AMCOL INTERNATIONAL CORPORATION
One North Arlington
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On May 15, 2003
To Our Shareholders:
The annual meeting of shareholders of AMCOL International Corporation, or
AMCOL, will take place on Thursday, May 15, 2003, at 11:00 AM, local time, at
the Hilton Northbrook, 2855 North Milwaukee Avenue, Northbrook, Illinois, for
the following purposes:
1. To elect three (3) directors, for a three-year term or until their
successors are elected and qualified.
2. To amend AMCOL's 1998 Long-Term Incentive Plan.
3. To ratify the appointment of independent auditors.
4. To transact any other business which properly comes before the
annual meeting.
Only shareholders of record of AMCOL's common stock as of the close of
business on March 19, 2003 will be entitled to notice of and to vote at the
annual meeting and at any adjournments of the annual meeting.
The Board of Directors recommends that you vote "FOR" each of AMCOL's
nominees for director, "FOR" approval of the amendment to AMCOL's 1998 Long-Term
Incentive Plan and "FOR" ratification of the appointment of independent
auditors.
Whether or not you plan to attend the annual 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 annual 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 1, 2003
AMCOL INTERNATIONAL CORPORATION
One North Arlington
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held On May 15, 2003
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 annual meeting of shareholders to be held
on Thursday, May 15, 2003, at 11:00 AM, Central Daylight Savings Time, at the
Hilton Northbrook, 2855 North Milwaukee Avenue, Northbrook, Illinois, and at any
adjournment of the annual meeting. This proxy statement and the accompanying
proxy card are first being mailed or delivered to shareholders of AMCOL on or
about April 1, 2003.
At the annual meeting, you will be asked to consider and vote upon the
following matters:
1. The election of three (3) directors for a three-year term or until
their successors are elected and qualified.
2. To amend AMCOL's 1998 Long-Term Incentive Plan.
3. To ratify the appointment of independent auditors.
4. Any other business which properly comes before the annual meeting.
The Board of Directors recommends that you vote "FOR" each of AMCOL's
nominees for director, "FOR" approval of the amendment to AMCOL's 1998 Long-Term
Incentive Plan and "FOR" ratification of the appointment of independent
auditors.
Whether or not you plan to attend the annual 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 annual meeting, you may revoke your proxy and, if you wish, vote your shares
in person.
The date of this proxy statement is April 1, 2003.
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THE ANNUAL MEETING
General
This proxy statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of AMCOL for use at the annual
meeting to be held on Thursday, May 15, 2003, at 11:00 AM, Central Daylight
Savings Time, at the Hilton Northbrook, 2855 North Milwaukee Avenue, Northbrook,
Illinois, and at any adjournment of the annual meeting.
Record Date
The Board of Directors has fixed the close of business on March 19, 2003,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the annual 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 annual meeting, either by proxy, or telephone or
in person. As of the record date, there were 28,092,666 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 Annual Meeting; Recommendation of the Board of Directors
At the annual meeting, AMCOL's shareholders will be asked to consider and
vote upon the following matters:
o the election of three directors;
o amendment to AMCOL's 1998 Long-Term Incentive Plan;
o ratification of the appointment of independent auditors; and
o any other business which properly comes before the annual meeting.
The Board of Directors recommends that you vote "FOR" each of AMCOL's
nominees for director, "FOR" approval of the amendment to AMCOL's 1998 Long-Term
Incentive Plan and "FOR" ratification of the appointment of independent
auditors.
Proxies; Vote Required
Under Delaware law, the election of the three directors, the amendment to
AMCOL's 1998 Long-Term Incentive Plan and ratification of the appointment of
independent auditors must be approved by the holders of a majority of the shares
of AMCOL's common stock represented at the annual meeting.
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All properly executed proxies received by AMCOL prior to the annual
meeting and not revoked will be voted in accordance with the instructions marked
thereon. Unless contrary instructions are marked, proxies will be voted "FOR"
each of AMCOL's nominees for director, "FOR" the amendment to AMCOL's 1998
Long-Term Incentive Plan and "FOR" ratification of the appointment of
independent auditors. The Board of Directors knows of no other business which
will be presented for consideration at the annual 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 thereof by doing any of the
following:
o giving written notice to the Secretary of AMCOL at One North
Arlington, 1500 West Shure Drive, Suite 500, Arlington Heights,
Illinois, 60004-7803;
o submitting a duly executed proxy bearing a later date;
o voting by telephone on a later date; or
o attending the annual meeting and voting in person.
Attendance at the annual 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 annual 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 holder's 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 AMCOL's nominees for directors, amendment to
the 1998 Long-Term Incentive Plan and ratification of the appointment of
independent auditors.
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.
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PROPOSAL 1: ELECTION OF DIRECTORS
AMCOL's Board of Directors consists of 10 directors. AMCOL's Certificate
of Incorporation divides the Board of Directors into three classes, with the
members of one class to be elected each year for a three-year term. The terms of
the Class II directors will expire at the Annual Meeting. The following tables
set forth certain information regarding the director nominees and the continuing
members of the Board:
Information Concerning Nominees
CLASS II
(Term expiring in 2006)
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Name Age Director Since Principal Occupation for Last Five Years
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Robert E. Driscoll, III 64 1985 Retired Dean and Professor of Law, University of South Dakota.
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Daniel P. Casey 60 2002 Retired Chief Financial Officer and Vice Chairman of the Board of
Gaylord Container Corp., a manufacturer and distributor of brown
paper and packaging products.
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Dale E. Stahl 55 1995 President and Chief Executive Officer of Inland Paperboard and
Packaging, Inc., a manufacturer of containerboard and corrugated
boxes since June 2000; prior thereto President and Chief Operating
Officer of Gaylord Container Corporation, a manufacturer and
distributor of brown paper and packaging products.
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Each nominee must receive the favorable vote of the holders of a majority
of the shares of common stock represented at the annual meeting in person or by
proxy, assuming a quorum is present.
The Board of Directors recommends that AMCOL's shareholders vote "FOR"
each of the nominees named above.
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Information Concerning Continuing Members of the Board
Class I
(Term expiring in 2005)
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Name Age Director Since Principal Occupation for Last Five Years
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John Hughes 60 1984 Chairman of the Board. Chief Executive Officer of AMCOL from 1985
until May 2000.
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Clarence O. Redman 60 1989 Secretary of AMCOL. Also, of counsel to Lord, Bissell & Brook since
October 1997, the
law firm that
serves as Corporate
Counsel to AMCOL.
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Lawrence E. Washow 49 1998 President and Chief Executive Officer of AMCOL since May 2000,
Chief Operating Officer of AMCOL since August 1997; prior thereto,
Senior Vice President of AMCOL and President of Chemdal
International Corporation (unit sold to BASF AG in June 2000).
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Audrey L. Weaver* 48 1997 Private investor.
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* Paul C. Weaver and Audrey L. Weaver are first cousins.
CLASS III
(Term expiring in 2004)
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Name Age Director Since Principal Occupation for Last Five Years
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Arthur Brown 62 1990 Chairman, President and Chief Executive Officer of Hecla Mining
Company.
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Jay D. Proops 61 1995 Private investor since 1995; prior thereto, Vice Chairman and
co-founder of The Vigoro Corporation. Also a Director of Great Lakes
Chemical Corporation.
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Paul C. Weaver* 40 1995 Vice President of Information Resources, Inc. since 2002; prior
thereto Managing partner of Consumer Aptitudes, Inc. since July 1997,
both companies engage in marketing research; prior thereto, various
sales and account management positions for AC Nielsen Company, a
provider of marketing information services.
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* Paul C. Weaver and Audrey L. Weaver are first cousins.
-5-
PROPOSAL 2: AMENDMENT TO AMCOL'S 1998 LONG-TERM INCENTIVE PLAN
General
The Board of Directors has adopted, subject to shareholder approval, an
amendment to AMCOL's 1998 Long-Term Incentive Plan, or the Plan. The Plan was
approved by AMCOL's shareholders at AMCOL's annual meeting in 1998 and amended
at AMCOL's annual meeting in 2001. Under the proposed amendment, the maximum
number of shares of AMCOL common stock with respect to which awards may be
issued under the Plan will be increased from 2,900,000 to 3,900.000. As of
February 28, 2003, the number of AMCOL shares of common stock subject to
outstanding options under the Plan was 1,950,517, leaving only remaining 410,389
shares of AMCOL common stock with respect to which awards may be issued under
the Plan. The increase of 1,000,000 shares would permit the Compensation
Committee to continue to grant options or other securities based incentives to
attract and reward employees, officers and directors.
The following is a brief description of the material features of the Plan.
You are encouraged to read the Plan in its entirety. This document has been
filed with the SEC and is publicly available.
Purpose
The purpose of the 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. Approximately seventy individuals are
eligible for awards under the Plan including nine directors, six executive
officers of the Company and fifty-five key employees.
Awards
The Plan provides for the granting of awards of restricted stock,
Incentive Stock Options, or ISOs, nonqualified stock options, or NSOs, and stock
appreciation rights, or SARs. The Plan permits awards to participants with
respect to a total of 2,900,000 shares of AMCOL's common stock. If the
amendments to the Plan are approved, the Plan will permit awards to participants
with respect to a total of 3,900,000 shares of AMCOL's common stock. As of
February 28, 2003 the closing sale price of AMCOL's common stock was $5.70 per
share as reported by the New York Stock Exchange.
The Committee
The Plan is administered by a committee composed of two or more
individuals elected by the Board of Directors from time to time. The committee
must be composed of directors. Currently, the Plan is administered by the
Compensation Committee of the Board of Directors. The Compensation Committee
from time to time grants awards under the Plan to selected eligible directors,
officers and employees, without payment by the participant.
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Restricted Stock Awards
The Plan permits 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
The Plan provides 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 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 Plan provides 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 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
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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
The Plan provides for the granting of SARs to any participant. SARs
granted by the committee pursuant to the Plan may relate to and be associated
with all or any part of a specific ISO or NSO. A 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 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.
The Manner of Exercise
The committee may permit the exercise price for options granted under the
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 other 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 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 Internal Revenue Code, or Code; provided,
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however, that NSOs, SARs and restricted stock are transferable in the
committee's discretion after vesting.
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 Plan at any time, but may not impair
the rights of participants with respect to any outstanding awards without the
consent of participants.
The Plan will terminate ten years after its adoption by the Board of
Directors; provided, however, that the Board of Directors may terminate the Plan
at any time.
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 exercised 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 Securities Exchange Act of 1934 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.
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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.
New Plan Benefits
The grant of awards under the Plan is within the discretion of the
committee administering the
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Plan or the Board of Directors. Therefore, we are unable to determine the dollar
value and number of options which will be received by or allocated to (i) any of
the executive officers, (ii) the current executive officers, as a group, (iii)
the current directors who are not executive officers, as a group, (iv) each
nominee for election as a director and (v) the employees who are not executive
officers, as a group, as a result of the adoption of the amendment to the 1998
Plan. If the proposed amendment had been in effect during 2002, it would not
have affected the determination of the number of options received by or
allocated to participants in 2002. No person is currently expected to receive
five percent or more of the total number of options available for grant under
the Plan and AMCOL is not aware that any associate of any executive officer or
director has received options under the Plan.
The Amendment
In order to implement the amendment, the Plan is proposed to be amended as
set forth below:
Section 3 of the Plan shall be amended to read as follows:
3. Stock Subject to the Plan.
Except as otherwise provided in Section 12, the aggregate
number of shares of Common Stock with respect to which Awards may be
granted through this Plan may not exceed 3,900,000 shares. If any
Awards shall terminate or expire as to any number of shares, new
Awards may thereafter be awarded with respect to such shares. The
aggregate number of shares of Common Stock with respect to which
Awards may be granted to any Participant in any calendar year may
not exceed 100,000 shares.
Proxies will be voted for or against approval of the amendment to the 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 amendment.
The Board of Directors recommends that AMCOL's shareholders vote "FOR"
approval of the amendment to AMCOL's 1998 Long-Term Incentive Plan.
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PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has appointed KPMG LLP to serve as independent
auditors for the fiscal year ending December 31, 2003, subject to ratification
of the appointment by the shareholders. KPMG LLP has served as the Company's
independent auditors for many years and is considered to be well qualified.
If the share owners should not ratify the appointment of Ernst & Young
LLP, the Audit Committee will reconsider the appointment.
The Board of Directors recommends that AMCOL's shareholders vote "FOR"
approval of the ratification of the appointment of Ernst & Young LLP as
independent auditors.
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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 percent of AMCOL's common stock as of February 28, 2003.
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Name and Address of Beneficial Owner Number of Shares and Percent
Nature of Beneficial of Class
Ownership(1)
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Advisory Research, Inc. (2)
180 North Stetson St., Suite 5780 1,726,800 6.16
Chicago, Illinois 60601
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Bankmont Financial Corp.
Paul Bechtner Trust 3,374,528 12.03
111 West Monroe Street (3)
Chicago, Illinois 60690
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Everett P. Weaver
c/o AMCOL International Corporation 3,386,528 12.07
1500 West Shure Drive, Suite 500 (4)(5)
Arlington Heights, Illinois 60004-7803
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William D. Weaver
c/o AMCOL International Corporation 4,230,829 15.06
1500 West Shure Drive, Suite 500 (4)(6)
Arlington Heights, Illinois 60004-7803
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(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) Based solely on a Schedule 13G filed with the SEC on February 14, 2003.
According to the Schedule 13G, Advisory Research, Inc. is an investment
advisor.
(3) Voting and investment power are share by the trustees of this trust. See
note (4) below.
(4) Includes 3,374,528 shares held in the Paul Bechtner Trust as to which
Messrs. Everett P. Weaver, William D. Weaver and Bankmont Financial Corp.
are co-trustees and share voting and investment power.
(5) Includes 15,000 shares in a trust as to which voting and investment power
are shared with Mr. Weaver's wife.
(6) Includes 344,501 shares held in a living trust, 200,000 shares in a
charitable remainder trust, 56,800 shares in a family charitable remainder
unitrust, and 30,000 shares in a charitable foundation, also includes
225,000 shares held in Mr. Weaver's wife's living trust, as to which Mr.
Weaver may be deemed to have voting and investment power.
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Security Ownership of Directors and Executive Officers
The following table sets forth, as of February 28, 2003, shares
beneficially owned by: (i) each director and nominee; (ii) the Chief Executive
Officer; (iii) the named officers set forth on page 16; and (iv) as a group,
such persons and other executive officers.
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Beneficial Owner Number of Shares and Nature Percent of Class
of Beneficial Ownership(1)
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Arthur Brown 77,840 *
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Daniel P. Casey 10,000 *
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Robert E. Driscoll, III 427,675 1.52
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John Hughes 1,216,491 4.31
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Jay D. Proops 119,741 *
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C. Eugene Ray 135,489 *
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Clarence O. Redman 293,567 1.05
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Dale E. Stahl 115,741 *
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Lawrence E. Washow 1,004,121 3.51
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Audrey L. Weaver 782,003 2.79
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Paul C. Weaver 399,962 1.42
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Gary L. Castagna 228,702 *
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Ryan McKendrick 169,355 *
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Gary Morrison 221,933 *
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Peter L. Maul 176,907 *
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All of the above and other
executive officers as a
group (16 persons) 4,915,806 16.59
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* Percentage represents less than 1% of the total shares of common stock
outstanding as of February 28, 2003.
(1) Nature of beneficial ownership is set forth on Page 15
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Nature of Beneficial Ownership (Shares Held) as of February 28, 2003
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As Trustee
Beneficial Owner Directly or In the In As By of the Subject to
as Joint Company's Limited Trustee or As Family Company's Options
Tenants (1) Savings Partnership Co-Trustee Custodian Members Pension Plan Exercisable
Plan (2) (3) (4) (5) in 60 Days
- ------------------------------------------------------------------------------------------------------------------------------------
Arthur Brown 23,400 -- -- -- -- -- -- 54,440
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel P. Casey 10,000 -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Robert E. Driscoll, III 7,000 -- 390,895 4,300 -- -- -- 25,480
- ------------------------------------------------------------------------------------------------------------------------------------
John Hughes 109,669 135,711 492,837 -- 55,838 217,500 204,936
- ------------------------------------------------------------------------------------------------------------------------------------
Jay D. Proops 24,000 -- 10,000 -- -- -- -- 85,741
- ------------------------------------------------------------------------------------------------------------------------------------
C. Eugene Ray 81,150 -- -- -- -- 20,250 -- 34,089
- ------------------------------------------------------------------------------------------------------------------------------------
Clarence O. Redman 154,760 65,136 -- 56,800 -- -- -- 16,871
- ------------------------------------------------------------------------------------------------------------------------------------
Dale E. Stahl 30,000 -- -- -- -- -- -- 85,741
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence E. Washow 244,957 16,591 -- -- -- -- -- 525,073
- ------------------------------------------------------------------------------------------------------------------------------------
Audrey L. Weaver 691,937 -- -- 56,800 -- 26,154 217,500 7,112
- ------------------------------------------------------------------------------------------------------------------------------------
Paul C. Weaver 299,397 -- -- 27,037 -- 30,830 -- 42,698
- ------------------------------------------------------------------------------------------------------------------------------------
Gary L. Castagna 4,100 3,102 -- -- -- -- 217,500 4,000
- ------------------------------------------------------------------------------------------------------------------------------------
Ryan F. McKendrick 2,298 13,641 -- -- -- -- -- 153,416
- ------------------------------------------------------------------------------------------------------------------------------------
Gary D. Morrison 7,966 43,672 -- -- -- -- -- 170,295
- ------------------------------------------------------------------------------------------------------------------------------------
Peter L. Maul 17,361 2,668 -- -- 5,670 -- -- 151,208
- ------------------------------------------------------------------------------------------------------------------------------------
All Directors and
Executive Officers 1,598,558 257,665 536,606 580,974 5,670 133,072 217,500 1,585,761
- ------------------------------------------------------------------------------------------------------------------------------------
(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 and an Investment Retirement Account, the shares
are held in AMCOL's Savings Plan.
(3) The named director is a general partner.
(4) Mr. Redman resigned as co-trustee of the Weaver Family Unitrust on March
18, 2003 and no longer has a beneficial interest in the 56,800 shares held
in such trust.
(5) Messrs. Castagna, Hughes and Washow share voting rights.
-15-
NAMED OFFICERS' COMPENSATION
Summary Compensation Table
The Summary Compensation Table below includes, for each of the fiscal
years ended December 31, 2002, 2001 and 2000, individual compensation for
services to AMCOL and its subsidiaries of those persons who were at December 31,
2002: (i) the Chief Executive Officer; and (ii) the four other most highly
compensated executive officers of AMCOL, or collectively, the named officers.
- ----------------------------------------------------------------------------------------------------------------------------
Annual Compensation(1)(2) Long-Term
Compensation Awards
- ----------------------------------------------------------------------------------------------------------------------------
Name and Principal Position Securities All Other
Bonus Bonus Underlying Compensation
Year Salary($) ($)(3) ($)(4) Options ($)(5)
- ----------------------------------------------------------------------------------------------------------------------------
Lawrence E. Washow 2002 432,000 108,000 -- 30,000 35,451
President and Chief 2001 400,000 394,801 -- 31,500 25,585
Executive Officer since May 2000 2000 375,000 -- 700,000 21,500 39,139
- ----------------------------------------------------------------------------------------------------------------------------
Gary L. Castagna 2002 238,000 59,500 -- 18,000 14,939
Senior Vice President of 2001 220,000 115,464 -- 27,000 7,962
AMCOL and former President 2000 91,667 73,333 300,000 -- 20,145
of Chemdal International
Corporation from August 1997 until
May 2000
- ----------------------------------------------------------------------------------------------------------------------------
Ryan F. McKendrick 2002 218,000 91,432 -- 17,000 21,573
Vice President of AMCOL 2001 200,000 195,552 -- 14,000 7,998
and President of CETCO 2000 184,000 119,598 -- 12,000 12,941
- ----------------------------------------------------------------------------------------------------------------------------
Gary Morrison 2002 196,000 19,600 -- 12,000 8,000
Vice President of AMCOL 2001 190,000 76,380 -- 14,000 7,600
and President of American 2000 170,000 136,000 -- 12,000 16,705
Colloid Company
- ----------------------------------------------------------------------------------------------------------------------------
Peter L. Maul 2002 176,000 44,000 -- 10,000 10,430
Vice President of AMCOL 2001 160,979 35,802 -- 10,000 8,559
and President of Nanocor, Inc. 2000 152,954 7,750 -- 12,000 6,800
- ----------------------------------------------------------------------------------------------------------------------------
-16-
Summary Compensation Table (continued)
(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
percent 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 Compensation Committee granted bonuses to certain executives in
recognition of their contribution to the development and success of the
absorbent polymers business that was sold to BASF AG in June 2000.
(5) The figures in this column include Company matching contributions under
AMCOL's Savings Plan and the 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.
-17-
Option Grants in Last Fiscal Year
Shown below is information on grants of incentive stock options during the
fiscal year ended December 31, 2002, to the named officers, which are reflected
in the Summary Compensation Table on Page 16.
- ---------------------------------------------------------------------------------------------------------------
Grant
Date
Individual Grants in 2002 Value
------------------------------------------------------------------------------
Number of
Securities % of Total Grant
Underlying Options Date
Options Granted to Exercise Expiration Present
Name Granted(1) Employees(2) Price(3) Date Value(4)
- ---------------------------------------------------------------------------------------------------------------
Lawrence E. Washow 30,000 9.76% $6.65 02/04/12 $91,836
- ---------------------------------------------------------------------------------------------------------------
Gary L. Castagna 18,000 5.85% $6.65 02/04/12 $55,102
- ---------------------------------------------------------------------------------------------------------------
Ryan F. McKendrick 17,000 5.53% $6.65 02/04/12 $52,040
- ---------------------------------------------------------------------------------------------------------------
Gary D. Morrison 12,000 3.90% $6.65 02/04/12 $36,734
- ---------------------------------------------------------------------------------------------------------------
Peter L. Maul 10,000 3.25% $6.65 02/04/12 $30,612
- ---------------------------------------------------------------------------------------------------------------
(1) These Incentive Stock Options ("ISOs") were issued pursuant to AMCOL's
1998 Long-Term Incentive Plan (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 307,450 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 $6.65, equal to the fair market value
of the underlying stock on the date of grant; an option term of 6.4 years;
an interest rate of 4.51% 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 44.61%; and dividends at the rate of
$0.06 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.
-18-
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Shown below is information with respect to (i) options exercised by the
named officers pursuant to AMCOL's option plans during fiscal 2002 and (ii)
unexercised options granted in fiscal 2002 and prior years under AMCOL's option
plans to the named officers and held by them at December 31, 2002.
- ------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Acquired Options at 12/31/02 12/31/02
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable(1)
- ------------------------------------------------------------------------------------------------------------------
Lawrence E. Washow 51,907 $250,934 479,161 / 144,703 $1,757,743 / $332,074
- ------------------------------------------------------------------------------------------------------------------
Gary L. Castagna -- -- -- / 45,000 -- / $31,300
- ------------------------------------------------------------------------------------------------------------------
Ryan F. McKendrick -- -- 128,853 / 73,552 $476,547 / $164,763
- ------------------------------------------------------------------------------------------------------------------
Gary D. Morrison 17,000 $68,063 157,841 / 52,655 $622,758 / $103,471
- ------------------------------------------------------------------------------------------------------------------
Peter L. Maul -- -- 133,877 / 54,054 $500,613 / $125,218
- ------------------------------------------------------------------------------------------------------------------
(1) Based on the closing sale price as quoted on The New York Stock Exchange
on that date.
Equity Compensation Plan Information
This table shows information about our common stock that may be issued
upon the exercise of options, warrants and rights as of December 31, 2002 under
all of our equity compensation plans.
- -------------------------------------------------------------------------------------------------------------------
Number of Securities
Remaining Available for
Number of Securities to be Future Issuance Under
Issued Upon Exercise of Weighted-Average Exercise Equity Compensation Plans
Outstanding Options, Price of Outstanding (Excluding Securities
Warrants and Rights Options, Warrants and Rights Reflected in Column(a)
Plan Category (a) (b) (c)
- -------------------------------------------------------------------------------------------------------------------
Equity Compensation Plans
Approved by Security 3,678,079 $3.029 410,389
Holders (1)
- -------------------------------------------------------------------------------------------------------------------
Equity Compensation Plans
Not Approved by Security -- -- --
Holders
- -------------------------------------------------------------------------------------------------------------------
Total 3,678,079 $3.029 410,389
- -------------------------------------------------------------------------------------------------------------------
(1) The equity compensation plans approved by the Company's shareholders are
the 1983 Incentive Stock Option Plan, the 1993 Stock Plan, the 1987
Nonqualified Stock Option Plan and the 1998 Long-Term Incentive Plan.
-19-
Pension Plans
- --------------------------------------------------------------------------------------------------------------
Estimated Annual Retirement Benefits Based on Years of Service
- --------------------------------------------------------------------------------------------------------------
Remuneration 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 on page 20 assume
(i) that the plans will be continued and (ii) that the employee will elect to
receive his pension at normal retirement age. The table above and the estimates
on page 20 do not reflect the reduction in an individual's final monthly
compensation due to 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
- -------------------------------------------------------------------------------
Lawrence E. Washow 24 $591,603 $201,585
- -------------------------------------------------------------------------------
Gary L. Castagna 2 $276,252 --
- -------------------------------------------------------------------------------
Ryan F. McKendrick 19 $269,788 $70,840
- -------------------------------------------------------------------------------
Gary D. Morrison 22 $256,414 $72,004
- -------------------------------------------------------------------------------
Peter L. Maul 19 $198,782 $53,621
- -------------------------------------------------------------------------------
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, 2002, 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.
Castagna left the employ of the Company in 2000 and received his full pension
payout in the form of a lump-sum payment during 2000 in connection with the sale
of the absorbent polymers business, of which he was President. Mr. Castagna was
rehired by the Company in 2001.
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 September 30, 2002, was $1,948,224.
-20-
Employment Agreements
Each of Messrs. Washow, Castagna, McKendrick, Morrison and Maul entered
into employment agreements with AMCOL, effective March 15, 2002. The initial
employment term under each agreement is three years, with a rolling six-month
extension (unless either party gives notice of expiration six months prior to
the extension). Each agreement provides a specified annual salary, a specified
target annual bonus, certain payments in the event of termination that is not a
result of a change of control, and a non-competition / non-solicitation covenant
effective during employment and for one year thereafter.
If one of these officers is terminated without cause or for good reason,
which includes termination at the officer's election for a 30 day period
commencing six months after a Change of Control, he is entitled to receive: (1)
his earned but unpaid salary and bonus; (2) a pro-rata annualized bonus; (3) a
lump sum equal to three times (in the case of Washow and Castagna) or two times
(in the case of McKendrick, Morrison and Maul) the sum of his base salary and
annualized bonus; (4) continued benefits for three years (in the case of Washow
and Castagna) or two years (in the case of McKendrick, Morrison and Maul) or
cash in lieu thereof; and (5) a lump sum of any amount then payable to him
pursuant to the tax gross-up payment. In the event of termination of one of
these officers for death or disability within seven months after a Change of
Control, the officer's beneficiaries are entitled to receive the above
compensation and benefits except that the continued benefits (or cash in lieu
thereof) described in (4) above are limited to welfare benefits.
Each agreement also provides that if a Change of Control occurs, all
outstanding stock options, restricted stock and other equity compensation
granted to the officer become fully vested and exercisable.
A Change of Control is defined as any one or more of the following: (1)
any person (other than a Subsidiary, any employee benefit plan (or any related
trust) of the Company or any of its Subsidiaries or any Excluded Person)
acquiring 50.1% or more of the Company's common stock; (2) whenever the
Incumbent Directors cease to constitute at least one-half of the directors of
the Company then serving; (3) immediately prior to the consummation of a merger
or similar transaction for the sale of all, or substantially all of, the assets
of the Company (in the case of McKendrick, Morrison and Maul) or a sale of 50.1%
of assets of the Company (in the case of Washow and Castagna); (4) shareholder
approval of a plan of liquidation; and (5) a sale of all of the stock or assets
of a subsidiary where being president of the subsidiary is the officer's primary
responsibility.
-21-
Board Committee Membership Roster and Meetings
-------------------------------------------------------------------------
Name Audit Compensation Executive Nominating
-------------------------------------------------------------------------
Arthur Brown X* X
-------------------------------------------------------------------------
Robert E. Driscoll III X X
-------------------------------------------------------------------------
John Hughes X X
-------------------------------------------------------------------------
Jay D. Proops X X X
-------------------------------------------------------------------------
C. Eugene Ray X X X* X*
-------------------------------------------------------------------------
Clarence O. Redman X X
-------------------------------------------------------------------------
Dale E. Stahl X X* X X
-------------------------------------------------------------------------
Lawrence E. Washow X
-------------------------------------------------------------------------
Audrey L. Weaver X
-------------------------------------------------------------------------
Paul C. Weaver X X
-------------------------------------------------------------------------
Number of Meetings
in 2002 5 4 3 2
-------------------------------------------------------------------------
* Chairperson.
The Board of Directors held 5 meetings during the 2002 fiscal year. During
the last year, all Directors attended at least 75% of the aggregate of the total
number of meetings of the Board of Directors and the total number of meetings
held by each committee of the Board on which such Directors served. The
mandatory retirement age for directors is 70.
The Audit Committee, comprised of independent, non-employee directors, is
responsible for reviewing the proposed audit program for each fiscal year, the
results of the audits and the adequacy of AMCOL's systems of internal accounting
control with AMCOL's financial management and its independent auditors. The
Committee recommends to the Board of Directors the appointment of the
independent auditors for each fiscal year. The Audit Committee charter is
attached to this Proxy Statement.
The Compensation Committee, comprised of non-employee directors, is
responsible for annually reviewing the salaries and bonuses of all executive
officers, and oversees AMCOL's compensation, incentive and employee benefit
programs. This Committee is also responsible for the selection of those
officers, directors and key employees who are eligible to receive stock options,
determines the number of options to be awarded and the period during which
options may be exercised under AMCOL's various option plans. Clarence O. Redman
is a member of AMCOL's Compensation Committee and, as such, participated in
discussions where the compensation awarded to each of the Named Officers was
decided. Mr. Redman is of counsel to Lord, Bissell & Brook, the principal law
firm engaged by AMCOL.
The Nominating Committee, comprised of non-employee directors, is
responsible for recommending to the Board of Directors, at the request of the
Board of Directors, nominees who are deemed by the Committee to be qualified for
Board of Directors' membership. The Nominating Committee will not consider
nominees recommended by shareholders of AMCOL.
-22-
Director Compensation
------------------------------------------------------------------------------
Type of Compensation Cash Stock Options
------------------------------------------------------------------------------
Annual Retainer $14,700 2,000
------------------------------------------------------------------------------
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. The Company provides excess
personal liability insurance coverage for its non-employee directors. The
premium paid per non-employee director for such insurance was approximately $545
for 2002.
Pursuant to the 1998 Long-Term Incentive Plan, each of the non-employee
directors was granted 2,000 options at $6.65 per share in 2002.
Directors' fees will increase for 2003 as follows: $18,000 and 3,000 stock
option grants for the annual retainer; $1,500 for the board meeting attendance
fee; $2,000 for the annual Executive, Compensation and Nominating Committee
chair retainers; $3,000 for the annual Audit Committee chair retainer; $1,000
for Executive, Compensation and Nominating Committee attendance fees; and $1,500
for the Audit Committee meeting attendance fee. As of May 15, 2003, non-employee
Directors will be able to participate in the Company's health insurance plan at
the Directors' cost.
-23-
Compensation Committee Report on Executive Compensation
AMCOL's mission is to supply high-quality performance products and
innovative technologies for mineral 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 six
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 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
-24-
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 salary targets are set at median levels (50th percentile) relative to
competitive market levels for comparable positions based upon available survey
data from AMCOL's comparative compensation group. 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.
In arriving at Mr. Washow's 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. Washow's 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 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 return on capital and earnings per share, which
the committee deems appropriate. In the case of the other executives, their
bonuses are 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. Mr.
Washow, as Chief Executive Officer, was paid a bonus of $108,000 for the 2002
fiscal year financial performance of AMCOL.
Limitations on Payments
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 Securities Exchange Act of 1934 by reason of being among
the four most highly compensated
-25-
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. To the extent that any bonus
payments cause the executive's total compensation to exceed $1,000,000 in any
given year, the excess will be deferred until a year when such amount can be
deducted by the Company.
Long-Term Incentives
Long-term incentives are provided annually in the form of stock options.
Stock options under AMCOL's 1998 Long-Term Incentive Plan are granted by the
Compensation Committee. Stock options 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. Stock options are the only long-term incentive compensation vehicle
currently used by AMCOL. In 2002 and prior years the Compensation Committee has
granted incentive stock options; however, in 2003 the Compensation Committee
granted non-qualified stock options.
The option program serves to focus executives on long-term shareholder
value creation and 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 10 to 15 percent 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 2002, the Chief Executive Officer received options to purchase 30,000
shares with an exercise price of $6.65, as provided in the Option Grant Table on
Page 18. The Compensation Committee believes the equity incentive program
provides a strong link between management behavior and shareholder interests.
Compensation Committee
----------------------
Dale E. Stahl, Chairman
Arthur Brown
Robert E. Driscoll, III
C. Eugene Ray
Clarence O. Redman
Audrey L. Weaver
Report of the Audit Committee
The Audit Committee of AMCOL consists of five independent (as defined by
the rules of the
-26-
New York Stock Exchange) directors and operates under a written charter approved
by the Audit Committee and adopted by the Board of Directors. The members of the
committee are Arthur Brown, Robert E. Driscoll, III, Jay D. Proops, C. Eugene
Ray and Dale E. Stahl, Chairman. The Audit Committee recommends the selection of
the Company's independent accountants to the Board of Directors.
Management is responsible for the Company's financial reporting process
including its system of internal control, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. The Company's independent auditors are responsible for
auditing those financial statements. Our responsibility is to monitor and review
these processes. It is not our duty or our responsibility to conduct auditing or
accounting reviews or procedures. We are not employees of the Company and we may
not be, and we may not represent ourselves to be or to serve as, accountants or
auditors by profession or experts in the fields of accounting or auditing.
Therefore, we have relied, without independent verification, on management's
representation that the financial statements have been prepared with integrity
and objectivity and in conformity with accounting principles generally accepted
in the United States of America and on the representations of the independent
auditors included in their report on the Company's financial statements. Our
oversight does not provide us with an independent basis to determine that
management has maintained appropriate accounting and financial reporting
principles or policies, or appropriate internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, our considerations and discussions with management and
the independent auditors do not assure that the Company's financial statements
are presented in accordance with generally accepted accounting principles, that
the audit of our Company's financial statements has been carried out in
accordance with generally accepted auditing standards or that our Company's
independent accountants are in fact "independent."
Review with Management
The Audit Committee has reviewed and discussed the Company's audited
financial statements for the year ended December 31, 2002 with management.
Review and Discussions with Independent Accountants
The Audit Committee has discussed with KPMG LLP, the Company's independent
accountants, the matters required to be discussed by Statement on Auditing
Standards No. 61, "Communication with Audit Committees," which include, among
other items, matters related to the conduct of the audit of the Company's
financial statements.
The Audit Committee has also received the written disclosures from KPMG
LLP required by Independence Standards Board Standard No. 1, which relates to
the accountants' independence from the Company and its related entities, and has
discussed with KPMG LLP their independence from the Company.
Conclusion
Based on the review and discussions referred to above, the Audit Committee
recommended to the Company's Board of Directors that the Company's audited
financial statements be included in the
-27-
Company's Annual Report on Form 10-K for the year ended December 31, 2002 filed
with the Securities and Exchange Commission.
Audit Committee
---------------
Arthur Brown, Chairman
Robert E. Driscoll, III
Jay D. Proops
C. Eugene Ray
Dale E. Stahl
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INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of KPMG LLP served as AMCOL's independent auditors for the
fiscal year ended December 31, 2002. During fiscal year 2002, AMCOL retained
KPMG LLP to audit AMCOL's consolidated financial statements and benefit plans
and to perform certain other auditing and tax services. Fees paid to KPMG LLP
for these services were as follows:
Audit Fees $170,197
All other fees $515,341
(a) Other fees include amounts related to tax consultation in
connection with various transactions, statutory audits of certain
non-U.S. subsidiaries, support for mergers and acquisitions and
audits of the financial statements of AMCOL's benefit plans.
The Audit Committee has considered whether the provision of these
non-audit services by KPMG LLP is compatible with maintaining auditor
independence.
KPMG LLP did not render professional services relating to financial
information systems design and implementation for the year ended December 31,
2002.
A representative of KPMG LLP will be present at the annual meeting, will
be afforded the opportunity to make a statement, and will be available to
respond to appropriate questions.
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Stock Performance Graph
The following graph sets forth a five-year comparison of cumulative total
returns for: (i) AMCOL (which trades on The New York Stock Exchange); (ii) S&P
SmallCap 600 Index; and (iii) 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, Mississippi Chemical Corporation, Oil-Dri Corporation of America
and Zemex Corporation. ChemFirst, Inc. was acquired by DuPont in November 2002
and has therefore been removed from the peer group.
Comparison of Five-Year Cumulative Total Return (1)
AMCOL, S&P SmallCap 600 and Self-Determined Peer Group
12/97 12/98 12/99 12/00 12/01 12/02
AMCOL International 100.0 63.4 105.7 121.9 186.6 152.69
S&P SmallCap 600 Index 100.0 98.7 110.9 124.0 132.1 112.77
Custom Peer Group* 100.0 76.7 54.5 39.6 51.9 30.3
* The peer group consists of the following companies: Calgon Carbon
Corporation, ChemFirst, Inc., Mississippi Chemical Corporation, Oil-Dri
Corporation of America, and Zemex Corporation.
(1) Assumes $100 invested on December 31, 1997, in AMCOL International
Corporation Common Stock, S&P SmallCap 600 and Self-Determined Peer Group.
ChemFirst, Inc. was acquired by DuPont in November 2002 and has therefore
been removed from the peer group.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Clarence O. Redman is of counsel to Lord, Bissell & Brook, the principal
law firm engaged by AMCOL.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, AMCOL's directors, its
executive officers and any persons holding more than 10% of AMCOL's common stock
are required to report their initial ownership of AMCOL's common stock and any
subsequent changes in that ownership to the Securities and Exchange Commission.
Specific due dates for these reports have been established and AMCOL is required
to disclose in this proxy statement if a director or executive officer filed a
late report. No late reports were filed. In making these disclosures, AMCOL has
relied solely on written representations of its directors and executive officers
and copies of the reports that they have filed with the Commission.
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 2004 must be received by AMCOL on or before
December 3, 2003.
If a shareholder intends to present a proposal at the 2004 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 February 9, 2004
and March 11, 2004. 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 the 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 annual 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.
By Order of the Board of Directors,
Clarence O. Redman
Secretary
Arlington Heights, Illinois
April 1, 2003
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