the 1993 plan and the 1998 plan
are proposed to be amended as set forth below. The plan amendments are
contingent upon the receipt of shareholder approval of the purchase agreement.
1993 Plan. The following shall be added to the end of Section 12 of the
1993 plan:
"Notwithstanding anything herein to the contrary, all nonvested options
held by employees who are to become employees of BASF (the "Chemdal
Employees"), pursuant to the Asset and Stock Purchase Agreement dated
November 22, 1999, between AMCOL International Corporation, a Delaware
corporation, and BASF Aktiengesellschaft, a corporation organized under the
laws of Germany, shall be immediately fully vested and exercisable, except
that any nonvested options held by any Chemdal employees whose options were
issued under a scheme approved by United Kingdom Inland Revenue will not be
vested."
1998 Plan. The following shall be added to the end of Section 11 of the
1998 plan:
"Notwithstanding anything herein to the contrary, all nonvested options
held by employees who are to become employees of BASF (the "Chemdal
Employees"), pursuant to the Asset and Stock Purchase Agreement dated
November 22, 1999, between AMCOL International Corporation, a Delaware
corporation, and BASF Aktiengesellschaft, a corporation organized under the
laws of Germany, shall be immediately fully vested and exercisable, except
that any nonvested options held by any Chemdal employees whose options were
issued under a scheme approved by United Kingdom Inland Revenue will not be
vested.
The following sentences shall be removed in their entirety from Section 7
of the 1998 plan:
"The aggregate fair market value of the common stock covered by ISOs
granted under the Plan or any other stock option plan of AMCOL or any
subsidiary or parent of AMCOL that become exercisable for the first time by
any employee in any calendar year shall not exceed $100,000. The aggregate
fair market value will be determined at the Award Date."
Board Recommendation
Proxies will be voted for or against approval of the plan amendments to the
1993 plan and the 1998 plan in accordance with the specifications marked
thereon, and will be voted in favor of approval if no specification is made.
Assuming a quorum is present, the affirmative vote of a majority of the shares
of common stock represented in person or by proxy at the special meeting and
entitled to vote thereon is required to adopt the plan amendments.
The Board of Directors recommends that you vote "FOR" adoption of the plan
amendments.
SECURITY OWNERSHIP
Security Ownership of Five Percent Beneficial Owners
The following table sets forth all persons known to be the beneficial owner
of more than 5% of AMCOL's common stock as of December 31, 1999.
Number of Shares and
Name and Address of Beneficial Owner Nature of Beneficial Percent
Ownership (1) of Class
Bank of Montreal 3,101,751 (2) 11.52%
Paul Bechtner Trust
111 West Monroe Street
Chicago, Illinois 60690
Everett P. Weaver 3,116,751 (3)(4) 11.58%
c/o AMCOL International Corporation
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803
William D. Weaver 4,155,059 (3)(5) 15.43%
c/o AMCOL International Corporation
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803
<FN>
(1) Nature of beneficial ownership is direct unless otherwise indicated by footnote. Beneficial ownership as shown in the
table arises from sole voting and investment power unless otherwise indicated by footnote.
(2) Voting and investment power are shared by the trustees of this trust. See note (3) below.
(3) Includes 3,101,751 shares held in the Paul Bechtner Trust as to which Messrs. Everett P. Weaver, William D. Weaver and the
Bank of Montreal are co-trustees and share voting and investment power.
(4) Includes 15,000 shares in a trust as to which voting and investment power are shared with Mr. Weaver's wife.
(5) Includes 615,570 shares held in a living trust and 56,800 shares in a charitable remainder unit trust as to which Mr.
Weaver exercises sole voting and investment power. Also includes 1,600 shares held by his wife, 223,400 shares held in
his wife's living trust, 45,000 shares held by his wife as trustee for the benefit of her brother, and 63,560 shares held
by his wife for the benefit of their grandchildren as to which Mr. Weaver may be deemed to share voting and investment power.
</FN>
Security Ownership of Directors and Executive Officers
The following table sets forth, as of February 21, 2000, shares
beneficially owned by: each director and nominee; the Chief Executive Officer;
the four other most highly compensated executive officers; and as a group, such
persons and other executive officers.
Number of Shares and Nature
Beneficial Owner of Beneficial Ownership (1) Percent of Class
Arthur Brown 28,146 *
Robert E. Driscoll, III 380,895 1.38%
John Hughes 800,709 2.90%
James A. McClung 4,600 *
Jay D. Proops 42,700 *
C. Eugene Ray 106,146 *
Clarence O. Redman 63,708 *
Paul G. Shelton 416,962 1.51%
Dale E. Stahl 28,200 *
Lawrence E. Washow 433,325 1.57%
Audrey L. Weaver 651,796 2.36%
Paul C. Weaver 383,920 1.39%
Gary L. Castagna 62,825 *
Frank B. Wright, Jr. 35,251 *
All of the above and other executive officers as a group (20
persons) 3,220,884 11.66%
<FN>
* Percentage represents less than 1% of the total shares of common stock outstanding as of February 21, 2000.
(1) Nature of beneficial ownership is set forth on Page _____.
</FN>
Nature of Beneficial Ownership
(Shares Held) as of February 21, 2000
Directly In the In Limited As As By As Trustee Subject
Beneficial Owner or as Company's Partnership Trustee Custodian Family of the to Options
Joint Savings or Members Company's Exercisable
Tenants Plan Co-Trustee Pension in 60 Days
(1) (2) Plan (4)
Arthur Brown 23,400 --- --- --- --- --- --- 4,746
Robert E. Driscoll, III 5,000 --- 371,295 (3) 4,000 --- --- --- 600
John Hughes 249,530 103,443 --- --- --- 41,328 217,500 188,908
James A. McClung 1,000 --- --- --- --- --- --- 3,600
Jay D. Proops 24,000 --- 10,000 --- --- --- --- 8,700
C. Eugene Ray 81,150 --- --- --- --- 20,250 --- 4,746
Clarence O. Redman 25,374 14,934 --- --- --- --- --- 23,400
Paul G. Shelton 70,085 22,068 --- --- 14,492 935 217,500 91,882
Dale E. Stahl 19,500 --- --- --- --- --- --- 8,700
Lawrence E. Washow 79,643 13,448 --- --- 7,500 --- 217,500 115,234
Audrey L. Weaver 646,070 --- --- --- --- 5,126 --- 600
Paul C. Weaver 318,876 --- --- 30,638 --- 31,706 --- 2,700
Gary L. Castagna 2,733 4,357 --- --- --- --- --- 55,735
Frank B. Wright, Jr. 1,350 18,284 --- --- --- --- --- 15,617
All Directors and Executive 1,568,524 242,595 381,295 34,638 21,992 99,345 217,500 692,177
Officers
<FN>
(1) Includes shares held in joint tenancy with spouses for which voting rights may be shared.
(2) With the exception of Mr. Redman's shares, which are held in the Clarence O. Redman PC Savings Plan, the shares are held
in AMCOL's Savings Plan.
(3) Mr. Driscoll is a general partner.
(4) Messrs. Hughes, Shelton and Washow share voting rights.
</FN>
NAMED OFFICERS' COMPENSATION
Summary Compensation Table
The Summary Compensation Table below includes, for each of the fiscal years
ended December 31, 1999, 1998 and 1997, individual compensation for services to
AMCOL and its subsidiaries of those persons who were at December 31, 1999: the
Chief Executive Officer; and the four other most highly compensated executive
officers of AMCOL, or collectively, the named officers.
Long-Term All Other
Compen-sation Compen-sation
Name and Principal Position Annual Compensation (1)(2) Awards ($)(4)
Securities
Bonus Underlying
Year Salary ($) ($)(3) Options (#)
John Hughes 1999 475,000 712,500 25,000 41,146
Chairman and Chief Executive Officer 1998 450,000 257,792 25,000 19,386
1997 400,000 244,650 25,500 24,400
Lawrence E. Washow 1999 350,000 437,500 21,250 31,280
President and Chief Operating 1998 316,667 137,600 18,750 16,578
Officer 1997 229,256 114,449 12,750 8,740
Paul G. Shelton 1999 275,000 258,090 17,000 21,656
Senior Vice President and Chief 1998 240,000 92,800 12,500 13,694
Financial Officer of AMCOL and 1997 215,000 102,354 12,750 8,600
President of Ameri-Co Carriers, Inc.
and Nationwide Freight Service, Inc.
Frank B. Wright, Jr. 1999 215,000 112,698 11,250 15,840
Vice President of AMCOL and 1998 195,000 101,010 10,750 10,600
President of Volclay International 1997 175,000 70,000 9,563 3,500
Corporation
Gary L. Castagna 1999 200,000 200,000 11,250 18,571
Vice President of AMCOL and 1998 160,000 109,874 10,750 8,599
President of Chemdal International 1997 142,645 54,976 6,375 5,706
Corporation
<FN>
(1) Includes deferred compensation under AMCOL's Savings Plan and AMCOL's Deferred Compensation Plan.
(2) The incremental cost of non-cash compensation and other personal benefits during any year presented did not exceed the lesser
of $50,000 or 10% of the total of annual salary and bonus reported for any individual named above.
(3) The figures in this column reflect bonuses from the Executive Incentive Compensation Plan and the Bonus Plan as described in
the Board Compensation Committee Report on Executive Compensation.
(4) The figures in this column include Company matching contributions under AMCOL's Savings Plan. During 1997, AMCOL
approved a 401(k) restoration plan whereby the matching contributions for salary deferrals in excess of ERISA limits to
AMCOL's Savings Plan were credited to AMCOL's Deferred Compensation Plan.
</FN>
Option Grants in Last Fiscal Year
Shown below is information on grants of incentive stock options during the
fiscal year ended December 31, 1999 to the named officers, which are reflected
in the Summary Compensation Table on Page ___.
Date
Name Individual Grants in 1999 Value
Number of
Securities % of Total Grant
Underlying Options Date
Options Granted to Exercise Expiration Present
Granted (1) Employees (2) Price (3) Date Value (4)
John Hughes 25,000 8.68% $9.00 02/03/09 $87,494
Lawrence E. Washow 21,250 7.38 9.00 02/03/09 74,370
Paul G. Shelton 17,000 5.90 9.00 02/03/09 59,496
Frank B. Wright, Jr. 11,250 3.91 9.00 02/03/09 39,372
Gary L. Castagna 11,250 3.91 9.00 02/03/09 39,372
<FN>
(1) These incentive stock options, or ISOs, were issued pursuant to the 1998
plan and may not be exercised until they vest. These ISOs vest 40% after
two years, 60% after three years, 80% after four years and 100% after five
years, provided that on death or retirement under specified conditions,
these ISOs become fully vested. The exercise price may not be less than the
fair market value of the shares subject to the option on the date of grant.
The exercise price may not be less than 110% of such fair market value if
the purchaser is a holder of more than 10% of AMCOL's outstanding voting
securities.
(2) Based on 288,000 options granted to all employees.
(3) Fair market value on the date of grant.
(4) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options reflected in the above table include the following: an
exercise price on the option of $9.00, equal to the fair market value of
the underlying stock on the date of grant; an option term of 6 years;
interest rate of 4.87% representing the interest rates on U.S. Treasury
securities on the date of grant with maturity dates corresponding to the
vesting of the options; volatility of 44.90% and dividends at the rate of
$0.24 per share representing the annualized dividends paid with respect to
a share of common stock at the date of grant. There have been no reductions
to reflect the probability of forfeiture due to termination prior to
vesting, or to reflect the probability of a shortened option term due to
termination of employment prior to the option expiration date. The ultimate
values of the options will depend on the future market price of AMCOL's
stock, which cannot be forecast with reasonable accuracy. The actual value,
if any, an optionee will realize upon exercise of an option will depend on
the excess of the market value of AMCOL's common stock over the exercise
price on the date the option is exercised.
</FN>
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Shown below is information with respect to options exercised by the named
officers pursuant to AMCOL'S option plans during fiscal 1999 and unexercised
options granted in fiscal 1999 and prior years under AMCOL's option plans to the
named officers and held by them at December 31, 1999.
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Name Acquired Value Options at 12/31/99 12/31/99
on Realized Exercisable/ Exercisable/
Exercise Unexercisable Unexercisable (1)
John Hughes 33,750 $179,759 164,463 / 78,425 $1,305,643 / $407,027
Lawrence E. Washow 20,000 182,333 105,003 / 53,469 785,263 / 281,791
Paul G. Shelton 17,300 134,489 84,606 / 43,318 766,669 / 232,464
Frank B. Wright, Jr. -- -- 9,135 / 31,278 53,237 / 161,580
Gary L. Castagna -- -- 50,040 / 29,186 259,340 / 152,664
<FN>
(1) Based on the closing sale price as quoted on The New York Stock Exchange on that date.
</FN>
Pension Plans
Remuneration Estimated Annual Retirement Benefits Based on Years of Service
15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
$150,000 $33,750 $45,000 $56,250 $67,500 $78,750 $84,375
200,000 45,000 60,000 75,000 90,000 105,000 112,500
250,000 56,250 75,000 93,750 112,500 131,250 140,625
300,000 67,500 90,000 112,500 135,000 157,500 168,750
350,000 78,750 105,000 131,250 157,500 183,750 196,875
400,000 90,000 120,000 150,000 180,000 210,000 225,000
450,000 101,250 135,000 168,750 202,500 236,250 253,125
500,000 112,500 150,000 187,500 225,000 262,500 281,250
550,000 123,750 165,000 206,250 247,500 288,750 309,375
The above table shows the estimated annual retirement benefits payable on a
straight life annuity basis to participating employees, including officers, in
the earnings and years of service classifications indicated under AMCOL's
retirement plans, which cover substantially all of its domestic employees on a
non-contributory basis. The estimated benefits as disclosed below assume that
the plans will be continued and that the employee will elect to receive his
pension at normal retirement age. The table above and the estimates below do not
reflect the reduction in an individual's final monthly compensation due to the
social security monthly covered compensation. This reduction is based upon the
retirement year for a particular individual.
Years of Average Pension
Name Service Compensation Benefit
John Hughes 35 $604,658 $296,330
Lawrence E. Washow 21 375,426 112,142
Paul G. Shelton 18 303,929 85,007
Frank B. Wright, Jr. 4 200,324 --
Gary L. Castagna 10 233,207 30,044
The above table indicates the average earnings for the highest five
consecutive calendar years and the number of years of credited service under the
pension plans as of December 31, 1999, for each of the named officers. Covered
compensation includes a participant's base salary, commissions, bonuses and
salary reductions under AMCOL's Savings Plan and Deferred Compensation Plan. Mr.
Wright has only been employed by AMCOL for four years, and does not have a
vested pension benefit. The average compensation for Mr. Wright represents the
average paid during his employment with AMCOL.
Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as
amended, limit the annual benefits that may be paid from a tax-qualified
retirement plan. As permitted by the Employee Retirement Income Security Act of
1974, AMCOL has a supplemental plan that authorizes the payment out of general
funds of AMCOL any benefits calculated under provisions of AMCOL's pension plan
that may be above the limits under these sections. The accrued, unfunded
liability of the supplemental plan at December 31, 1999, was $__________.
Change In Control Arrangements
Each of the named officers has an agreement with AMCOL which provides that,
upon a change in control of AMCOL, each of them is to be employed by AMCOL for a
period of time after the change in control (three years in the case of Messrs.
Hughes, Washow and Shelton and two years for Messrs. Wright and Castagna),
unless there is just cause for his termination. A change in control is defined
as a change in legal or beneficial ownership of 51% of AMCOL's common stock
within a six-month period, or the sale of 90% or more of AMCOL's assets. The
sale transaction does not constitute a change of control under these agreements.
If termination occurs within the specified period for other than just
cause, through either actual termination or constructive termination, the named
officer will receive compensation equal to his current annual salary plus an
average of his incentive bonus payments for prior periods, less any compensation
received from the date of the change in control. These payments may not exceed
an amount equal to two times, in the case of Messrs. Wright and Castagna, and
three times, in the case of Messrs. Hughes, Washow and Shelton, the respective
named officer's average annual compensation during the prior five calendar
years. Each named officer will also receive continued medical, health and
disability benefits for one year after termination.
The table below indicates the maximum amount that would have been paid had
a change of control occurred and the named executives were terminated without
cause prior to December 31, 1999.
Name Date of Agreement Payment
John Hughes April 1, 1997 $1,813,974
Lawrence E. Washow February 16, 1998 1,126,278
Paul G. Shelton April 1, 1997 911,772
Frank B. Wright, Jr. December 1, 1999 400,648
Gary L. Castagna February 17, 1998 466,414
The agreements do not require the named officers to seek other employment,
but any payments or benefits will be reduced by up to 50% by any compensation
earned from other employment. For a period of years (three years in the case of
Messrs. Hughes, Washow and Shelton and two years in the case of Messrs. Wright
and Castagna) from the date of termination of employment with or without cause,
before or after a change in control, each of the named officers is prohibited
from engaging in any business that competes with AMCOL and from soliciting any
employee of AMCOL.
Director Compensation
Type of Compensation Cash Stock Options
Annual Retainer $14,700 2,000 shares
Board Meeting Attendance Fee $1,470
Annual Retainer for Committee Chairman $1,969
Committee Meeting Attendance Fee $525
Directors who are also full-time employees of AMCOL are not paid for their
services as directors or for attendance at meetings.
Pursuant to the 1998 plan, each of the non-employee directors was granted
2,000 options at $13.00 per share in 1999.
Compensation Committee Report on Executive Compensation
AMCOL's mission is to supply high-quality performance products and
innovative technologies for absorbent polymers, minerals and environmental
markets worldwide. To accomplish this objective, AMCOL has developed
comprehensive compensation strategies that emphasize maximizing shareholder
value and growth in sales and earnings. The compensation program has been
designed to reinforce and support AMCOL's business goals and to help the
organization both attract and retain high quality executive talent.
The Compensation Committee of the Board of Directors is comprised of seven
non-employee directors whose objectives are to approve the design, assess the
effectiveness of and administer compensation programs in support of the
compensation policies. The Compensation Committee also evaluates executive
performance and reviews and approves all salary arrangements and other
remuneration for the officer group.
Compensation Committee Philosophy
The Compensation Committee is committed to implementing and administering a
compensation program that supports and underscores AMCOL's mission and values.
The policies underlying the Compensation Committee's compensation decisions are
enumerated more fully below:
Compensation opportunities should strengthen AMCOL's ability to attract,
retain, and encourage the growth and development of the highest caliber
executive talent upon whose efforts the success of AMCOL largely depends.
A substantial portion of pay for senior executives should be comprised of
at-risk, variable compensation whose payout is dependent on the achievement
of specific corporate and individual performance objectives. In addition,
the at-risk components of pay will have a significant equity-based element
to ensure appropriate linkage between executive behavior and shareholder
interests.
The committee considers stock ownership by management to be an important
means of linking management's interests with those of shareholders.
Effective February 1999, AMCOL adopted stock ownership guidelines for its
corporate and subsidiary officers. The amount of stock required to be owned
increases with the level of responsibility of each executive, with the
Chief Executive Officer expected to own stock with a value of at least
equal to four times base salary. Shares that the executives have the right
to acquire through the exercise of stock options are not included in the
calculation of stock ownership for purposes of these guidelines. Executives
are expected to reach their respective stock ownership goals over a
three-year period.
Each compensation component targets pay opportunities at the median of
compensation paid to executives included in AMCOL's comparative
compensation peer group. AMCOL's comparative compensation group is not the
same as the companies that make up the peer group in the stock price
performance graph included in this proxy statement. In order to provide an
appropriate basis for compensation analysis, a group larger than the stock
price graph's peer group was used; note, however, that a significant number
of the peer group companies are included in the comparative compensation
group.
Components of Compensation
AMCOL's total compensation program consists of several components, each of
which plays a role in supporting overall business goals and pay philosophy. In
assessing the competitiveness of AMCOL's senior executive compensation programs,
available salary data consisting of general manufacturing companies is used for
comparison purposes. Pay decisions are based upon pay data for comparable
positions. The total compensation program consists of base salary, annual
incentives and long-term incentives.
Base Pay
Base salaries are set at median levels (50th percentile) relative to
competitive market levels for comparable positions based upon available survey
data from general manufacturing and durable and nondurable goods manufacturing
industries. The Compensation Committee annually reviews each executive's base
salary and makes adjustments based upon levels of responsibility, breadth of
knowledge, internal equity issues, as well as market pay practices. Salary
adjustments are based primarily upon individual performance, which is evaluated
based on individual contributions to AMCOL.
As reflected in the Summary Compensation Table on Page ___, the Chief
Executive Officer's base salary was increased in 1999 by $25,000 (5.6%). In
arriving at Mr. Hughes' base salary, the Compensation Committee considered his
individual performance and his long-term contributions to the financial success
of AMCOL. The Committee also compared Mr. Hughes' base salary with the base
salaries of chief executive officers from appropriate salary surveys.
Annual Incentives
The Executive Incentive Compensation Plan, or the incentive plan,
underscores AMCOL's pay-for-performance philosophy by rewarding executives for
meaningful contributions toward predetermined financial performance goals. The
annual incentive opportunity for the Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer is based upon performance of AMCOL, as a
whole, compared to targets for return on capital and earnings per share. These
executives do not receive bonuses until AMCOL achieves a designated level of
return on capital and earnings per share. In the case of the other executives,
their bonus is determined pursuant to formulas tailored for each business
segment with an emphasis on the return on capital and earnings of the particular
business segment to which the executive devotes the majority of his time. The
Chief Executive Officer was paid a bonus of $712,500 for the 1999 financial
performance of AMCOL.
In connection with the proposed sale of AMCOL's SAP business, the
Compensation Committee has granted bonuses to certain of AMCOL's employees in
recognition of their contribution to the development and success of the SAP
business. These bonuses are contingent upon the closing of the sale of the SAP
business. John Hughes, our Chief Executive Officer was granted a bonus of
$_________. In addition, the following executive officers were also granted a
bonus in connection with the proposed sale of the SAP business: Lawrence E.
Washow, President and Chief Operating Officer, Paul G. Shelton, Senior
Vice-President and Chief Financial Officer,
and Gary L. Castagna, Vice President of AMCOL and President of Chemdal
International Corporation. In addition, seven key employees of the SAP business
were granted bonuses. In order to be eligible to receive these bonuses, the
relevant employees may not terminate their employment with AMCOL prior to the
closing of the sale of the SAP business.
Long-Term Incentives
Long-term incentives are provided annually in the form of incentive stock
options, or ISOs. Options under AMCOL's 1998 Long-Term Incentive Plan are
granted by the Compensation Committee. ISOs are granted at a price not less than
the fair market value of the common stock on the date of grant. Hence, the
options will only have value when and if the stock price appreciates above the
grant date price. ISOs are the only long-term incentive compensation vehicle
currently used by AMCOL.
The option program serves to focus executives on long-term shareholder
value creation and to foster an ownership mentality among the executive
management team. In keeping with AMCOL's commitment to provide a total
compensation package that focuses on at-risk pay components, long-term
incentives will continue to comprise a large portion of the value of an
executive's total compensation package. Currently, approximately 15% to 20% of
the value of total compensation is comprised of equity incentives.
When determining award sizes, the Compensation Committee considers the
executive's responsibility level, prior experience, historical award data and
ability to positively impact long-term shareholder value. The Compensation
Committee also strives to deliver market competitive long-term incentive award
opportunities to executives based on the dollar value of the award delivered.
In 1999, the Chief Executive Officer received options to purchase 25,000
shares with an exercise price of $9.00, as provided in the Option Grant Table on
Page __. The Compensation Committee believes the equity incentive program
provides a strong link between management behavior and shareholder interests.
Compensation Committee
Jay D. Proops, Chairman
Arthur Brown
Robert E. Driscoll, III
C. Eugene Ray
Clarence O. Redman
Dale E. Stahl
Audrey L. Weaver
Stock Performance Graph
The following graph sets forth a five-year comparison of cumulative total
returns for: AMCOL (which trades on The New York Stock Exchange); S&P SmallCap
600 Index; and a custom peer group of publicly traded companies, or the peer
group.
Using the assistance of consultants, AMCOL selected the peer group which
consists of companies whose businesses, sales sizes, market capitalization and
stock trading volumes were similar to that of AMCOL.
All returns were calculated assuming dividend reinvestment on a quarterly
basis. The returns of each company in the peer group have been weighted
according to market capitalization.
The peer group consists of the following companies: Calgon Carbon
Corporation, ChemFirst, Inc., Lilly Industries Inc., McWhorter Technologies,
Inc., Mississippi Chemical Corporation, Oil-Dri Corporation of America and Zemex
Corporation.
Comparison of Five-Year Cumulative Total Return*
AMCOL, S&P SmallCap 600 and Self-Determined Peer Group
[GRAPHIC OMITTED]
12/95 12/96 12/97 12/98 12/99
AMCOL International 102.6 115.7 177.7 112.7 187.76
S&P SmallCap 129.9 157.6 197.8 195.2 219.16
Self-Determined Peer Group 116.1 133.5 135.2 109.6 86.1
* Assumes $100 invested on December 31, 1994, in AMCOL International
Corporation CommonStock, S&P SmallCap 600 and Self-Determined Peer Group.
* Total return assumes reinvestment of dividends on a quarterly basis.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
A representative of KPMG LLP, AMCOL's independent certified public
accountants, will be present at the special meeting, will be afforded the
opportunity to make a statement, and will be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be included in AMCOL's proxy statement
and form of proxy relating to, and to be presented at, the annual meeting of
shareholders of AMCOL to be held in 2001, must be received by AMCOL on or before
December __, 2000.
If a shareholder intends to present a proposal at the 2001 annual meeting
of shareholders but does not seek inclusion of that proposal in AMCOL's proxy
statement for that meeting, such shareholder must deliver written notice of the
proposal to AMCOL in accordance with the requirements of AMCOL's By-Laws.
Generally, such proposals must be delivered to AMCOL between ___________, 2001
and ________, 2001. All proposals or notices should be directed to
the Secretary of AMCOL at One North Arlington, 1500 West Shure Drive, Suite 500,
Arlington Heights, Illinois 60004-7803.
OTHER MATTERS
In addition to the business described above, there will be remarks by the
Chairman and Chief Executive Officer and a general discussion period during
which shareholders will have an opportunity to ask questions about AMCOL.
As of the date of this proxy statement, AMCOL's management knows of no
matter not specifically referred to above as to which any action is expected to
be taken at the special meeting. It is intended, however, that the persons named
as proxies will vote the proxies, insofar as they are not otherwise instructed,
regarding such other matters and the transaction of such other business as may
be properly brought before the meeting, as seems to them to be in the best
interest of AMCOL and its shareholders.
ADDITIONAL INFORMATION
AMCOL files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information that AMCOL files at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information about the public reference rooms. Our
filings are also available from commercial document retrieval services and at
the Internet web site maintained by the SEC at http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this proxy
statement, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this proxy statement, except
for any information superseded by information contained directly in this proxy
statement. This proxy statement incorporates by reference AMCOL's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999, which contains
important information about us and our financial condition.
We are also incorporating by reference additional documents that we may
file with the SEC between the date of this proxy statement and the date of the
special meeting. These include periodic reports, such as Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.
If you are a shareholder, you may have previously received some of the
documents incorporated by reference. You may still obtain copies of any of these
documents from AMCOL or the SEC or the SEC's Internet web site described above.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this proxy statement, by requesting them in writing or by telephone
from AMCOL at AMCOL International Corporation, One North Arlington, 1500 West
Shure Drive, Suite
500, Arlington Heights, Illinois 60004-7803, Telephone: (847) 394-8730,
Attention: Investor Relations. Please request documents by April __, 2000 to
ensure receipt before the special meeting.
By Order of the Board of Directors,
Clarence O. Redman
Secretary
Arlington Heights, Illinois
April __, 2000
AMCOL INTERNATIONAL CORPORATION
Special Meeting of Shareholders to be held on May ___, 2000
As a shareholder of AMCOL International Corporation (the "Company"), I
acknowledge receipt of Notice of Special Meeting and accompanying Proxy
Statement and appoint John Hughes, Lawrence E. Washow and Paul C. Weaver, or any
one of them, to vote all shares of stock of AMCOL International Corporation that
I am entitled to vote, at the special meeting of shareholders to be held on
___________, May ___, 2000, at 10:00 a.m., Chicago time, at _______________, and
any adjournment thereof.
1. To consider and vote upon a proposal to approve the sale by AMCOL of its
superabsorbent polymers business, or the SAP business, to BASF
Aktiengesellschaft, or BASF, pursuant to the terms of an Asset and Stock
Purchase Agreement dated November 22, 1999. The purchase agreement provides
for the transfer to BASF of the following:
- all of the shares of capital stock of AMCOL's indirect subsidiaries
Chemdal Corporation and Chemdal Asia Ltd.; and
- all other assets of AMCOL and its designated subsidiaries related
primarily to the SAP business.
FOR AGAINST ABSTAIN 2. To consider and vote upon a proposal to approve certain
amendments to AMCOL's 1993 Stock Plan and 1998 Long-Term Incentive Plan, or the
plan amendments. FOR AGAINST ABSTAIN THIS PROXY SHALL BE VOTED IN ACCORDANCE
WITH THE INSTRUCTIONS GIVEN, AND IN THE ABSENCE OF SUCH INSTRUCTIONS, SHALL BE
VOTED FOR EACH OF THE PROPOSALS. IF OTHER BUSINESS IS PRESENTED AT THE MEETING,
THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXIES ON
THOSE MATTERS.
This Proxy Is Solicited on Behalf of the Board of Directors
You are urged to mark, sign and return your proxy promptly in the enclosed
self-addressed, postage-paid (if mailed in the United States) envelope.
Dated ________________, 2000
_________________________________________
SIGNATURE OF SHAREHOLDER
_________________________________________
SIGNATURE OF SHAREHOLDER
When signing the proxy, please date it and take care to have the
signature agree to the shareholder's name as it appears on this
side of the proxy. If shares are registered in the names of two
or more persons, each person should sign. Executors,
administrators, trustees and guardians should so indicate when
signing.
CONTROL NUMBER VOTE BY TELEPHONE Call Toll Free On a Touch Tone
Telephone 1-888-___-____ There is NO CHARGE to you for this call.
The Board of Directors encourages you to use this inexpensive,
time saving method to vote.
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
You will be asked to enter a Control Number, which is located in the box on the
left side of this form.
Proposal 1: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1-
THANK YOU FOR VOTING.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1-
THANK YOU FOR VOTING.
If you vote by telephone, DO NOT mail back your proxy.