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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
(Check the appropriate box:)
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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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 11, 2006
To Our Shareholders:
The annual meeting of shareholders of AMCOL International Corporation,
or AMCOL, will take place on Thursday, May 11, 2006, at 11:00 AM, Central
Daylight Savings Time, at the Hilton Hotel 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 approve the AMCOL International Corporation 2006 Long-Term
Incentive Plan;
3. To approve the AMCOL International Corporation Annual Cash
Incentive Plan; and
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 17, 2006 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 and "FOR" both the 2006 Long-Term Incentive Plan and the
Annual Cash Incentive Plan.
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 or the Internet in accordance with the
instructions provided. Please do not submit a proxy card if you have voted by
telephone or the Internet. 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 10, 2006
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 11, 2006
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 11, 2006, at 11:00 AM, Central Daylight Savings Time, at the
Hilton Hotel 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 10, 2006.
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. The approval of the AMCOL International Corporation 2006
Long-Term Incentive Plan;
3. The approval of the AMCOL International Corporation Annual
Cash Incentive Plan; and
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 and "FOR" both the 2006 Long-Term Incentive Plan and the
Annual Cash Incentive Plan.
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 or the Internet in accordance with the
instructions provided. Please do not submit a proxy card if you have voted by
telephone or the Internet. 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 10, 2006.
1
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 11, 2006, at 11:00 AM, Central Daylight
Savings Time, at the Hilton Hotel 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 17,
2006, 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
in person. As of the record date, there were 29,937,861 shares of AMCOL's common
stock issued and outstanding.
Purpose of the Annual Meeting; Recommendations 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 (3) directors;
o the approval of the 2006 Long-Term Incentive Plan;
o the approval of the Annual Cash Incentive Plan; 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 and "FOR" both the 2006 Long-Term Incentive Plan and the
Annual Cash Incentive Plan.
Proxies; Vote Required
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. 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.
With respect to the election of directors, shareholders may vote (a) in
favor of all nominees, (b) to withhold votes as to all nominees, or (c) to
withhold votes for specific nominees. Directors are elected by a plurality vote,
so the three director nominees receiving the greatest number of votes will be
elected. Votes withheld will be counted as present for purposes of determining a
quorum. Withheld votes will not affect the outcome of the election.
With respect to the proposals to approve the AMCOL International
Corporation 2006 Long-Term Incentive Plan and the AMCOL International
Corporation Annual Cash Incentive Plan, shareholders may vote: (a) in favor of
the plan, (b) against the plan, or (c) abstain from voting on the plan.
Abstentions will be counted as present for purposes of determining a quorum.
Since a majority of the shares represented at the meeting and entitled to vote
is required for approval of these plans, abstentions will have the effect of a
vote against approval of the plans.
2
Under New York Stock Exchange rules, the proposals to elect directors
and approve the AMCOL International Corporation Annual Cash Incentive Plan are
considered "discretionary" items. Therefore, brokers may vote in their
discretion on these matters on behalf of clients who have not furnished voting
instructions to the broker. In contrast, the proposal to approve the AMCOL
International Corporation 2006 Long-Term Incentive Plan is a "non-discretionary"
item, and brokers who have not received voting instructions from their clients
may not vote on this proposal. These so-called "broker non-votes" will not be
considered in determining the number of votes necessary for approval, and,
therefore, will have no effect on the outcome.
The New York Stock Exchange listing requirements require that the total
votes cast on the approval of the AMCOL International Corporation 2006 Long-Term
Incentive Plan must represent over 50% of the outstanding common stock entitled
to vote.
All properly delivered proxies received by AMCOL prior to the annual
meeting and not revoked will be voted in accordance with the instructions
provided. Unless contrary instructions are marked, proxies will be voted "FOR"
each of AMCOL's nominees for director and "FOR" both the 2006 Long-Term
Incentive Plan and the Annual Cash Incentive Plan. The Board of Directors knows
of no other business that 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 or at
the annual meeting 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 or the Internet 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.
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, e-mail 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.
3
PROPOSAL ONE:
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 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
(If elected, term to expire in 2009)
NAME AGE DIRECTOR SINCE PRINCIPAL OCCUPATION FOR LAST FIVE YEARS
- --------------------------- -------- -------------- -------------------------------------------------------------
Robert E. Driscoll, III 67 1985 Retired Dean and Professor of Law, University of South Dakota.
Daniel P. Casey 63 2002 Retired Chief Financial Officer and Vice Chairman of the Board
of Gaylord Container Corporation, a manufacturer and
distributor of brown paper and packaging products. Also a
director of Caraustar Industries, Inc., a recycled packaging
company.
Dale E. Stahl 58 1995 Retired from Inland Paperboard and Packaging, Inc., a
manufacturer of containerboard and corrugated boxes, where Mr.
Stahl served as President, Chief Executive Officer and Chief
Operating Officer from June 2000 until September 2003. Prior
thereto, President and Chief Operating Officer of Gaylord
Container Corporation, a manufacturer and distributor of brown
paper and packaging products.
The Board of Directors recommends that AMCOL's shareholders vote "FOR"
each of the nominees named above.
Information Concerning Continuing Members of the Board
Class III
(Term expiring in 2007)
NAME AGE DIRECTOR SINCE PRINCIPAL OCCUPATION FOR LAST FIVE YEARS
- --------------------------- -------- -------------- -------------------------------------------------------------
Arthur Brown 65 1990 Chairman and retired Chief Executive Officer (since May 2003)
of Hecla Mining Company, a producer of precious metals.
Jay D. Proops 64 1995 Private investor since 1995; prior thereto, Vice Chairman and
co-founder of The Vigoro Corporation, a manufacturer and
distributor of fertilizers and related products. Also a
director of Chemtura Corporation, a producer of specialty
chemicals.
Paul C. Weaver* 43 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).
* Paul C. Weaver and Audrey L. Weaver are first cousins.
4
Class I
(Term expiring in 2008)
NAME AGE DIRECTOR SINCE PRINCIPAL OCCUPATION FOR LAST FIVE YEARS
- --------------------------- -------- -------------- --------------------------------------------------------------
John Hughes 63 1984 Chairman of the Board; Chief Executive Officer of AMCOL from
1985 until May 2000.
Clarence O. Redman 63 1989 Secretary of AMCOL since 1982. Also, of counsel to Lord,
Bissell & Brook LLP since October 1997, the law firm that
serves as corporate counsel to AMCOL.
Lawrence E. Washow 52 1998 President and Chief Executive Officer of AMCOL since May 2000
and Chief Operating Officer of AMCOL since August 1997.
Audrey L. Weaver* 51 1997 Private investor.
* Paul C. Weaver and Audrey L. Weaver are first cousins.
PROPOSAL TWO:
APPROVAL OF THE AMCOL INTERNATIONAL CORPORATION
2006 LONG-TERM INCENTIVE PLAN
GENERAL
On February 7, 2006, our Board of Directors adopted, subject to
shareholder approval, the AMCOL International Corporation 2006 Long-Term
Incentive Plan (the "Long-Term Incentive Plan"). The Board is asking the
shareholders to approve the Long-Term Incentive Plan to advance the interests of
AMCOL by providing eligible directors and employees of AMCOL with the
opportunity to acquire shares of AMCOL's common stock. By encouraging such stock
ownership, AMCOL seeks to attract, retain, and motivate the best available
personnel for positions of substantial responsibility and to provide additional
incentives to directors and employees of AMCOL to promote the success of the
business.
The following summary of the Long-Term Incentive Plan should be read in
conjunction with the complete Long-Term Incentive Plan, which is attached to
this proxy statement as Appendix A.
SUMMARY OF THE LONG-TERM INCENTIVE PLAN
Type of Awards. The Long-Term Incentive Plan provides for the granting
of awards of nonqualified stock options ("NSOs"), incentive stock options
("ISOs"), restricted stock or restricted stock units, some of which may be
issued as qualified performance-based awards, and stock appreciation rights
("SARs") (collectively, "Awards").
Administration. The Long-Term Incentive Plan will be administered by
our Compensation Committee. All determinations of the Compensation Committee are
made by a majority vote of its members and are final and binding on all
participants. The Compensation Committee has discretionary authority to: (i)
construe and interpret the Long-Term Incentive Plan; (ii) establish, amend and
rescind appropriate rules and regulations relating to the Long-Term Incentive
Plan; (iii) select the individuals who will receive Awards under the Long-Term
Incentive Plan and determine the size and terms of such Awards, retaining the
right to amend or modify the Awards as permitted under the Long-Term Incentive
Plan; (iv) contest rulings or decisions on matters relating to the Long-Term
Incentive Plan or to any Awards; (v) make other decisions necessary or advisable
for the administration of the Long-Term Incentive Plan; and (vi) determine the
form in which tax withholding under the Long-Term Incentive Plan will be made.
5
Participants. Present and future directors, officers and employees of
AMCOL or any subsidiary or affiliate shall be eligible to participate in the
Long-Term Incentive Plan. The Compensation Committee from time to time shall
select those officers, directors and employees of AMCOL and any subsidiary or
affiliate of AMCOL who shall be designated as participants.
Number of Shares of Common Stock Available. The Long-Term Incentive
Plan permits a total of 1,500,000 shares of AMCOL's common stock to be awarded
to participants. Shares issued under the Long-Term Incentive Plan may be either
authorized but unissued shares or treasury shares. If any Award shall terminate,
expire, be cancelled or forfeited as to any number of shares of common stock
(other than a cancellation within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code")), new Awards may thereafter be
awarded with respect to such shares. The maximum number of shares for which
Awards may be granted under the Long-Term Incentive Plan pursuant to ISOs shall
be 500,000 and the maximum number of shares of common stock for which Awards of
restricted stock and restricted stock units may be granted under the Long-Term
Incentive Plan shall be 500,000. In addition, the total number of shares of
common stock with respect to which Awards may be granted to any participant in
any calendar year shall not exceed 200,000 shares and the total number of shares
of common stock with respect to Qualified Performance-Based Awards that can be
paid to any Covered Employee in any performance period shall not exceed 100,000
shares.
Nonqualified Stock Options. The Long-Term Incentive Plan provides for
the granting of NSOs to any participant. The Compensation 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 100% of the fair market value
of the common stock on the date of grant.
Unless the Compensation Committee otherwise determines, the option
period for NSOs granted pursuant to the Long-Term Incentive 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 on or 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 Compensation
Committee.
Incentive Stock Options. The Long-Term Incentive Plan provides for the
granting of ISOs to any employee of AMCOL. The Compensation 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 Compensation Committee
and may not be less than the fair market value of AMCOL's common stock on the
date of grant and not less than 110% of such fair market value if the
participant was the holder of more than 10% of AMCOL's outstanding voting
securities on the date of the grant.
Unless the Compensation Committee otherwise determines, the option
period for ISOs granted under the Long-Term Incentive 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
Compensation Committee.
Restricted Stock and Restricted Stock Units. The Long-Term Incentive
Plan permits the granting of awards of shares of restricted stock and restricted
stock units to any participant. Awards of shares of restricted stock and
restricted stock units may be issued to participants without payment. Upon
completion of a vesting period and the fulfillment of any required conditions,
restrictions upon the shares of restricted stock or the restricted stock units
expire and new certificates representing unrestricted shares of common stock are
issued to the participant. Generally, in the case of shares of restricted stock,
the participant will have all of the rights of a shareholder of AMCOL 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. In the case of
an Award of restricted stock units, no shares of common stock or other property
shall be issued at the time the Award is granted. Upon the lapse or waiver of
restrictions and the restricted period relating to restricted stock units,
shares of common stock shall be issued to the holder of the restricted stock
units and evidenced in such manner as the Compensation Committee may deem
appropriate.
6
Stock Appreciation Rights. The Long-Term Incentive Plan provides for
the granting of SARs to any participant. SARs granted by the Compensation
Committee pursuant to the Long-Term Incentive 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 Compensation 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
Compensation Committee.
Performance-Based Awards. The Compensation Committee may grant awards
of restricted stock or restricted stock units that are subject to the
achievement of performance goals as may be determined by the Compensation
Committee. Such Awards, when they are intended to qualify under Section 162(m)
of the Code, are called "Qualified Performance-Based Awards," and will be
granted to persons whom the Compensation Committee anticipates to be "Covered
Employees" within the meaning of Section 162(m) of the Code. The term Covered
Employee means AMCOL's Chief Executive Officer and each other person whose
compensation is required to be disclosed in AMCOL's filings with the Securities
and Exchange Commission by reason of that person being among the four highest
compensated executive officers of AMCOL on the last day of a taxable year. The
Compensation Committee may in its discretion grant Awards to Covered Employees
that are performance based but are not intended to qualify as Qualified
Performance-Based Awards.
To the extent necessary to comply with the Qualified Performance-Based
Award requirements of Section 162(m) of the Code, with respect to any award of
restricted stock or restricted stock units that may be granted to one or more
Covered Employees and intended to comply with the requirements for
performance-based awards under Section 162(m), the Compensation Committee will,
in writing, (a) designate one or more Covered Employees, (b) select the
performance criteria applicable to the performance period, (c) establish the
performance goals, and amounts of such Awards, as applicable, which may be
earned for such performance period, and (d) specify the relationship between
performance criteria and the performance goals and the amounts of such Awards,
as applicable, to be earned by each Covered Employee for the performance period.
Following the completion of each performance period, the Compensation Committee
will certify in writing whether the applicable performance goals have been
achieved for the performance period. No Award or portion thereof that is subject
to the satisfaction of any condition will be considered to be earned or vested
until the Compensation Committee certifies in writing that the conditions to
which the distribution, earning or vesting of the Award is subject have been
achieved. During the performance period, the Compensation Committee may not
increase the amount of a Qualified Performance-Based Awards that would otherwise
be payable upon satisfaction of the conditions, but may reduce or eliminate the
payments as provided for in the Award Agreement.
The payment of performance-based awards under the Long-Term Incentive
Plan will be based upon the attainment of performance goals related to one or
more performance criteria selected by the Compensation Committee from among the
following measures, individually or in combination: (i) return on capital; (ii)
earnings per share; (iii) net sales; (iv) net earnings; (v) net operating
profits; (vi) expense control; (vii) working capital relating to inventory
and/or accounts receivable; (viii) operating margin; (ix) share price
performance; (x) implementation or completion of critical projects; and (xi)
total return to shareholders.
The Manner of Option Exercise. The Compensation Committee may permit
the exercise price for options granted under the Long-Term Incentive Plan to be
paid in cash or shares of common stock, including shares which the participant
received upon the exercise of one or more options, provided that the shares meet
any criteria established by the Compensation Committee. The Compensation
Committee may also permit the option exercise price to be paid by the
participant's delivery of an election directing AMCOL to withhold shares from
the common stock otherwise due upon exercise of the option or any method
permitted by law.
7
Nontransferability. ISOs are not transferable, voluntarily or
involuntarily, other than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code. During
a participant's lifetime, his ISOs may be exercised only by him. All other
Awards are not transferable other than by will or the laws of descent and
distribution, pursuant to a qualified domestic relations order as defined by the
Code or in the Compensation Committee's discretion after vesting.
Vesting. Unless the Compensation Committee establishes a different
vesting schedule at the time of grant, Awards generally vest 33% after one year,
66% after two years and 100% after three years. A participant may not exercise
an option or SAR or transfer shares of restricted stock until the Award has
vested. Under the Long-Term Incentive Plan, generally, if a participant's
employment with AMCOL or service on the Board of Directors is terminated due to
retirement (after the participant's 65th birthday or 55th birthday with the
consent of the Compensation Committee), death or disability, the participant's
Awards will become fully vested. If within 12 months following a "Change of
Control" (as defined in the Long-Term Incentive Plan), the employment of a
participant is terminated without cause or the participant resigns for good
reason, any Award issued to the participant shall be fully vested, and, in the
case of an Award other than an Award of restricted stock or restricted stock
units, fully exercisable for 90 days following the date on which the
participant's service with AMCOL is terminated, but not beyond the date the
Award would otherwise expire. If a participant's employment with or service with
AMCOL is terminated for any other reason, any Awards that are not yet vested are
forfeited.
Adjustments for Change in Capitalization. The Long-Term Incentive Plan
provides that in the event of a stock dividend, stock split, reverse stock
split, share combination, or recapitalization or similar event affecting the
capital structure of AMCOL, or a merger, consolidation, acquisition of property
or shares, separation, spinoff, reorganization, stock rights offering,
liquidation, the Compensation Committee may in its discretion make such
substitutions or adjustments as it deems appropriate and equitable to the share
reserve, the share limitations described above, and the purchase price and
number of shares subject to outstanding Awards.
Cashouts. In the event of an extraordinary dividend or other
distribution, merger, reorganization, consolidation, combination, sale of
assets, split up, exchange, or spin off, or other extraordinary corporate
transaction, the Compensation Committee may, in such manner and to such extent
(if any) as it deems appropriate and equitable, make provision for a cash
payment or for the substitution or exchange of any or all outstanding Awards for
the cash, securities or property deliverable to the holder of any or all
outstanding Awards based upon the distribution or consideration payable to
holders of common stock upon or in respect of such event. However, in each case,
that with respect to any ISO no such adjustment may be made that would cause the
Long-Term Incentive Plan to violate Section 422 of the Code (or any successor
provision).
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.
Federal Tax Consequences. The following brief description of the tax
consequences of Awards under the Long-Term Incentive Plan is based on federal
income tax laws currently in effect and does not purport to be a complete
description of such federal income tax consequences.
Incentive Stock Options. A grantee generally will have no taxable
-----------------------
income upon either the grant or exercise of an ISO. If the grantee does not
dispose of shares acquired pursuant to the exercise of an ISO within two years
of the grant or one year of the exercise, any gain or loss realized in his
subsequent disposition will be capital gain or loss. If such holding period
requirements are not satisfied, the grantee will generally realize ordinary
income at the time of disposition in an amount equal to the excess of the fair
market value of the shares on the date of exercise (or if less, the amount
realized upon disposition) over the option price. Any remaining gain is taxed as
long-term or short-term capital gain.
Nonqualified Stock Options. The grant of an NSO generally is not a
--------------------------
taxable event for the grantee. Upon exercise of the option, the grantee
generally will recognize ordinary income in an amount equal to the excess of the
fair market value of the stock acquired upon exercise (determined as of the date
of exercise) over the exercise price of such option. AMCOL will be entitled to a
deduction equal to the amount of ordinary income recognized by the grantee in
the year in which such taxable income is recognized and AMCOL is required to
withhold federal income taxes with respect to any amounts included in the
grantee's taxable income.
8
Stock Appreciation Rights. The grant of a SAR generally is not a
-------------------------
taxable event for the grantee. However, upon exercise of the SAR, the grantee
generally will recognize ordinary income equal to the amount of any cash
received or the fair market value of any common stock received.
Restricted Stock Awards and Restricted Stock Units. A grant of
--------------------------------------------------
restricted stock or restricted stock units generally is not a taxable event for
the grantee. However, when the applicable restrictions lapse, the grantee
generally will recognize ordinary income equal to the excess of the fair market
value of such stock on the date of lapse over the amount, if any, paid for such
stock and AMCOL is permitted a commensurate compensation expense deduction for
income tax purposes. Alternatively, with respect to a grant of restricted stock,
the grantee may file an election under Section 83(b) of the Code, in which case
the grantee will recognize ordinary income on the date of grant equal to the
excess of the fair market value of such stock on the date of grant over the
amount, if any, paid for such stock.
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 below. 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.
Section 162(m). Section 162(m) of the Code generally disallows a public
--------------
company's tax deduction for compensation in excess of $1 million paid in any
taxable year to a Covered Employee. Compensation that qualifies as
"performance-based compensation", however, is excluded from the $1 million
deductibility cap. AMCOL intends that some of the Awards granted to employees
whom the Compensation Committee expects to be Covered Employees at the time a
deduction arises in connection with the Awards qualify as "performance-based
compensation" so that deductions with respect to those Awards will not be
subject to the $1 million cap under Section 162(m) of the Code. Future changes
in Section 162(m) of the Code or the regulations thereunder may adversely affect
the ability of AMCOL to ensure that Awards under the 2006 Long-Term Incentive
Plan will qualify as "performance based compensation" so that deductions are not
limited by Section 162(m) of the Code.
Amendment; Termination. The Board of Directors may amend the Long-Term
Incentive Plan at any time, but may not: 1) impair the rights of participants
with respect to any outstanding Awards without the consent of participants; 2)
increase the limitations on the shares available under the Long-Term Incentive
Plan, unless such increase is approved by the shareholders; or 3) amend the
provision of the Long-Term Incentive Plan that requires shareholder approval
before repricing an Award. The Long-Term Incentive Plan will terminate ten years
after its adoption by the Board of Directors; provided, however, that the Board
of Directors may terminate the Long-Term Incentive Plan at any time.
New Plan Benefits. The grant of Awards under the Long-Term Incentive
Plan is within the discretion of the Compensation Committee administering the
Long-Term Incentive Plan or the Board of Directors. Accordingly, the dollar
value or number of Awards that will be received or allocated to any participant
under the Long-Term Incentive Plan cannot be determined.
The Board of Directors recommends that you vote "FOR" the approval of
the Long-Term Incentive Plan.
9
PROPOSAL THREE:
APPROVAL OF THE AMCOL INTERNATIONAL CORPORATION
ANNUAL CASH INCENTIVE PLAN
GENERAL
On February 7, 2006, the Board of Directors adopted, subject to
shareholder approval, the AMCOL International Corporation Annual Cash Incentive
Plan ( the "Cash Incentive Plan"). The Board of Directors believes it to be in
the best interest of AMCOL to adopt the Cash Incentive Plan to promote AMCOL's
long-term growth and profitability by providing employees with incentives to
improve shareholder value.
The Cash Incentive Plan is designed to provide "performance-based
compensation" under Section 162(m) of the Code. Under Section 162(m) of the
Code, AMCOL generally is not eligible for a federal income tax deduction for
compensation paid to Covered Employees, meaning AMCOL's Chief Executive Officer
and the four other most highly compensated executive officers to the extent that
they receive compensation of more than $1 million in any year. However,
compensation that is "performance-based" within the meaning of Section 162(m) of
the Code is not subject to these deduction limits. To be performance-based,
among other requirements, the compensation must be paid only upon the attainment
of certain performance goals using performance criteria that have been approved
by our shareholders.
AMCOL may grant discretionary awards to employees that are not subject
to any of the these criteria under another compensation plan, the Annual
Discretionary Cash Incentive Plan. The following is a brief description of the
principal features of the Cash Incentive Plan, which is attached to this proxy
statement as Appendix B.
SUMMARY OF THE PLAN
Administration. The Cash Incentive Plan will be administered by our
Compensation Committee, which shall have full and exclusive discretionary power
to interpret the terms and the intent of the Cash Incentive Plan and any award
agreement or other agreement or document ancillary to or in connection with the
Cash Incentive Plan, to determine eligibility for awards and to adopt such
rules, regulations, forms, instruments, and guidelines for administering the
Cash Incentive Plan as the Compensation Committee may deem necessary or proper.
Such authority shall include, but not be limited to, selecting award recipients,
establishing all award terms and conditions, including the terms and conditions
set forth in award agreements, determining if such terms and conditions have
been met and adopting modifications and amendments to the Cash Incentive Plan or
any award agreement.
Eligibility. Awards may be granted under the Cash Incentive Plan to the
executive officers and other key employees of AMCOL, as selected by the
Compensation Committee in its discretion.
Terms of the Awards. The Compensation Committee in its discretion may
determine the performance goals to be achieved during any performance period,
the length of any performance period and the amount of any award. All awards are
payable in cash and, at the discretion of the Compensation Committee, may be
paid following the close of the performance period or on a deferred basis. The
Compensation Committee may establish different levels of payment under an award
to correspond with different levels of achievement of performance goals
specified in the award. The Compensation Committee may reduce or eliminate an
award made under the Cash Incentive Plan for any reason. The maximum aggregate
award that a participant may receive in any one calendar year may not exceed
$2,000,000.
The payment of awards under the Cash Incentive Plan will be based upon
the attainment of performance goals related to one or more performance criteria
selected by the Compensation Committee from among the following measures,
individually or in combination: (i) return on capital; (ii) earnings per share;
(iii) net sales; (iv) net earnings; (v) net operating profits; (vi) expense
control; (vii) working capital relating to inventory and/or accounts receivable;
(viii) operating margin; (ix) share price performance; (x) implementation or
completion of critical projects; and (xi) total return to shareholders.
10
Performance-Based Awards. To the extent necessary to comply with the
Qualified Performance-Based Award requirements of Section 162(m) of the Code,
the Compensation Committee will, in writing, (a) designate one or more Covered
Employees, (b) select the performance criteria applicable to the performance
period, (c) establish the performance goals, and amounts of such Awards, as
applicable, which may be earned for such performance period, and (d) specify the
relationship between performance criteria and the performance goals and the
amounts of such Awards, as applicable, to be earned by each Covered Employee for
the performance period.
Following the completion of each performance period, the Compensation
Committee will certify in writing whether the applicable performance goals have
been achieved for the performance period. No Award or portion thereof that is
subject to the satisfaction of any condition will be considered to be earned
until the Compensation Committee certifies in writing that the conditions to
which the distribution of the Award is subject have been achieved. During the
performance period, the Compensation Committee may not increase the amount of a
Qualified Performance-Based Awards that would otherwise be payable upon
satisfaction of the conditions, but may reduce or eliminate the payments as
provided for in the Award Agreement.
Amendment and Termination. The Compensation Committee may, at any time
and from time to time, alter, amend, modify, suspend, or terminate the Cash
Incentive Plan and any award agreement in whole or in part; provided, however,
no amendment of the Cash Incentive Plan shall be made without shareholder
approval if shareholder approval is required under Section 162(m) of the Code.
New Plan Benefits. Awards under the Cash Incentive Plan will be granted
in the discretion of the Compensation Committee. Except as described below, the
recipients and other terms of such awards cannot be determined at this time.
Information regarding our recent practices with respect to cash bonus awards is
presented in the "Summary Compensation Table" section in this Proxy Statement.
AMCOL may authorize and pay cash and non-cash incentive awards under plans and
arrangements other than the Cash Incentive Plan.
FEDERAL INCOME TAX CONSEQUENCES
Amounts paid pursuant to the Cash Incentive Plan are intended to
qualify as "qualified performance-based compensation" under section 162(m) of
the Code. Therefore, AMCOL believes that under existing federal income tax laws,
such amounts will be deductible by AMCOL when paid to an award recipient. An
award recipient will generally be required to recognize ordinary income upon
receipt of compensation under the Cash Incentive Plan.
2006 AWARDS
In February 2006, the Compensation Committee authorized certain
incentive awards to executive officers under the Cash Incentive Plan, subject to
shareholder approval of the Cash Incentive Plan. These awards are intended to
qualify for full deductibility under Section 162(m) of the Code if they are
subsequently earned and paid out. These are cash incentive awards for the 2006
fiscal year, which will become payable for 2006 performance if certain target
performance goals are achieved.
Target performance goals may be based upon one or more objective
business criteria that apply to the individual participant, one or more business
units or subsidiaries or AMCOL as a whole. The criteria may be weighed
differently for each participant. For 2006, the business criteria for each of
the executives named in the table below includes earnings per share and return
on capital employed. The business criteria for Messrs. McKendrick and Morrison
also includes environmental segment operating profit and business operating
profit, respectively. No amount will be payable unless a specified "threshold"
performance level is reached.
11
The table below shows the amounts payable under the Cash Incentive Plan
upon achievement of specified levels of performance for 2006:
THRESHOLD MAXIMUM
NAME AND POSITION LEVEL TARGET LEVEL BONUS (1)
- --------------------------------------------- ------------ ------------ ------------
Lawrence E. Washow
President and Chief Executive Officer $ 150,000 $ 525,000 $ 788,000
Gary L. Castagna
Senior Vice President, Chief
Financial Officer and Treasurer $ 42,000 $ 167,000 $ 278,000
Ryan F. McKendrick
Vice President; President of
Colloid Environmental
Technologies Company and
Volclay International Corp. $ 47,000 $ 161,000 $ 268,000
Gary Morrison
Vice President; President of
American Colloid Company $ 17,000 $ 134,000 $ 223,000
(1) All bonus amounts are subject to the following limits: Mr. Washow, 150%
of 2006 salary and Messrs. Castagna, McKendrick and Morrison, 100% of
2006 salary.
The Board unanimously recommends that AMCOL's shareholders vote "FOR"
the proposal to approve the Cash Incentive Plan.
12
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 five percent of AMCOL's common stock as of February 23, 2006.
NUMBER OF SHARES AND PERCENT
NATURE OF BENEFICIAL OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (1) (2)
- --------------------------------------------- -------------------- ----------
Harris Financial Corp.
111 West Monroe Street
Chicago, Illinois 60690 3,151,751(3)(4) 10.5%
Annamarie Weaver
c/o AMCOL International Corporation
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803 3,478,288(4)(5) 11.6%
Leslie Weaver
c/o AMCOL International Corporation
1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803 4,514,688(4)(6) 15.1%
(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 on 29,921,754 shares of common stock outstanding as of February
23, 2006.
(3) Based on an amendment to Schedule 13G filed with the Securities and
Exchange Commission on January 20, 2006.
(4) Includes 3,151,751 shares held in the Paul Bechtner Trust as to which
Harris Financial Corp., Ms. Annamarie Weaver and Ms. Leslie Weaver are
co-trustees and share voting and investment power.
(5) Includes 31,929 shares held by Ms. A. Weaver's husband.
(6) Includes 37,895 shares held by Ms. L. Weaver's husband, 121,220 shares
held by Ms. L. Weaver's children and 559,380 shares held in trusts for
which Ms. L. Weaver serves as co-trustee.
13
Security Ownership of Directors and Executive Officers
The following table sets forth, as of February 23, 2006, shares of
AMCOL common stock beneficially owned by: (i) each director and nominee, (ii)
the Chief Executive Officer, (iii) the named officers, and (iv) such persons as
a group, representing all of AMCOL's directors and executive officers.
NUMBER OF SHARES
AND NATURE OF
BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP (1) CLASS
- ------------------------------ ------------------ ------------
Arthur Brown 43,661 *
Daniel P. Casey 21,000 *
Robert E. Driscoll, III 299,873 1.0%
John Hughes 649,739 2.1%
Jay D. Proops 96,417 *
Clarence O. Redman 74,962 *
Dale E. Stahl 43,495 *
Lawrence E. Washow 681,260 2.2%
Audrey L. Weaver 1,262,597 4.2%
Paul C. Weaver 411,416 1.3%
Gary L. Castagna 188,092 *
Ryan McKendrick 36,011 *
Gary Morrison 265,929 *
Peter L. Maul 84,356 *
All of the above as a group 3,998,808 13.4%
* Percentage represents less than 1% of the total shares of common stock
outstanding as of February 23, 2006, which was 29,921,754.
(1) Nature of beneficial ownership is set forth on the next page.
14
NATURE OF BENEFICIAL OWNERSHIP AS OF FEBRUARY 23, 2006
------------------------------------------------------------------------------------------------
AS TRUSTEE SUBJECT
DIRECTLY IN AMCOL'S IN LIMITED AS TRUSTEE OF AMCOL'S TO OPTIONS
OR AS JOINT SAVINGS PARTNERSHIP OR CO- BY FAMILY PENSION EXERCISABLE
BENEFICIAL OWNER TENANTS (1) PLAN (2) (3) TRUSTEE MEMBERS PLAN (4) IN 60 DAYS
- ----------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
Arthur Brown 9,505 -- -- -- -- -- 34,156
Daniel P. Casey 12,000 -- -- -- -- -- 9,000
Robert E. Driscoll, III 7,000 -- 265,895 4,300 -- -- 22,678
John Hughes -- -- 54,211 440,913 55,838 80,000 18,777
Jay D. Proops 35,043 -- 10,000 -- -- -- 51,374
Clarence O. Redman 15,670 25,136 -- -- -- -- 34,156
Dale E. Stahl 30,000 -- -- -- -- -- 13,495
Lawrence E. Washow 411,126 19,515 -- -- -- 80,000 170,619
Audrey L. Weaver 650,406 -- -- 572,880 31,911 -- 7,400
Paul C. Weaver 315,638 -- -- 30,638 30,984 -- 34,156
Gary L. Castagna 40,100 5,325 -- -- -- 80,000 62,667
Ryan F. McKendrick 35,898 113 -- -- -- -- --
Gary D. Morrison 28,709 81,563 -- -- -- -- 155,657
Peter L. Maul 18,000 4,750 -- 53,571 5,670 -- 12,435
All Directors and Executive
Officers 1,609,095 136,402 330,106 1,102,302 124,403 80,000 626,570
(1) Includes shares held in joint tenancy with spouses for which voting
rights may be shared.
(2) Shares are held in AMCOL's Savings Plan, with the exception of Mr.
Redman's shares, which are held in the Clarence O. Redman PC Savings
Plan, and 5,000 shares held in an Individual Retirement Account.
(3) The named director is a general partner.
(4) Messrs. Hughes, Washow and Castagna share voting rights.
15
NAMED OFFICERS' AND DIRECTORS' COMPENSATION
Summary Compensation Table
The Summary Compensation Table below includes, for each of the fiscal
years ended December 31, 2005, 2004 and 2003, individual compensation for
services to AMCOL and its subsidiaries of those persons who were at December 31,
2005: (i) the Chief Executive Officer; and (ii) the four other most highly
compensated executive officers of AMCOL, or collectively, the named officers.
LONG-TERM
ANNUAL COMPENSATION (1)(2) COMPENSATION AWARDS
-------------------------------- ---------------------------
RESTRICTED ALL OTHER
STOCK SECURITIES COMPEN-
BONUS AWARDS UNDERLYING SATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($) ($)(3) OPTIONS ($)(4)
- ---------------------------------- ------ ----------- --------- ------------ ------------ ------------
Lawrence E. Washow 2005 500,000 750,000 -- 30,000 46,399
President and Chief 2004 469,800 704,700 -- 30,000 39,040
Executive Officer 2003 450,000 675,000 261,200(5) 30,000 27,940
Gary L. Castagna 2005 265,000 257,510 -- 20,000 20,778
Senior Vice President, Chief 2004 255,000 255,000 -- 18,000 23,140
Financial Officer and Treasurer 2003 246,000 246,000 163,250(6) 18,000 14,220
Ryan F. McKendrick
Vice President; President of
Colloid Environmental 2005 253,450 253,450 -- 20,000 8,400
Technologies Company and 2004 243,000 243,000 -- 17,000 8,200
Volclay International Corp. 2003 233,000 233,000 163,250(6) 17,000 8,000
Gary Morrison 2005 213,000 197,620 -- 12,000 8,400
Vice President; President of 2004 206,000 206,000 -- 12,000 8,200
American Colloid Company 2003 200,000 200,000 117,540(7) 12,000 8,000
Peter L. Maul 2005 196,270 84,380 -- 10,000 11,811
Vice President; President of 2004 190,000 100,000 -- 10,000 13,280
Nanocor, Inc.(8) 2003 183,000 100,000 117,540(7) 10,000 9,057
(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
of the named officers.
(3) The timing of the vesting of these shares of restricted stock depends
on whether AMCOL achieves certain target returns on capital in 2003,
2004 and 2005. AMCOL achieved such targets and all of these shares of
restricted stock were fully vested on February 28, 2006. The holders of
these restricted shares are entitled to vote and receive dividends.
(4) The figures in this column include AMCOL 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.
(5) Represents the value of 40,000 shares of restricted stock on May 22,
2003, the grant date. On December 31, 2005 Mr. Washow held 40,000
restricted shares in the aggregate at a value of $820,800.
(6) Represents the value of 25,000 shares of restricted stock on May 22,
2003, the grant date. On December 31, 2005 the named officer held
25,000 restricted shares in the aggregate at a value of $513,000.
(7) Represents the value of 18,000 shares of restricted stock on May 22,
2003, the grant date. On December 31, 2005 the named officer held
18,000 restricted shares in the aggregate at a value of $369,360.
(8) Mr. Maul has resigned all positions with AMCOL effective as of March
31, 2006.
16
Option Grants in Last Fiscal Year
Shown below is information on grants of stock options during the fiscal
year ended December 31, 2005 to the named officers, which are reflected in the
Summary Compensation Table.
GRANT
DATE
INDIVIDUAL GRANTS IN 2005 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 10.21% $ 20.90 2/10/2011 $ 242,936
Gary L. Castagna 20,000 6.81% $ 20.90 2/10/2011 $ 161,956
Ryan F. McKendrick 20,000 6.81% $ 20.90 2/10/2011 $ 161,956
Gary D. Morrison 12,000 4.08% $ 20.90 2/10/2011 $ 97,174
Peter L. Maul 10,000 3.40% $ 20.90 2/10/2011 $ 80,978
(1) These Non-Qualified Stock Options ("NSOs") were issued pursuant to
AMCOL's 1998 Long-Term Incentive Plan (the "1998 Plan") and may not be
exercised until they vest. These NSOs vest 33% after one year, 66%
after two years, and 100% after three years, provided that on death or
retirement under specified conditions, these NSOs 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.
(2) Based on 293,900 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 $20.90; an option term of
3.90 years; an interest rate of 3.527% 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 52.65%; and
dividends at the rate of $0.36 per share representing the annualized
dividends paid with respect to a share of common stock at the date of
grant. There have been no reductions to reflect the probability of
forfeiture due to termination prior to vesting, or to reflect the
probability of a shortened option term due to termination of employment
prior to the option expiration date. The ultimate values of the options
will depend on the future market price of AMCOL's stock, which cannot
be forecast with reasonable accuracy. The actual value, if any, an
grantee will realize upon exercise of an option will depend on the
excess of the market value of AMCOL's common stock over the exercise
price on the date the option is exercised.
17
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
Shown below is information with respect to options exercised by the
named officers during 2005 and unexercised options held by the named officers at
December 31, 2005.
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS AT 12/31/05
ACQUIRED VALUE OPTIONS AT 12/31/05 ($)
ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE ($) UNEXERCISABLE UNEXERCISABLE (1)
- ---------------------- ---------- ---------- ---------------------- ----------------------
Lawrence E. Washow 36,475 $ 667,099 146,619 / 78,300 $2,303,791 / $461,116
Gary L. Castagna 5,000 $ 69,150 40,400 / 50,600 $526,428 / $303,752
Ryan F. McKendrick 44,139 $ 703,849 5,667 / 46,599 $13,714 / $249,338
Gary D. Morrison 25,626 $ 460,065 143,374 / 31,600 $2,477,432 / $188,792
Peter L. Maul 39,167 $ 637,851 9,369 / 26,399 $101,284 / $158,355
(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, 2005 under
all of our equity compensation plans.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
ISSUED UPON EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a)
PLAN CATEGORY (a) (b) (c)
- --------------------------- -------------------------- --------------------- -------------------------
Equity Compensation Plans
Approved by Security
Holders (1) 1,895,987 8.80 882,695
Equity Compensation Plans
Not Approved by Security
Holders - - -
Total 1,895,987 8.80 882,695
(1) The equity compensation plans approved by AMCOL's shareholders are the
1987 Nonqualified Stock Option Plan, the 1993 Stock Plan and the 1998
Long-Term Incentive Plan.
18
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 named
officers, in the earnings and years of service classifications indicated under
AMCOL's retirement plans, which cover substantially all of its domestic
employees hired on or before December 31, 2003 on a non-contributory basis. The
estimated benefits assume (i) that the plans will be continued and (ii) that the
employee will elect to receive a pension at normal retirement age. The table
above and the estimates 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 27 $ 812,255 $ 333,136
Gary L. Castagna 5 $ 401,190 $ 30,106
Ryan F. McKendrick 22 $ 407,404 $ 132,970
Gary D. Morrison 25 $ 322,696 $ 119,088
Peter L. Maul 22 $ 247,048 $ 82,531
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, 2005 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 AMCOL 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 AMCOL 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, 2005 was $3,307,294.
Employment Agreements
Each of Messrs. Castagna, McKendrick, Morrison and Washow are parties
to employment agreements with AMCOL. The initial employment term under each
agreement is three years (expiring in March 2009), with a rolling six-month
extension (unless either party gives notice of expiration six months prior to
the extension). Each agreement provides for an annual salary and a performance
based annual bonus, both of which are subject to deferral in AMCOL's discretion
in the event payments to such executive are not deductible by AMCOL under the
tax laws. Such amounts, if any, will be deferred until they are deductible by
AMCOL. The agreements also include a non-competition / non-solicitation covenant
effective during employment and for one year thereafter.
19
Prior to a Change of Control (as defined below), if AMCOL terminates an
officer without cause or the officer terminates his employment for Good Reason
(as defined below), the officer is entitled to receive: (1) his accrued salary
and bonus; (2) a pro-rata annualized bonus; (3) his base salary for 18 months
(in the case of Messrs. Castagna, McKendrick and Morrison) or 24 months (in the
case of Mr. Washow); (4) a lump sum of any amount then payable to him pursuant
to the tax gross-up provision; and (5) continued employee benefits during a
transition period.
After a Change of Control, if an officer is terminated without cause or
the officer terminates his employment for Good Reason or during the seventh
month following the Change of Control, the officer is entitled to receive: (1)
his accrued salary and bonus; (2) a pro-rata annualized bonus; (3) a lump sum
equal to three times (in the case of Messrs. Castagna, McKendrick and Washow) or
two times (in the case of Mr. Morrison) the sum of his salary and annualized
bonus; (4) continued employee benefits until the earlier of three years (in the
case of Messrs. Castagna, McKendrick and Washow) or two years (in the case of
Mr. Morrison) or the date the officer commences a new job; and (5) a lump sum of
any amount then payable to him pursuant to the tax gross-up provision. If a
Change of Control occurs, all outstanding stock options, restricted stock and
other equity compensation awards granted to the officer become fully vested and
exercisable unless otherwise provided in the award agreement.
If the officer's employment terminates due to his death or disability
prior to a Change of Control or more than seven months after a Change of
Control, the officer or his beneficiaries are entitled to the officer's accrued
salary and bonus and the officer's pro-rata annualized bonus. If the officer's
employment terminates due to his death or disability within seven months after a
Change of Control, the officer or his beneficiaries are entitled to receive the
compensation and benefits described above with respect to termination without
cause after a Change of Control, except that the employee benefits are limited
to welfare benefits.
If, at any time, AMCOL terminates an officer for cause or, except as
described above, the officer terminates his employment without Good Reason, the
officer is entitled to his accrued salary and bonus, but shall not be entitled
to any severance pay.
A Change of Control is defined as any change of control under the tax
laws and any one or more of the following, subject to certain exemptions: (1)
any person (other than certain AMCOL affiliates, an AMCOL subsidiary or an AMCOL
employee benefit plan) acquires 50.1% or more of AMCOL's common stock; (2) the
incumbent directors cease to constitute at least one-half of the AMCOL
directors; (3) 50.1% of AMCOL's assets are sold; (4) the shareholders approve a
plan of liquidation; and (5) with respect to Messrs. McKendrick and Morrison,
the sale of the stock or assets of the subsidiaries for which they serve as
president, provided such subsidiaries represent a significant portion of AMCOL's
net sales.
Good Reason is defined as the occurrence of any one of the following
events: (1) any material breach of the employment agreement by AMCOL which has
not been cured as required; or (2) AMCOL's failure to assign the employment
agreement to a successor or the successor's failure to expressly assume and
agree to be bound by the employment agreement.
20
Director Compensation
The following table reflects the compensation paid to our directors
during 2005.
STOCK
TYPE OF COMPENSATION CASH OPTIONS
- --------------------------------------------------------------------------- --------- ---------
Annual Retainer $ 40,000 3,000
Board Meeting Attendance Fee $ 2,000
Supplemental Annual Retainer for the Chairman of the Board $ 15,000
Annual Retainer for the Chairs of the Executive and Nominating and
Governance Committees $ 2,000
Annual Retainer for the Chair of the Audit Committee $ 7,500
Annual Retainer for Chair of the Compensation Committee $ 3,000
Attendance Fee for Meetings of the Executive, Compensation and Nominating
and Governance Committees $ 1,500
Attendance Fee for Meetings of the Audit Committee $ 3,000
Directors who are also full-time employees of AMCOL are not paid for
their services as directors or for attendance at meetings.
AMCOL provides excess personal liability insurance coverage for its
non-employee directors. The premium paid per non-employee director for such
insurance was approximately $882 for 2005. Non-employee directors are eligible
to participate in AMCOL's health insurance plan at the directors' cost.
In 2005, each of the non-employee directors was granted 3,000 options,
as noted in the above table, at an exercise price of $20.90 per share, the fair
market value on the date of the grant.
CORPORATE GOVERNANCE MATTERS
Board Committee Membership and Meetings
NOMINATING
AND
NAME AUDIT COMPENSATION EXECUTIVE GOVERNANCE
- -------------------------- ------- ------------- --------- -----------
Arthur Brown X* X
Daniel P. Casey X X X
Robert E. Driscoll, III X X
John Hughes X
Jay D. Proops X X X*
Clarence O. Redman X
Dale E. Stahl X* X X
Lawrence E. Washow X
Audrey L. Weaver X
Paul C. Weaver X* X
Number of Meetings in 2005
5 3 4 1
* Chairperson.
During 2005, the Board of Directors held five meetings. Each director
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 all committees of
the Board on which such director served. Pursuant to our Corporate Governance
Guidelines, which may be found on our website at www.amcol.com, directors are
expected to resign from the Board effective as of the annual shareholders
meeting following the date on which they reach the age of 70.
21
Director Independence
AMCOL's Board of Directors has determined that the following directors
are independent as defined in the applicable standards of the New York Stock
Exchange: Messrs. Brown, Casey, Driscoll, Proops, Stahl and Weaver and Ms.
Weaver. These independent directors constitute a majority of the directors of
AMCOL. The Board has also determined that each member of the Audit Committee,
the Compensation Committee and the Nominating and Governance Committee is
independent as defined in the applicable standards of the New York Stock
Exchange. In making the independence determinations, our Board of Directors
reviewed all of our directors' relationships with AMCOL, including business,
familial and other types of relationships. In addition, the Board has determined
that each member of the Audit Committee is independent as defined in the
applicable rules and regulations of the Securities and Exchange Commission.
The Audit Committee
The Audit Committee is responsible for providing assistance to the
Board of Directors in fulfilling the Board's oversight responsibility by
monitoring the integrity of the financial statements of AMCOL, the independent
registered public accounting firm's qualifications and independence, AMCOL's
compliance with legal and regulatory requirements pertaining to its financial
statements, and the performance of AMCOL's internal audit function and
independent registered public accounting firm. The Committee is also responsible
for appointing the independent registered public accounting firm for each fiscal
year.
The Board of Directors has determined that each member of the Audit
Committee is an "audit committee financial expert" as defined in the
Sarbanes-Oxley Act of 2002 and the applicable rules and regulations of the
Securities and Exchange Commission. The Audit Committee operates pursuant to a
charter adopted by the Board, which may be found on our website at
www.amcol.com.
The Compensation Committee
The Compensation Committee assists the Board of Directors in fulfilling
its responsibilities in connection with the compensation of company directors,
officers and employees. Specifically, the Committee is responsible for annually
reviewing and approving corporate goals and objectives relevant to the
compensation of the Chief Executive Officer, evaluating the Chief Executive
Officer's performance in light of those goals and objectives, and as a committee
determining and approving the Chief Executive Officer's compensation level based
on this evaluation. In determining the long-term incentive component of the
Chief Executive Officer's compensation, the Committee considers, among other
things, AMCOL's performance and relative shareholder return, the value of
similar incentive awards to chief executive officers at comparable companies and
awards given to the Chief Executive Officer in past years. This review and
evaluation may involve consultations from time to time with the other
independent directors.
The Committee is also responsible for reviewing and making
recommendations to the Board with respect to the compensation of officers other
than the Chief Executive Officer, including the annual base salary level;
incentive compensation plans; equity-based plans and retirement plans;
employment agreements, severance arrangements and change in control
agreements/provisions, in each case, as, when and if appropriate; and any
special or supplemental benefits. The Compensation Committee also makes grants
of equity awards under AMCOL's 1998 Long-term Incentive Plan. In carrying out
its responsibilities, the Committee has sole authority to retain and terminate
any compensation consultant to be used to assist the Committee in fulfilling its
responsibilities. The Compensation Committee is also responsible for making
recommendations to the Board regarding director compensation and succession
planning. The Compensation Committee operates pursuant to a charter adopted by
the Board, which may be found on our website at www.amcol.com.
22
The Nominating and Governance Committee
The Nominating and Governance Committee is responsible for identifying,
seeking and recommending to the Board of Directors individuals qualified to
become directors consistent with criteria approved by the Board. In considering
potential candidates for the Board, including with respect to incumbent
directors, the Committee considers the potential candidate's integrity and
business ethics; strength of character, judgment and experience, consistent with
the needs of AMCOL; specific areas of expertise and leadership roles; and the
ability to bring diversity to the Board, including whether the potential
candidate brings complementary skills and viewpoints. The Committee also
considers the ability of the individual to allocate the time necessary to carry
out the tasks of board membership including membership on appropriate
committees.
The Committee identifies potential nominees by asking current directors
and others to notify the Committee if they become aware of persons, meeting the
criteria described above, who may be available to serve on the Board. The
Committee has sole authority to retain and terminate any search firm to be used
to identify director candidates and has sole authority to approve the search
firm's fees and other retention terms. Historically, AMCOL has not engaged third
parties to assist in identifying and evaluating potential nominees, but would do
so in those situations where particular qualifications are required to fill a
vacancy and the Board's contacts are not sufficient to identify an appropriate
candidate. Pursuant to its charter, the Nominating and Governance Committee's
policy is to not consider nominees recommended by shareholders of AMCOL.
Other responsibilities of the Committee include developing and
recommending to the Board the Corporate Governance Guidelines applicable to
AMCOL, overseeing the evaluations of the Board and management, recommending to
the Board director nominees for each committee, and recommending to the Board
the size of the Board and its committee structure. The Nominating and Governance
Committee operates pursuant to a charter adopted by the Board, which may be
found on our website at www.amcol.com.
Executive Sessions of Non-Management Directors
Pursuant to our Corporate Governance Guidelines, our non-management
directors met two times in 2005 in regularly scheduled executive sessions
without management. The directors who preside at such meetings rotate among the
chairmen of our Audit, Compensation, Nominating and Governance and Executive
Committees. If these sessions include one of our non-independent directors, our
independent directors meet alone at least once a year.
Shareholder Communications with the Board of Directors
AMCOL's annual meeting of shareholders provides an opportunity each
year for shareholders to ask questions of or otherwise communicate directly with
members of our Board of Directors on appropriate matters. Our directors are
expected to attend shareholders meetings pursuant to our Corporate Governance
Guidelines. All of our directors attended the 2005 annual meeting, and we
anticipate that all of our directors will attend the 2006 annual meeting.
In addition, shareholders may, at any time, communicate in writing with
the Audit Committee, the board of directors, any particular director, or the
independent directors as a group, by sending written communication to AMCOL
International Corporation, Attention: Board of Directors, Audit Committee,
Presiding Independent Director of the Board of Directors, or the name of a
particular board member, as applicable, One North Arlington, 1500 West Shure
Drive, Suite 500, Arlington Heights, Illinois 60004-7803. Copies of written
communications received at such address will be provided to the named addressee.
Shareholders may also reach the Audit Committee by calling AMCOL's alert line at
(877) 862-6265. Shareholders may report their concerns anonymously or
confidentially.
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 is responsible for annually reviewing and
approving corporate goals and objectives relevant to the compensation of the
Chief Executive Officer, evaluating the Chief Executive Officer's performance in
light of those goals and objectives, and determining and approving the Chief
Executive Officer's compensation level based on this evaluation. This review and
evaluation may involve consultations from time to time with the other
independent directors.
The Compensation Committee is also responsible for reviewing and making
recommendations to the Board with respect to the compensation of officers other
than the Chief Executive Officer, including the annual base salary level;
incentive compensation plans; equity-based plans and retirement plans;
employment agreements, severance arrangements and change in control
agreements/provisions, in each case, as, when and if appropriate; and any
special or supplemental benefits.
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:
o 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.
o 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.
o The Committee considers stock ownership by management to be an
important means of linking management's interests with those
of shareholders. AMCOL maintains 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.
o Base and equity compensation components target pay
opportunities at the median of compensation paid to executives
included in AMCOL's comparative compensation peer group, while
incentive compensation is a function of company performance.
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.
24
Components of Compensation
AMCOL's executive 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 peer group and other
general manufacturing companies is used for comparison purposes. Compensation
program design is based in part on the pay data for comparable positions at
these companies as well as AMCOL's financial performance. The executive
compensation program consists of base salary, annual incentives and long-term
incentives.
Base Pay
The initial base salaries for Mr. Washow, the Chief Executive Officer,
and AMCOL's other executive officers were established in their respective
employment agreements. The Compensation Committee annually reviews each
executive's base salary and may grant increases based upon levels of
responsibility, breadth of knowledge, internal equity issues and market pay
practices. Salary increases are based primarily upon individual performance,
which is evaluated based on individual contributions to AMCOL.
Mr. Washow's base salary was increased to $500,000 for 2005. In
arriving at this increase in 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
Pursuant to the terms of their respective employment agreements, Mr.
Washow and each of the other executive officers are eligible for an annual cash
bonus based on the achievement of target performance goals established annually
by the Compensation Committee. Upon the achievement of the target performance
goals, each executive shall be paid a bonus equal to a predetermined percentage
of his base salary. If Mr. Washow achieves the target performance goal, he is
entitled to a bonus equal to 100% of his base salary.
The target performance goals for the Chief Executive Officer and Chief
Financial Officer are based upon AMCOL's return on capital and earnings per
share. Mr. Washow was paid a bonus of $750,000 for the 2005 fiscal year
financial performance of AMCOL. In the case of the other executives, their
target performance goals are 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.
Long-Term Incentives
Long-term incentives are provided annually in the form of stock options
and/or restricted stock awards. The long-term incentive program serves to focus
executives on long-term shareholder value creation and foster an ownership
mentality among the executive management team. The Compensation Committee
believes the equity incentive program provides a strong link between management
behavior and shareholder interests. The Compensation Committee believes that the
aggregate annual incentive awards granted to all employees should equal between
one and one and a half percent of AMCOL's outstanding common stock. 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
meaningful portion of the value of an executive's total compensation package.
In 2005, the named officers were granted stock option awards under
AMCOL's 1998 Long-Term Incentive Plan. The stock options granted to the named
officers vest 33% after one year, 66% after two years, and 100% after three
years, and upon death or retirement under specified conditions, the stock
options become fully vested.
25
In determining the long-term incentive component of Mr. Washow's
compensation, the Compensation Committee considers, among other things, AMCOL's
performance and relative shareholder return, the value of similar incentive
awards to chief executive officers at comparable companies and awards given to
Mr. Washow in prior years. In 2005, Mr. Washow received an option to purchase
30,000 shares of common stock at an exercise price of $20.90 per share.
Internal Revenue Code Section 162(m)
Under Section 162(m) of the Internal Revenue Code, AMCOL may not deduct
annual compensation in excess of $1 million paid to certain employees, generally
the Chief Executive Officer and four other most highly compensated executive
officers, unless that compensation qualifies as performance-based compensation
under a shareholder approved plan and meets certain other technical
requirements. In the event that AMCOL would not be entitled to a tax deduction
under Section 162(m) with respect to compensation to these executives, the
Compensation Committee has in place a policy that AMCOL will defer payment of a
portion of salary and bonus payments equal to such excess until such time or
times as AMCOL is entitled to a tax deduction under Section 162(m). The
restricted stock awards granted to the executive officers in 2003 do not qualify
as performance-based compensation under Section 162(m). These awards were fully
vested on February 28, 2006 and the shares held by Mr. Washow were valued at
$1,104,400 as of such date. The Compensation Committee has decided to waive this
policy to require deferral of excess amounts for the 2006 fiscal year with
respect to the 2003 restricted stock awards. Assuming shareholder approval is
obtained, future awards under both the AMCOL International Corporation 2006
Long-Term Incentive Plan and AMCOL International Corporation Annual Cash
Incentive Plan are expected to qualify as performance-based compensation under
Section 162(m).
While the Compensation Committee considers the impact of Section 162(m)
in structuring AMCOL's compensation plans and programs, the Compensation
Committee has, and may continue to, approve awards which would not qualify as
performance-based compensation under Section 162(m). The Compensation Committee
reserves the flexibility and authority to make decisions that are in the best
interest of AMCOL and its shareholders, even if those decisions do not result in
full deductibility under Section 162(m).
Compensation Committee
----------------------
Dale E. Stahl, Chairman
Arthur Brown
Daniel P. Casey
Robert E. Driscoll, III
Audrey L. Weaver
26
REPORT OF THE AUDIT COMMITTEE
Management is responsible for AMCOL'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. AMCOL's independent registered public accounting firm is
responsible for auditing those financial statements. The Audit Committee's
responsibility is to monitor and review these processes on behalf of the Board
of Directors. It is not our duty or our responsibility to conduct auditing or
accounting reviews or procedures. 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 registered public accounting firm included in
its report on AMCOL'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 registered
public accounting firm do not assure that AMCOL's financial statements are
presented in accordance with generally accepted accounting principles or that
the audit of AMCOL's financial statements has been carried out in accordance
with generally accepted auditing standards.
Review with Management
The Audit Committee has reviewed and discussed AMCOL's audited
financial statements as of and for the year ended December 31, 2005 with
management.
Review and Discussions with Independent Registered Public Accounting Firm
The Audit Committee has discussed with KPMG LLP, AMCOL's independent
registered public accounting firm for the fiscal year ended December 31, 2005,
the audited financial statements as of and for the year ended December 31, 2005
and the matters required to be discussed under auditing standards generally
accepted in the United States, including those matters set forth in Statement on
Auditing Standards No. 61 (Communication with Audit Committees).
The Audit Committee has also received the written disclosures from KPMG
LLP required by Independence Standards Board Standard No. 1, which relates to
the independent registered public accounting firm's independence from AMCOL and
its related entities, and has discussed with KPMG LLP their independence from
AMCOL. The Audit Committee has also considered whether KPMG's provision of
non-audit services to AMCOL is compatible with maintaining the independent
registered public accounting firm's independence.
Conclusion and Recommendation
The Audit Committee has concluded that KPMG LLP is independent from
AMCOL and its management. Based on the review and discussions referred to above,
the Audit Committee recommended to AMCOL's Board of Directors that AMCOL's
audited financial statements be included in AMCOL's Annual Report on Form 10-K
for the year ended December 31, 2005 filed with the Securities and Exchange
Commission.
Audit Committee
---------------
Arthur Brown, Chairman
Daniel P. Casey
Robert E. Driscoll, III
Jay D. Proops
27
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The firm of KPMG LLP served as AMCOL's independent registered public
accounting firm for the fiscal year ended December 31, 2005. During 2005, the
Audit Committee appointed 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:
2004 ACTUAL 2005 ACTUAL
------------ ------------
Audit Fees (1) $ 1,593,163 $ 1,447,689
Audit-Related Fees (2) $ 233,242 $ 40,212
Tax Fees (3) $ 224,812 $ 87,964
All Other Fees (4) $ 66,080 $ 74,182
Total $ 2,117,298 $ 1,650,048
(1) Audit fees represent fees for professional services provided in
connection with the audit of our financial statements and review of our
quarterly financial statements and audit services provided in
connection with other statutory or regulatory filings.
(2) Audit-Related fees consist primarily of accounting consultations,
employee benefit plan audits, services related to business acquisitions
and divestitures and other attestation services.
(3) For 2005 and 2004, respectively, tax fees principally included tax
compliance fees of $51,148 and $121,613, tax advice and planning fees
of $36,817 and $99,003, and tax fees in relation to acquisitions of $0
and $4,196.
(4) All other fees principally includes preparation of expatriate employee
tax returns, and pension plan administration.
The non-audit services provided by KPMG LLP for the fiscal year ended
December 31, 2005 were pre-approved in accordance with the Audit Committee's
pre-approval policies, which are explained in more detail below. The Audit
Committee has considered whether the provision of these non-audit services by
KPMG LLP is compatible with maintaining KPMG LLP's independence.
Pre-Approval Policies
The Audit Committee is responsible for reviewing and pre-approving all
audit and non-audit services provided by the independent registered public
accounting firm and shall not engage the independent registered public
accounting firm to perform non-audit services proscribed by law or regulation.
The Audit Committee may delegate pre-approval authority to a member of the Audit
Committee. The Audit Committee has delegated pre-approval authority to the
Chairman of the Audit Committee for purposes of pre-approving management's
engagement of the independent registered public accounting firm to perform
non-audit services when the fees for the engagement do not exceed $25,000. When
the fees for non-audit services reach a threshold of $75,000 for any fiscal
year, management must obtain specific pre-approval from the entire Audit
Committee. The decisions of any Audit Committee member to whom pre-approval
authority is delegated must be presented to the full Audit Committee at its next
scheduled meeting. In fiscal 2005, 100% of non-audit services were approved by
the Audit Committee.
Dismissal of Independent Registered Public Accounting Firm
On March 24, 2006, the Audit Committee of the Board of Directors of
AMCOL approved the dismissal of KPMG LLP as AMCOL's independent registered
public accounting firm, effective immediately.
28
The audit reports of KPMG LLP on the consolidated financial statements
of AMCOL and subsidiaries as of and for the years ended December 31, 2005 and
2004 did not contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles,
except that the audit reports for 2005 and 2004 contained an explanatory
paragraph with respect to the Company changing its method of accounting for
stock-based compensation effective January 1, 2003.
The audit report of KPMG LLP on management's assessment of the
effectiveness of internal control over financial reporting and the effectiveness
of internal control over financial reporting as of December 31, 2005 did not
contain an adverse opinion or disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles.
The audit report of KPMG LLP on management's assessment of the
effectiveness of internal control over financial reporting as of December 31,
2004 was unqualified and its audit report on the effectiveness of internal
control over financial reporting as of December 31, 2004 contained an adverse
opinion indicating that AMCOL did not maintain effective internal control over
financial reporting as of December 31, 2004 because of the effect of a material
weakness in the design of internal controls, which did not address the financial
statement accounting considerations arising from income tax matters, or the
timing of recording of changes in accounting estimates relating to income taxes
of foreign subsidiaries. The effect was further explained in the report as
follows:
"This control weakness resulted in material errors in the
accounting for income taxes, which were identified during the course of
the 2004 audit. The material errors led to (i) a restatement of the
financial results for the interim periods ended September 30, 2004 in
order to both recognize the expected federal income tax refunds
relating to certain deductions and credits claimed in amended tax
returns filed in September 2004 as well as correct the deferred income
tax assets and income taxes payable recorded by a wholly-owned Company
subsidiary in the United Kingdom and (ii) a restatement of beginning
retained earnings for the year ended December 31, 2001 to reflect the
estimate of the refund resulting from certain state tax deductions
claimed in amended tax returns filed in September 2004."
In connection with the audits of the two fiscal years ended December
31, 2005, and through March 24, 2006, there were no disagreements with KPMG LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope of procedures, which disagreements, if not
resolved to the satisfaction of KPMG LLP, would have caused KPMG LLP to make
reference to the subject matter of the disagreements in its reports for such
periods.
In connection with the audits of the two fiscal years ended December
31, 2005 and through March 24, 2006, there have been no reportable events (as
defined in Item 304(a)(1)(v)) of Regulation S-K) except that KPMG advised AMCOL
of the material weakness as explained in KPMG's report on management's
assessment of the effectiveness of internal control over financial reporting and
the effectiveness of internal control over financial reporting as of December
31, 2004 as described above. The subject matter of the material weakness was
discussed by AMCOL's management and the Audit Committee of the Board of
Directors of AMCOL with KPMG. AMCOL has authorized KPMG to respond fully to the
inquiries of AMCOL's successor accountant, Ernst & Young LLP, concerning the
subject matter of the material weakness.
AMCOL provided KPMG LLP with a copy of the above disclosure prior to
filing a Current Report on Form 8-K with the Securities and Exchange Commission
and requested that KPMG LLP furnish it with a letter addressed to the Securities
and Exchange Commission stating whether it agrees with the above statements and,
if not, stating the respects in which it does not agree. A copy of KPMG LLP's
letter stating that it agrees with the above statements is attached as an
Exhibit to AMCOL's Form 8-K.
Engagement of Independent Registered Public Accounting Firm
Also on March 24, 2006, the Audit Committee approved the engagement of
Ernst & Young LLP to serve as its independent registered public accounting firm,
effective immediately. During the two years ended December 31, 2005 and 2004 and
through March 24, 2006, neither the Company nor anyone on its behalf consulted
with Ernst & Young LLP with respect to any of the matters or reportable events
set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.
29
Representatives from KPMG LLP and Ernst & Young LLP will be present at
the annual meeting, will be afforded the opportunity to make statements, and
will be available to respond to appropriate questions.
STOCK PERFORMANCE GRAPH
The following graph sets forth a five-year comparison of cumulative
total shareholder returns for: (i) AMCOL (which trades on the New York Stock
Exchange); (ii) the S&P SmallCap 600 Index; and (iii) a custom peer group of
publicly traded companies. The peer group consists of companies whose
businesses, sales sizes, market capitalization and stock trading volumes are
similar to that of AMCOL. The peer group consists of the following companies:
Calgon Carbon Corporation, Compass Minerals International, Inc., Martin Marietta
Materials, Inc., Minerals Technologies Inc., Oil-Dri Corporation of America and
RPM International Inc.
All returns were calculated assuming dividend reinvestment on a
quarterly basis. Returns were adjusted for spin-offs and other special dividends
for both AMCOL and the peer group companies. Further, the tax-effectiveness of
any distributions to shareholders was not taken into account. The returns of
each company in the peer group have been weighted according to market
capitalization.
The following graph sets forth a five year comparison of the cumulative
total shareholder returns for the following: (1) the Corporation's common stock;
(2) the S&P SmallCap 600 Index; and (3) the Peer Group consisting of Calgon
Carbon Corporation, Compass Minerals International, Inc., Martin Marietta
Materials, Inc., Minerals Technologies, Inc., Oil-Dri Corporation of America and
RPM International, Inc. The graph assumes that $100 was invested at the close of
business on December 31, 2000 and assumes the reinvestment of all dividends.
S&P SMALL
DATE AMCOL CAP 600 PEER GROUP
--------- ------------ ------------ ------------
12/2000 $ 100.00 $ 100.00 $ 100.00
12/2001 $ 153.19 $ 106.54 $ 133.66
12/2002 125.41 $ 90.95 $ 112.22
12/2003 446.33 $ 126.23 $ 150.17
12/2004 449.63 $ 154.82 $ 185.42
12/2005 467.97 $ 166.71 $ 201.80
30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Clarence O. Redman, Secretary and a director, is of counsel to Lord,
Bissell & Brook LLP, the principal law firm engaged by AMCOL.
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. During 2005 there were no delinquent reports except that Mr.
McKendrick, an executive officer, filed one late report regarding the sale of
17,088 shares in his 401(k) account and Mrs. L. Weaver, a holder of more than
10% of our common stock, filed one late report regarding 5,100 shares given to
her and members of her immediate family. In making these disclosures, AMCOL has
relied solely on written representations of its directors and executive officers
and copies of the reports filed with the Securities and Exchange 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 2007 must be received by AMCOL on
or before December 1, 2006.
If a shareholder intends to present a proposal at the 2007 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 10, 2007
and March 12, 2007. 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.
COMMITTEE CHARTERS, GOVERNANCE GUIDELINES AND CODE OF CONDUCT
Copies of our Audit Committee Charter, Compensation Committee Charter,
Nominating and Governance Committee Charter, Corporate Governance Guidelines and
Code of Business Conduct and Ethics may be found on our website at
www.amcol.com. Copies of these documents are also available to shareholders upon
written request. Requests 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
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 regarding such other matters and the
transaction of such other business as may be properly brought before the meeting
in accordance with their best judgment.
By Order of the Board of Directors,
Clarence O. Redman
Secretary
Arlington Heights, Illinois
April 10, 2006
31
APPENDIX A
AMCOL INTERNATIONAL CORPORATION
2006 LONG-TERM INCENTIVE PLAN
1. Preamble.
--------
AMCOL International Corporation, a Delaware corporation (the
"Company"), hereby establishes the AMCOL International Corporation 2006
Long-Term Incentive Plan (the "Plan") as a means whereby the Company may,
through awards of (i) incentive stock options ("ISOs") within the meaning of
section 422 of the Code, (ii) non-qualified stock options ("NSOs"), (iii) stock
appreciation rights ("SARs"), (iv) restricted stock ("Restricted Stock") and (v)
restricted stock units ("Restricted Stock Units"):
(a) provide selected officers, directors and employees
with additional incentive to promote the success of
the Company's business;
(b) encourage such persons to remain in the service of
the Company; and
(c) enable such persons to acquire proprietary interests
in the Company.
2. Definitions and Rules of Construction.
-------------------------------------
2.01 "Affiliate" means any entity during any period that, in the
opinion of the Committee, the Company has a significant economic interest in the
entity.
2.02 "Award" means the grant of Options, SARs, Restricted Stock
and/or Restricted Stock Units to a Participant.
2.03 "Award Date" means the date upon which an Award is awarded to
a Participant under the Plan.
2.04 "Board" or "Board of Directors" means the board of directors
of the Company.
2.05 "Cause" with respect to any Award shall have the meaning set
forth in the Participant's employment agreement, or if no meaning is set forth
in the Participant's employment agreement or there is no employment agreement,
"Cause" shall mean: Participant's commission of a felony or misdemeanor that
involves fraud, dishonesty or moral turpitude; or Participant's gross negligence
or willful or intentional material misconduct in the performance of his duties.
The Participant shall be considered to have been discharged for "Cause" if the
Company determines, within 30 days after the Participant's resignation, that
discharge for Cause was warranted.
2.06 "Change of Control" with respect to any Award shall have the
meaning set forth in the Participant's employment agreement, or if no meaning is
set forth in the Participant's employment agreement or there is no employment
agreement, "Change of Control" shall be deemed to have occurred on the first to
occur of any of the following:
(a) any person (as such term is used in Rule 13d-5 under the
Exchange Act) or group (as such term is defined in Section
3(a)(9) and 13(d)(3) of the Exchange Act), other than a
Subsidiary, any employee benefit plan (or any related trust)
of the Company or any of its Subsidiaries or any Excluded
Person, becomes the Beneficial Owner (as defined in Rule 13d-3
(or any successor rule) of the Securities and Exchange
Commission under the Exchange Act of 1934) of 50.1% or more of
the Common Stock of the Company or of Voting Securities
representing 50.1% or more of the combined voting power of the
Company (such a person or group, a "50.1% Owner"), except that
(i) no Change of Control shall be deemed to have occurred
solely by reason of such beneficial ownership by a corporation
with respect to which both more than 49.9% of the common stock
of such corporation and Voting Securities representing more
than 49.9% of the aggregate voting power of such corporation
are then owned, directly or indirectly, by the persons who
were the direct or indirect owners of the common stock and
Voting Securities of the Company immediately before such
acquisition in substantially the same proportions as their
ownership, immediately before such acquisition, of the Common
Stock and Voting Securities of the Company, as the case may be
and (ii) such corporation shall not be deemed a 50.1% Owner;
or
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(b) the Incumbent Directors (determined using the Effective Date
of this Plan as the baseline) cease for any reason to
constitute at least one-half of the directors of the Company
then serving; or
(c) immediately prior to the consummation by the Company of a
merger, reorganization, consolidation, or similar transaction,
or a plan or agreement for the sale or other disposition of
50.1% of the consolidated assets of the Company or a plan of
liquidation of the Company (any of the foregoing transactions,
a "Reorganization Transaction") which is not an Exempt
Reorganization Transaction (provided however, there shall be
no Change of Control unless the Reorganization Transaction is
actually consummated); or
(d) the approval by the stockholders of the Company of a plan of
liquidation of the Company which, based on information
included in the proxy and other written materials distributed
to the Company's stockholders in connection with the
solicitation by the Company of such stockholder approval, is
not expected to qualify as an Exempt Reorganization
Transaction.
2.07 "Code" means the Internal Revenue Code of 1986, as amended
from time to time or any successor thereto.
2.08 "Committee" means the Compensation Committee of the Board of
Directors.
2.09 "Common Stock" means Common Stock of the Company, par value
$.01 per share.
2.10 "Company" means AMCOL International Corporation, a Delaware
corporation, and any successor thereto.
2.11 "Covered Employee" means an Employee who is, or as determined
by the Committee may become, a "covered employee" within the meaning of section
162(m) of the Code (or any successor provision), which generally means, the
chief executive officer and the four other highest compensated executive
officers of the Company for whom total compensation is required to be reported
to stockholders under the Securities Exchange Act of 1934.
2.12 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as it exists now or from time to time may hereafter be amended.
2.13 "Excluded Person" means any of the Paul Bechtner Trust,
Everett P.Weaver, The Estate of William D. Weaver or any Named Executive, any
Affiliates or Family Member of any of the foregoing and any group (as such term
is defined in Section 3(a)(9) and 13(d)(3) of the Exchange Act) of which any of
the foregoing is a member.
2.14 "Exempt Reorganization Transaction" means a Reorganization
Transaction which results (i) in the Persons who were the direct or indirect
owners of the outstanding Common Stock and Voting Securities of the Company
immediately before such Reorganization Transaction becoming, immediately after
the consummation of such Reorganization Transaction, the direct or indirect
owners of both more than 49.9% of the then-outstanding common stock of the
Surviving Corporation and Voting Securities representing more than 49.9% of the
aggregate voting power of the Surviving Corporation, in substantially the same
respective proportions as such Persons' ownership of the common stock and voting
Securities of the Company immediately before such Reorganization Transaction;
(ii) in the Excluded Person owning 50% or more of the common stock of the
Surviving Corporation or Voting Securities representing 50% or more of the
combined voting power of the Surviving Corporation; or (iii) from any merger,
reorganization, consolidation or similar transaction or a plan or agreement for
sale or other disposition of 50.1% of the consolidated assets of the Company or
a plan of liquidation of the Company pursuant to the Bankruptcy Code of Title 11
of the United States Code, as amended from time to time, or any similar or
successor statute, domestic or foreign.
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2.15 "Fair Market Value" means as of any date, the closing price
for the Common Stock on that date, or if no sales occurred on that date, the
next trading day on which actual sales occurred (as reported by the New York
Stock Exchange or any securities exchange or automated quotation system of a
registered securities association on which the Common Stock is then traded or
quoted).
2.16 "Family Members" mean with respect to an individual, any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the individual's household (other than a
tenant or employee), a trust in which these persons have more than 50% of the
beneficial interest, a foundation in which these persons (or the individual)
control the management of assets, and any other entity in which these persons
(or the individual) own more than 50% of the voting interests.
2.17 "Good Reason" with respect to any Award shall have the meaning
set forth in the Participant's employment agreement, or if no meaning is set
forth in the Participant's employment agreement or there is no employment
agreement, shall mean any of the following:
(a) any significant diminution in the Participant's title,
authority, or responsibilities from and after a Change of
Control;
(b) any reduction in the base compensation payable to the
Participant from and after a Change of Control; or
(c) the relocation after a Change of Control of the Company's
place of business at which the Participant is principally
located to a location that is greater than 50 miles from the
site immediately prior to the Change of Control.
2.18 "Incumbent Directors" means individuals serving as members of
the Board as of the Effective Date of this Plan; provided that any
subsequently-appointed or elected member of the Board whose election, or
nomination for election by stockholders of the Company or the Surviving
Corporation, as applicable, was approved by a vote or written consent of at
least one-half of the directors then comprising the Incumbent Directors shall
also thereafter be considered an Incumbent Director, unless the initial
assumption of office of such subsequently-elected or appointed director was in
connection with (i) an actual or threatened election contest, including a
consent solicitation, relating to the election or removal of one or more members
of the Board, (ii) a "tender offer" (as such term is used in Section 14(d) of
the Exchange Act), (iii) a proposed Reorganization Transaction, or (iv) a
request, nomination or suggestion of any Beneficial Owner of Voting Securities
representing 35% or more of the aggregate voting power of the Voting Securities
of the Company or the Surviving Corporation, as applicable.
2.19 "ISO" means an incentive stock option within the meaning of
section 422 of the Code. "NSO" means a non-qualified stock option which is not
intended to or does not qualify as an ISO under section 422 of the Code.
2.21 "Option" means an ISO or an NSO.
2.22 "Option Price" means the price per share of Common Stock at
which an Option may be exercised.
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2.23 "Participant" means an individual to whom an Award has been
granted under the Plan.
2.24 "Performance Criteria" means the criteria the Committee
selects for purposes of establishing the Performance Goal or Performance Goals
for a Participant for a Performance Period. The Performance Criteria that will
be used to establish Performance Goals are limited to the following: (i) return
on capital; (ii) earnings per share; (iii) net sales; (iv) net earnings; (v) net
operating profits; (vi) expense control; (vii) working capital relating to
inventory and/or accounts receivable; (viii) operating margin; (ix) share price
performance; (x) implementation or completion of critical projects; and (xi)
total return to shareholders. The Committee shall, within the time prescribed by
section 162(m) of the Code, define in an objective fashion the manner of
calculating the Performance Criteria it selects to use for such Performance
Period for such Participant.
2.25 "Performance Goals" means the goals established in writing by
the Committee for the Performance Period based upon the Performance Criteria.
Depending on the Performance Criteria used to establish such Performance Goals,
the Performance Goals may be expressed in terms of overall Company performance
or the performance of an Affiliate, a division or business unit of the Company,
or an individual. The Committee shall establish Performance Goals for each
Performance Period prior to, or as soon as practicable after, the commencement
of such Performance Period. The Committee, in its discretion, may, within the
time prescribed by section 162(m) of the Code, adjust or modify the calculation
of Performance Goals for such Performance Period in order to prevent the
dilution or enlargement of the rights of Participants (i) in the event of, or in
anticipation of, any unusual or extraordinary corporate item, transaction,
event, or development, or (ii) in recognition of, or in anticipation of, any
other unusual or nonrecurring events affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or business conditions.
2.26 "Performance Period" means the designated period during which
the Performance Goals must be satisfied with respect to the Award to which the
Performance Goals relate.
2.27 "Plan" means this AMCOL International Corporation 2006
Long-Term Incentive Plan, as set forth herein and from time to time amended.
2.28 "Qualified Performance-Based Award" means an Award that is
intended to qualify as "qualified performance-based compensation" within the
meaning of section 162(m) of the Code and is designated as a Qualified
Performance-Based Award pursuant to Section 14 hereof.
2.29 "Restricted Stock" means the Common Stock awarded to a
Participant pursuant to Section 8 of this Plan.
2.30 "Restricted Stock Unit" means a unit awarded to a Participant
pursuant to Section 8 of this Plan evidencing the right of a Participant to
receive a fixed number of shares of Common Stock at some future date.
2.31 "SAR" means a stock appreciation right issued to a Participant
pursuant to Section 9 of this Plan.
2.32 "SEC" means the Securities and Exchange Commission.
2.33 "Subsidiary" means any entity during any period which the
Company owns or controls more than 50% of (i) the outstanding capital stock,
or (ii) the combined voting power of all classes of stock.
2.34 "Surviving Corporation" means the corporation resulting from a
Reorganization Transaction or, if securities representing more than 50% of the
aggregate Voting Power of such resulting corporation are directly or indirectly
owned by another corporation, such other corporation.
2.35 "Voting Securities" of a corporation means securities of such
corporation that are entitled to vote generally in the election of directors of
such corporation, but not including any other class of securities of such
corporation that may have voting power by reason of the occurrence of a
contingency.
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2.36 Rules of Construction:
2.36.1 Governing Law and Venue. The construction and
-----------------------
operation of this Plan are governed by the laws of the State of
Delaware without regard to any conflicts or choice of law rules or
principles that might otherwise refer construction or interpretation of
this Plan to the substantive law of another jurisdiction, and any
litigation arising out of this Plan shall be brought in the Circuit
Court of the State of Illinois or the United States District Court for
the Eastern Division of the Northern District of Illinois.
2.36.2 Undefined Terms. Unless the context requires another
---------------
meaning, any term not specifically defined in this Plan is used in the
sense given to it by the Code.
2.36.3 Headings. All headings in this Plan are for reference
--------
only and are not to be utilized in construing the Plan.
2.36.4 Conformity with Section 422. Any ISOs issued under
---------------------------
this Plan are intended to qualify as incentive stock options described
in section 422 of the Code, and all provisions of the Plan relating to
ISOs shall be construed in conformity with this intention. Any NSOs
issued under this Plan are not intended to qualify as incentive stock
options described in section 422 of the Code, and all provisions of the
Plan relating to NSOs shall be construed in conformity with this
intention.
2.36.5 Gender. Unless clearly inappropriate, all nouns of
------
whatever gender refer indifferently to persons or objects of any
gender.
2.36.6 Singular and Plural. Unless clearly inappropriate,
-------------------
singular terms refer also to the plural and vice versa.
2.36.7 Severability. If any provision of this Plan is
------------
determined to be illegal or invalid for any reason, the remaining
provisions are to continue in full force and effect and to be construed
and enforced as if the illegal or invalid provision did not exist,
unless the continuance of the Plan in such circumstances is not
consistent with its purposes.
3. Stock Subject to the Plan.
-------------------------
3.01 General Limitation. Subject to adjustment as provided in
------------------
Section 12 hereof, the aggregate number of shares of Common Stock for which
Awards may be issued under this Plan may not exceed 1,500,000 shares. Reserved
shares may be either authorized but unissued shares or treasury shares, in the
Board's discretion. If any Award shall terminate, expire, be cancelled or
forfeited as to any number of shares of Common Stock (other than a cancellation
within the meaning of Code section 162(m)), new Awards may thereafter be awarded
with respect to such shares.
3.02 Individual Limitations. Subject to adjustment as provided in
----------------------
Section 12 of the Plan:
(a) the maximum number of shares of Common Stock with respect to
which Awards may be granted to any individual during any one
calendar year is 200,000 shares; and
(b) the maximum number of shares of Common Stock with respect to
Qualified Performance-Based Awards that can be paid to any
Covered Employee under the Plan for a Performance Period is
100,000 shares.
3.03 Incentive Stock Option Limitation. Subject to adjustment as
---------------------------------
provided in Section 12 of the Plan, the maximum number of shares of Common Stock
for which Awards may be granted under the Plan pursuant to ISOs shall be
500,000.
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3.04 Restricted Stock Limitation. Subject to adjustment as provided
---------------------------
in Section 12 of the Plan, the maximum number of shares of Common Stock for
which Awards of Restricted Stock and Restricted Stock Units may be granted under
the Plan shall be 500,000.
4. Administration.
--------------
The Committee shall administer the Plan. All determinations of the
Committee are made by a majority vote of its members. The Committee's
determinations are final and binding on all Participants. In addition to any
other powers set forth in this Plan, the Committee has the following powers:
(a) to construe and interpret the Plan;
(b) to establish, amend and rescind appropriate rules and
regulations relating to the Plan;
(c) subject to the terms of the Plan, to select the individuals
who will receive Awards, the times when they will receive
them, the form of agreements which evidence such Awards, the
number of Options, Restricted Stock, Restricted Stock Units
and/or SARs to be subject to each Award, the Option Price, the
vesting schedule (including any performance targets to be
achieved in connection with the vesting of any Award), the
expiration date applicable to each Award and other terms,
provisions and restrictions of the Awards (which need not be
identical) and subject to Section 18 hereof, to amend or
modify any of the terms of outstanding Awards provided,
however, that except as permitted by Section 12.01, no
outstanding Award may be repriced, whether through
cancellation of the Award and the grant of a new Award, or the
amendment of the Award, without the approval of the
stockholders of the Company;
(d) to contest on behalf of the Company or Participants, at the
expense of the Company, any ruling or decision on any matter
relating to the Plan or to any Awards;
(e) generally, to administer the Plan, and to take all such steps
and make all such determinations in connection with the Plan
and the Awards granted thereunder as it may deem necessary or
advisable; and
(f) to determine the form in which tax withholding under Section
16 of this Plan will be made (i.e., cash, Common Stock or a
combination thereof).
Except to the extent prohibited by applicable law or the applicable rules of a
stock exchange, and except with respect to any Qualified Performance-Based Award
intended to satisfy the requirements of Code section 162(m), the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
5. Eligible Participants.
---------------------
Present and future directors, officers and employees of the Company or
any Subsidiary or Affiliate shall be eligible to participate in the Plan. The
Committee from time to time shall select those officers, directors and employees
of the Company and any Subsidiary or Affiliate of the Company who shall be
designated as Participants and shall designate in accordance with the terms of
the Plan the number, if any, of ISOs, NSOs, SARs, Restricted Stock Units and
shares of Restricted Stock or any combination thereof, to be awarded to each
Participant.
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6. Terms and Conditions of Non-Qualified Stock Options.
---------------------------------------------------
Subject to the terms of the Plan, the Committee, in its discretion, may
award an NSO to any Participant. Each NSO shall be evidenced by an agreement, in
such form as is approved by the Committee, and except as otherwise provided by
the Committee, each NSO shall be subject to the following express terms and
conditions, and to such other terms and conditions, not inconsistent with the
Plan, as the Committee may deem appropriate:
6.01 Option Period. Each NSO will expire as of the earliest of:
-------------
(i) the date on which it is forfeited under the provisions of
Section 11.01;
(ii) 10 years from the Award Date;
(iii) in the case of a Participant who is an employee of the
Company, a Subsidiary or an Affiliate, three months after the
Participant's termination of employment with the Company and
its Subsidiaries and Affiliates for any reason other than for
Cause, death, total and permanent disability or retirement on
or after age 65;
(iv) in the case of a Participant who is a member of the board of
directors of the Company or a Subsidiary or Affiliate, but not
an employee of the Company, a Subsidiary or an Affiliate,
three months after the Participant's termination as a member
of the board for any reason other than for Cause, death, total
and permanent disability or retirement on or after age 65;
(v) immediately upon the Participant's termination of employment
with the Company and its Subsidiaries and Affiliates or
service on a board of directors of the Company or a Subsidiary
or Affiliate for Cause;
(vi) 12 months after the Participant's death or total and permanent
disability;
(vii) 60 months after the Participant's termination of employment
with the Company and its parent and Subsidiaries or service on
the Board on account of retirement on or after age 65; or
(viii) any other date specified by the Committee when the NSO is
granted.
6.02 Option Price. At the time granted, the Committee shall
------------
determine the Option Price of any NSO. However, the Option Price shall not be
less than 100% of the Fair Market Value of the Common Stock subject to the NSO
on the Award Date.
6.03 Vesting. Unless otherwise determined by the Committee and set
-------
forth in the agreement evidencing an Award, NSO Awards shall vest in accordance
with Section 11.01.
6.04 Other Option Provisions. The form of NSO authorized by the
-----------------------
Plan may contain such other provisions as the Committee may from time to time
determine.
7. Terms and Conditions of Incentive Stock Options
-----------------------------------------------
Subject to the terms of the Plan, the Committee, in its discretion, may
award an ISO to any employee of the Company or a Subsidiary. Each ISO shall be
evidenced by an agreement, in such form as is approved by the Committee, and
except as otherwise provided by the Committee, each ISO shall be subject to the
following express terms and conditions and to such other terms and conditions,
not inconsistent with the Plan, as the Committee may deem appropriate:
7.01 Option Period. Each ISO will expire as of the earliest of:
-------------
(i) the date on which it is forfeited under the provisions of
Section 11.01;
(ii) 10 years from the Award Date, except as set forth in Section
7.02 below;
A-7
(iii) immediately upon the Participant's termination of employment
with the Company and its Subsidiaries for Cause;
(iv) three months after the Participant's termination of employment
with the Company and its Subsidiaries for any reason other
than for Cause or death or total and permanent disability;
(v) 12 months after the Participant's death or total and permanent
disability;
(vi) any other date (within the limits of the Code) specified by
the Committee when the ISO is granted.
Notwithstanding the foregoing provisions granting discretion to the Committee to
determine the terms and conditions of ISOs, such terms and conditions shall meet
the requirements set forth in section 422 of the Code or any successor thereto.
7.02 Option Price and Expiration. The Option Price of any ISO shall
---------------------------
be determined by the Committee at the time an ISO is granted, and shall be no
less than 100% of the Fair Market Value of the Common Stock subject to the ISO
on the Award Date; provided, however, that if an ISO is granted to a Participant
who, immediately before the grant of the ISO, beneficially owns stock
representing more than 10% of the total combined voting power of all classes of
stock of the Company or its parent or subsidiary corporations, the Option Price
shall be at least 110% of the Fair Market Value of the Common Stock subject to
the ISO on the Award Date and in such cases, the exercise period specified in
the Option agreement shall not exceed five years from the Award Date.
7.03 Vesting. Unless otherwise determined by the Committee and set
-------
forth in the agreement evidencing an Award, ISO Awards shall vest in accordance
with Section 11.01.
7.04 Other Option Provisions. The form of ISO authorized by the
-----------------------
Plan may contain such other provisions as the Committee may, from time to time,
determine; provided, however, that such other provisions may not be inconsistent
with any requirements imposed on incentive stock options under Code section 422
and the regulations thereunder.
7.05 $100,000 Limitation. To the extent required by Code
-------------------
section 422, if the aggregate Fair Market Value (determined as of the time of
grant) of Common Stock with respect to which ISOs are exercisable for the first
time by a Participant during any calendar year (under this Plan and all other
plans of the Company and its Subsidiaries) exceeds $100,000, the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as NSOs.
8. Terms and Conditions of Awards of Restricted Stock or
-----------------------------------------------------
Restricted Stock Units.
----------------------
Subject to the terms of the Plan, the Committee, in its discretion, may
award Restricted Stock or Restricted Stock Units to any Participant. Each Award
of Restricted Stock or Restricted Stock Units shall be evidenced by an
agreement, in such form as is approved by the Committee, and, except as
otherwise provided by the Committee, all shares of Common Stock awarded to
Participants under the Plan as Restricted Stock and all Restricted Stock Units
shall be subject to the following express terms and conditions and to such other
terms and conditions, not inconsistent with the Plan, as the Committee shall
deem appropriate:
(a) Restricted Period. Restricted Stock Units and shares of
-----------------
Restricted Stock awarded under this Section 8 may not be sold,
assigned, transferred, pledged or otherwise encumbered before
they vest, other than as permitted by Section 13 hereof.
(b) Vesting. Unless otherwise determined by the Committee, Awards
-------
of Restricted Stock and Restricted Stock Units under this
Section 8 shall vest in accordance with Section 11.02. Until a
Participant's shares of Restricted Stock vest, he will have
all of the rights of a shareholder of the Company including,
but not limited to, the right to vote such shares and the
right to receive cash dividends declared thereon, but all
noncash dividends and distributions with respect to shares of
Restricted Stock shall be subject to the same vesting and
other restrictions applicable to the underlying shares of
Restricted Stock.
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(c) Certificate Legend for Restricted Stock Awards. Each
----------------------------------------------
certificate issued in respect of shares of Restricted Stock
awarded under this Section 8 shall be registered in the name
of the Participant and shall bear the following (or a similar)
legend until such shares have vested:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) relating to Restricted Stock
contained in Section 8 of the AMCOL International Corporation
2006 Long-Term Incentive Plan and an Agreement entered into
between the registered owner and AMCOL International
Corporation. Copies of such Plan and Agreement are on file at
the principal office of AMCOL International Corporation."
(d) Restricted Stock Units. In the case of an Award of Restricted
----------------------
Stock Units, no shares of Common Stock or other property shall
be issued at the time such Award is granted. Upon the lapse or
waiver of restrictions and the restricted period relating to
Restricted Stock Units, shares of Common Stock shall be issued
to the holder of the Restricted Stock Units and evidenced in
such manner as the Committee may deem appropriate.
9. Terms and Conditions of Stock Appreciation Rights.
-------------------------------------------------
The Committee may, in its discretion, grant a SAR to any Participant
under the Plan. Each SAR shall be evidenced by an agreement between the Company
and the Participant, and may relate to and be associated with all or any part of
a specific ISO or NSO. A SAR shall entitle the Participant to whom it is granted
the right, so long as such SAR is exercisable and subject to such limitations as
the Committee shall have imposed, to surrender any then exercisable portion of
his SAR and, if applicable, the related ISO or NSO, in whole or in part, and
receive from the Company in exchange, without any payment of cash (except for
applicable employee withholding taxes), that number of shares of Common Stock
having an aggregate Fair Market Value on the date of surrender equal to the
product of (i) 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 Option Price under such ISO or NSO on the Award Date, and (ii) the number
of shares of Common Stock subject to such SAR, and, if applicable, the related
ISO or NSO or portion thereof which is surrendered.
Except as otherwise determined by the Committee and set forth in the
Agreement, a SAR granted in conjunction with an ISO or NSO shall terminate on
the same date as the related ISO or NSO and shall be exercisable only if the
Fair Market Value of a share of Common Stock exceeds the Option Price for the
related ISO or NSO, and then shall be exercisable to the extent, and only to the
extent, that the related ISO or NSO is exercisable. The Committee may at the
time of granting any SAR add such additional conditions and limitations to the
SAR as it shall deem advisable, including, but not limited to, limitations on
the period or periods within which the SAR shall be exercisable and the maximum
amount of appreciation to be recognized with regard to such SAR. Any ISO or NSO
or portion thereof which is surrendered with a SAR shall no longer be
exercisable. A SAR that is not granted in conjunction with an ISO or NSO shall
terminate on such date as is specified by the Committee in the SAR agreement and
shall vest in accordance with Section 11.02. The Committee, in its sole
discretion, may allow the Company to settle all or part of the Company's
obligation arising out of the exercise of a SAR by the payment of cash equal to
the aggregate Fair Market Value of the shares of Common Stock which the Company
would otherwise be obligated to deliver.
A-9
10. Manner of Exercise of Options.
-----------------------------
To exercise an Option in whole or in part, a Participant (or, after his death,
his executor or administrator) must give written notice to the Committee,
stating the number of shares with respect to which he intends to exercise the
Option. The Company will issue the shares with respect to which the Option is
exercised upon payment in full of the Option Price. The Committee may permit the
Option Price to be paid in cash or shares of Common Stock held by the
Participant having an aggregate Fair Market Value, as determined on the date of
delivery, equal to the Option Price, provided such shares of Common Stock meet
such criteria as the Committee shall from time to time establish (e.g. that such
shares are "mature" shares under generally accepted accounting principles). The
Committee may permit a Participant to elect to pay the Option Price upon the
exercise of an Option by authorizing a third party to sell shares of Common
Stock (or a sufficient portion of the shares) acquired upon exercise of the
Option and remit to the Company a sufficient portion of the sale proceeds to pay
the entire Option Price and any tax withholding resulting from such exercise.
The Committee may also permit the Option Price to be paid by any other method
permitted by law, including by delivery to the Committee from the Participant of
an election directing the Company to withhold the number of shares of Common
Stock from the Common Stock otherwise due upon exercise of the Option having an
aggregate Fair Market Value on that date equal to the Option Price. If a
Participant pays the Option Price with shares of Common Stock which were
received by the Participant upon exercise of one or more ISOs, and such Common
Stock has not been held by the Participant for at least the greater of:
(a) two years from the date the ISOs were granted; or
(b) one year after the transfer of the shares of Common Stock to
the Participant,
the use of the shares shall constitute a disqualifying disposition and the ISO
underlying the shares used to pay the Option Price shall no longer satisfy all
of the requirements of Code Section 422.
11. Vesting.
-------
11.01 Options. A Participant may not exercise an Option until it has
-------
vested. The portion of an Award of Options that is vested depends upon the
period that has elapsed since the Award Date. The following schedule applies to
any Award of Options under this Plan unless the Committee establishes a
different vesting schedule:
Number of Years Since Award
Date Vested Percentage
--------------------------- -----------------
Fewer than one 0%
One but fewer than two 33%
Two but fewer than three 66%
Three or more 100%
Notwithstanding the above schedule, unless otherwise determined by the
Committee, a Participant's Awards shall become fully vested if a Participant's
employment with the Company and its Subsidiaries and Affiliates or service on
the board of directors of the Company, a Subsidiary or an Affiliate is
terminated due to: (i) retirement on or after his sixty-fifth birthday; (ii)
retirement on or after his fifty-fifth birthday with consent of the Company;
(iii) retirement at any age on account of total and permanent disability as
determined by the Company; or (iv) death. Unless the Committee otherwise
provides or the preceding sentence of this Section or Section 11.03 applies, if
a Participant's employment with or service to the Company, a Subsidiary or an
Affiliate terminates for any other reason, any Awards that are not yet vested
are immediately and automatically forfeited; provided, however, in such special
circumstances as the Committee deems appropriate, the Committee may take such
action as it deems equitable in the circumstances or in the best interests of
the Company, including, without limitation, fully vesting an Award or waiving or
modifying any other limitation or requirement under the Award.
A Participant's employment shall not be considered to be terminated
hereunder by reason of a transfer of his employment from the Company to a
Subsidiary or Affiliate, or vice versa, or a leave of absence approved by the
Participant's employer. A Participant's employment shall be considered to be
terminated hereunder if, as a result of a sale or other transaction, the
Participant's employer ceases to be a Subsidiary or Affiliate (and the
Participant's employer is or becomes an entity that is separate from the Company
and its Subsidiaries and Affiliates).
A-10
11.02 Restricted Stock, Restricted Stock Units and SARs.
-------------------------------------------------
The Committee shall establish the vesting schedule to apply to any Award of
Restricted Stock, Restricted Stock Units or SAR that is not associated with an
ISO or NSO granted under the Plan to a Participant, and in the absence of such a
vesting schedule set forth in the Agreement evidencing the Award, such Award
shall vest in accordance with Section 11.01.
11.03 Effect of "Change of Control". Notwithstanding Sections 11.01
-----------------------------
and 11.02 above, if within 12 months following a "Change of Control" the
employment of a Participant with the Company and its Subsidiaries and Affiliates
is terminated without Cause or the Participant resigns for Good Reason, any
Award issued to the Participant shall be fully vested, and in the case of an
Award other than an Award of Restricted Stock or Restricted Stock Units, fully
exercisable for 90 days following the date on which the Participant's service
with the Company and its Subsidiaries and Affiliates is terminated, but not
beyond the date the Award would otherwise expire but for the Participant's
termination of employment.
12. Adjustments to Reflect Changes in Capital Structure.
---------------------------------------------------
12.01 Adjustments. If there is any change in the corporate structure
-----------
or shares of the Company, the Committee may make any appropriate adjustments,
including, but not limited to, such adjustments deemed necessary to prevent
accretion, or to protect against dilution, in the number and kind of shares of
Common Stock with respect to which Awards may be granted under this Plan
(including the maximum number of shares of Common Stock with respect to which
Awards may be granted under this Plan in the aggregate and individually to any
Participant during any calendar year as specified in Section 3) and, with
respect to outstanding Awards, in the number and kind of shares covered thereby
and in the applicable Option Price. For the purposes of this Section 12, a
change in the corporate structure or shares of the Company includes, without
limitation, any change resulting from a recapitalization, stock split, stock
dividend, consolidation, rights offering, separation, reorganization, or
liquidation (including a partial liquidation) and any transaction in which
shares of Common Stock are changed into or exchanged for a different number or
kind of shares of stock or other securities of the Company or another
corporation.
12.02 Cashouts. In the event of an extraordinary dividend or other
---------
distribution, merger, reorganization, consolidation, combination, sale of
assets, split up, exchange, or spin off, or other extraordinary corporate
transaction, the Committee may, in such manner and to such extent (if any) as it
deems appropriate and equitable, make provision for a cash payment or for the
substitution or exchange of any or all outstanding Awards for the cash,
securities or property deliverable to the holder of any or all outstanding
Awards based upon the distribution or consideration payable to holders of Common
Stock upon or in respect of such event; provided, however, in each case, that
with respect to any ISO no such adjustment may be made that would cause the Plan
to violate section 422 of the Code (or any successor provision).
12.03 Section 409A. Notwithstanding the foregoing: (i) any
------------
adjustments made pursuant to Section 12 hereof to Awards that are considered
"deferred compensation" within the meaning of section 409A of the Code shall be
made in compliance with the requirements of section 409A of the Code unless the
Participant consents otherwise; (ii) any adjustments made pursuant to Section 12
of the Plan to Awards that are not considered "deferred compensation" subject to
section 409A of the Code shall be made in such a manner as to ensure that after
such adjustment, the Awards either continue not to be subject to section 409A of
the Code or comply with the requirements of section 409A of the Code unless the
Participant consents otherwise; and (iii) the Committee shall not have the
authority to make any adjustments pursuant to Section 12 of the Plan to the
extent that the existence of such authority would cause an Award that is not
intended to be subject to section 409A of the Code to be subject thereto.
13. Nontransferability of Awards.
----------------------------
13.01 ISOs. ISOs are not transferable, voluntarily or involuntarily,
----
other than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code. During a
Participant's lifetime, his ISOs may be exercised only by him.
A-11
13.02 Awards Other Than ISOs. All Awards granted pursuant to this
----------------------
Plan other than ISOs are transferable by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code, or in the Committee's discretion after vesting. With the approval of
the Committee, a Participant may transfer an Award (other than an ISO) for no
consideration to or for the benefit of one or more Family Members of the
Participant subject to such limits as the Committee may establish, and the
transferee shall remain subject to all the terms and conditions applicable to
the Award prior to such transfer. The transfer of an Award pursuant to this
Section 13 shall include a transfer of the right set forth in Section 18 hereof
to consent to an amendment or revision of the Plan and, in the discretion of the
Committee, shall also include transfer of ancillary rights associated with the
Award. The provisions of this Section 13 shall not apply to any Common Stock
issued pursuant to an Award for which all restrictions have lapsed and is fully
vested.
14. PERFORMANCE-BASED AWARDS
14.01 Purpose. The purpose of this Section 14 is to provide the
-------
Committee the ability to qualify Awards of Restricted Stock and Restricted Stock
Units as Qualified Performance-Based Awards. If the Committee, in its
discretion, decides to grant to a Covered Employee an Award of Restricted Stock
or Restricted Stock Units that is intended to constitute a Qualified
Performance-Based Award, the provisions of this Section 14 shall control over
any contrary provision contained herein; provided, however, that the Committee
may in its discretion grant Awards of Restricted Stock or Restricted Stock Units
to Covered Employees that are based on Performance Criteria or Performance Goals
but that do not satisfy the requirements of this Section 14.
14.02 Applicability. This Section 14 shall apply only to those
-------------
Covered Employees selected by the Committee to receive Qualified
Performance-Based Awards. The designation of a Covered Employee as a Participant
for a Performance Period shall not in any manner entitle the Participant to
receive an Award for the relevant Performance Period. Moreover, designation of a
Covered Employee as a Participant for a particular Performance Period shall not
require designation of such Covered Employee as a Participant in any subsequent
Performance Period and designation of one Covered Employee as a Participant
shall not require designation of any other Covered Employees as a Participant in
such period or in any other period.
14.03 Procedures with Respect to Qualified Performance-Based Awards.
-------------------------------------------------------------
To the extent necessary to comply with the Qualified Performance-Based Award
requirements of section 162(m)(4)(C) of the Code, with respect to any Award of
Restricted Stock or Restricted Stock Units that may be granted to one or more
Covered Employees, no later than 90 days following the commencement of any
fiscal year in question or any other designated fiscal period or period of
service (or such other time as may be required or permitted by section 162(m) of
the Code), the Committee shall, in writing, (a) designate one or more Covered
Employees, (b) select the Performance Criteria applicable to the Performance
Period, (c) establish the Performance Goals, and amounts of such Awards, as
applicable, which may be earned for such Performance Period, and (d) specify the
relationship between Performance Criteria and the Performance Goals and the
amounts of such Awards, as applicable, to be earned by each Covered Employee for
such Performance Period. Following the completion of each Performance Period,
the Committee shall certify in writing whether the applicable Performance Goals
have been achieved for such Performance Period. No Award or portion thereof that
is subject to the satisfaction of any condition shall be considered to be earned
or vested until the Committee certifies in writing that the conditions to which
the distribution, earning or vesting of such Award is subject have been
achieved. The Committee may not increase during a year the amount of a Qualified
Performance-Based Award that would otherwise be payable upon satisfaction of the
conditions but may reduce or eliminate the payments as provided for in the
agreement evidencing the Award.
14.04 Payment of Qualified Performance-Based Awards. Unless
---------------------------------------------
otherwise provided in the applicable agreement evidencing the Award, a
Participant must be employed by the Company or a subsidiary on the day a
Qualified Performance-Based Award for such Performance Period is paid to the
Participant. Furthermore, a Participant shall be eligible to receive payment
pursuant to a Qualified Performance-Based Award for a Performance Period only if
the Performance Goals for such period are achieved.
A-12
14.05 Additional Limitations. Notwithstanding any other provision of
----------------------
the Plan, any Award granted to a Covered Employee that is intended to constitute
a Qualified Performance-Based Award under this Section 14 shall be subject to
any additional limitations set forth in section 162(m) of the Code (including
any amendment to section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as qualified
performance-based compensation as described in section 162(m)(4)(C) of the Code,
and the Plan shall be deemed amended to the extent necessary to conform to such
requirements.
14.06 Effect on Other Plans and Arrangements. Nothing contained in
--------------------------------------
the Plan will be deemed in any way to limit or restrict the Committee from
making any award or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
14. Rights as Stockholder.
---------------------
No Common Stock may be delivered upon the exercise of any Option until
full payment has been made. A Participant has no rights whatsoever as a
stockholder with respect to any shares covered by an Option until the date of
the issuance of a stock certificate for the shares except as otherwise
determined by the Committee and set forth in the Agreement.
16. Withholding Taxes.
-----------------
The Committee may, in its discretion and subject to such rules as it
may adopt, permit or require a Participant to pay all or a portion of the
federal, state and local taxes, including FICA and Medicare withholding tax,
arising in connection with any Awards by (i) having the Company withhold shares
of Common Stock at the minimum rate legally required, (ii) tendering back shares
of Common Stock received in connection with such Award or (iii) delivering other
previously acquired shares of Common Stock having a Fair Market Value
approximately equal to the amount to be withheld.
17. No Right to Employment.
----------------------
Participation in the Plan will not give any Participant a right to be
retained as an employee or director of the Company or its Subsidiaries or
Affiliates, or any right or claim to any benefit under the Plan, unless the
right or claim has specifically accrued under the Plan.
18. Amendment of the Plan.
---------------------
The Board of Directors may from time to time amend or revise the terms
of this Plan in whole or in part, subject to the following limitations:
(a) no amendment may, in the absence of written consent to the
change by the affected Participant (or, if the Participant is
not then living, the affected beneficiary), adversely affect
the rights of any Participant or beneficiary under any Award
granted under the Plan prior to the date such amendment is
adopted by the Board; provided, however, no such consent shall
be required if the Committee determines in its sole and
absolute discretion that the amendment or revision (i) is
required or advisable in order for the Company, the Plan or
the Award to satisfy applicable law, to meet the requirements
of any accounting standard or to avoid any adverse accounting
treatment, or (ii) in connection with any transaction or event
described in Section 12, is in the best interests of the
Company or its shareholders. The Committee may, but need not,
take the tax consequences to affected Participants into
consideration in acting under the preceding sentence.
(b) no amendment may increase the limitations on the number of
shares set forth in Section 3, unless any such amendment is
approved by the Company's stockholders; and
(c) no amendment may be made to the provisions of Section 4(c)
relating to repricing unless such amendment is approved by the
Company's stockholders;
provided, however, that adjustments pursuant to Section 12.01 shall not be
subject to the foregoing limitations of this Section 18.
A-13
19. Conditions Upon Issuance of Shares.
----------------------------------
An Option shall not be exercisable and a share of Common Stock shall
not be issued pursuant to the exercise of an Option, and Restricted Stock or
Restricted Stock Units shall not be awarded until and unless the Award of
Restricted Stock or Restricted Stock Units, exercise of such Option and the
issuance and delivery of such share pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange or national securities
association upon which the shares of Common Stock may then be listed or quoted,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the shares of Common Stock are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned relevant provisions of law.
20. Substitution or Assumption of Awards by the Company.
---------------------------------------------------
The Company, from time to time, also may substitute or assume
outstanding awards granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either (a) granting an Award
under the Plan in substitution of such other company's award, or (b) assuming
such award as if it had been granted under the Plan if the terms of such assumed
award could be applied to an Award granted under the Plan. Such substitution or
assumption shall be permissible if the holder of the substituted or assumed
award would have been eligible to be granted an Award under the Plan if the
other company had applied the rules of the Plan to such grant. In the event the
Company assumes an award granted by another company, the terms and conditions of
such award shall remain unchanged (except that the exercise price and the number
and nature of shares issuable upon exercise of any such option will be adjusted
appropriately pursuant to section 424(a) of the Code). In the event the Company
elects to grant a new Award rather than assuming an existing option, such new
Award may be granted with a similarly adjusted exercise price.
21. Section 409A.
------------
It is the intention of the Company that no Award shall be "deferred
compensation" subject to section 409A of the Code, unless and to the extent that
the Committee specifically determines otherwise, and the Plan and the terms and
conditions of all Awards shall be interpreted accordingly. The terms and
conditions governing any Awards that the Committee determines will be subject to
section 409A of the Code, including any rules for elective or mandatory deferral
of the delivery of cash or Shares pursuant thereto, shall be set forth in the
applicable agreement governing the Award, and shall comply in all respects with
section 409A of the Code.
22. Effective Date and Termination of Plan.
--------------------------------------
22.01 Effective Date. This Plan is effective as of the date of its
--------------
approval by the stockholders of the Company.
22.02 Termination of the Plan. The Plan will terminate 10 years
-----------------------
after the date it is approved by the stockholders of the Company; provided,
however, that the Board of Directors may terminate the Plan at any time prior
thereto with respect to any shares that are not then subject to Awards.
Termination of the Plan will not affect the rights and obligations of any
Participant with respect to Awards granted before termination.
A-14
APPENDIX B
AMCOL INTERNATIONAL CORPORATION
ANNUAL CASH INCENTIVE PLAN
1. Purpose. The purpose of the AMCOL International Corporation Annual Cash
-------
Incentive Plan (the "Plan") is to provide performance-based incentive cash
compensation to executive officers and other selected key employees of AMCOL
International Corporation (the "Company") and its subsidiaries, in order to
promote the growth, performance and success of the Company.
2. Administration.
--------------
2.1 The Committee. The Plan will be administered by the
-------------
Compensation Committee of the Company's board of directors (the "Committee").
2.2 Responsibility and Authority of the Committee. Subject to the
---------------------------------------------
provisions of the Plan, the Committee, acting in its discretion, will have
responsibility and authority to (a) select the individuals who may participate
in the Plan, which individuals shall be executive officers or other key
employees of the Company or its subsidiaries, (b) prescribe the terms and
conditions of each participant's award and make amendments thereto, (c)
determine whether and the extent to which performance goals have been met, (d)
construe, interpret and apply the provisions of the Plan and of any agreement or
other document evidencing an award made under the Plan, and (e) make any and all
determinations and take any and all other actions as it deems necessary or
desirable in order to carry out the terms of the Plan. The Committee's
interpretations of the Plan, and all actions taken and determinations made by
the Committee pursuant to the powers vested in it hereunder, shall be conclusive
and binding on all parties concerned, including the Company, its shareholders
and any person granted an opportunity under the Plan.
3. Performance-Based Compensation Opportunities.
--------------------------------------------
3.1 General. Each award made under the Plan will represent the
-------
right to receive incentive cash compensation upon the achievement of specific
objective target performance goals that are established by the Committee in
writing and communicated to the recipient of the award by the 90th day of the
applicable performance period or, if earlier, before 25% of the applicable
performance period has elapsed. The Committee will determine the performance
period applicable to an award. Subject to the requirements of the Plan and
applicable law, each award will contain such other terms and conditions as the
Committee, acting in its discretion, may prescribe.
3.2 Performance Goals. The amount, if any, payable to a
-----------------
participant with respect to an award will depend upon whether and the extent to
which the performance goal(s) of the award are achieved during the applicable
performance period. Performance goals shall be established on an annual basis
and may be established on a corporate-wide basis and/or with respect to
operating units, divisions, subsidiaries, acquired businesses, minority
investments, partnerships or joint ventures. The Committee may establish
different levels of payment under an award to correspond with different levels
of achievement of performance goals specified in the award. Awards may contain
more than one target performance goal. Multiple performance goals contained in
an award may be aggregated, weighted, expressed in the alternative or otherwise
specified by the Committee. The level or levels of performance specified with
respect to a performance goal may be expressed in absolute terms, as objectives
relative to performance in prior periods, as an objective compared to the
performance of one or more comparable companies or an index covering multiple
companies, or otherwise as the Committee may determine. Notwithstanding anything
to the contrary contained in the Plan, the performance goals under any award
must be objective and must otherwise meet the requirements of Section 162(m) of
the Internal Revenue Code of 1986 (the "Code").
B-1
3.3 Business Criteria for Performance Goals. Target performance
---------------------------------------
goals may be based upon one or more objective business criteria that apply to
the individual participant, one or more business units or subsidiaries or the
Company as a whole. The business criteria shall be as follows, individually or
in combination: (i) return on capital; (ii) earnings per share; (iii) net sales;
(iv) net earnings; (v) net operating profits; (vi) expense control; (vii)
working capital relating to inventory and/or accounts receivable; (viii)
operating margin; (ix) share price performance; (x) implementation or completion
of critical projects; and (xi) total return to shareholders.
3.4 Adjustments. The Committee may reduce or eliminate an award
-----------
made under the Plan for any reason, including, without limitation, changes in
the position or duties of a participant during or after a performance period,
whether due to termination of employment (including death, disability,
retirement, voluntary termination or termination with or without cause) or
otherwise.
3.5 Certification. Following the completion of the performance
-------------
period applicable to an award, the Committee shall determine and shall certify
in writing whether and the extent to which the performance goal(s) under the
award have been achieved, as well as the amount, if any, payable to the
participant as a result of such achievement(s), which determination(s) and
certification(s) shall be subject to and shall be made in accordance with the
requirements of Section 162(m) of the Code.
3.6 Payment of Amounts Earned. Subject to such deferral and/or
-------------------------
other conditions as may be permitted or required by the Committee, cash amounts
earned under an award will be paid or distributed as soon as practicable
following the Committee's determination and certification of such amounts.
3.7 Maximum Annual Amount Payable to a Participant.
----------------------------------------------
Notwithstanding anything to the contrary contained herein, no individual may
earn more than two million dollars ($2,000,000) in any calendar year pursuant to
an award made to such individual under the Plan.
3.8 Deferral. Notwithstanding anything contained herein to the
--------
contrary, if permitted under Section 409A of the Code, in the event that all or
a portion of an annual incentive award shall be ineligible for treatment as
"qualified performance-based compensation" under Section 162(m) of the Code, the
committee, in its sole discretion, shall have the right, with respect to any
participant who is a "covered employee" under Section 162(m) of the Code, to
defer, in whole or in part, such participant's receipt of payment of his or her
annual incentive award until the participant is no longer a "covered employee"
or until such time as shall be determined by the Committee, provided that the
Committee may effect such a deferral only in a situation where the Company would
be prohibited a deduction under Section 162(m) of the Code and such deferral
shall be limited to the portion of the award that is not deductible.
4. Non-transferability. No interest in or under an award made or a payment
-------------------
due or to become due under the Plan may be assigned, transferred or otherwise
alienated other than by will or the laws of descent and distribution, and any
attempted assignment, alienation, sale, transfer, pledge, encumbrance, charge or
other alienation of any such interest shall be void and unenforceable.
5. No Right to Continued Employment. No award and nothing contained in the
--------------------------------
Plan or in any document relating to the Plan shall confer upon an eligible
employee or participant any right to continue as an employee of the Company or a
subsidiary or constitute a contract or agreement of employment.
6. Withholding Taxes. The Company (or the relevant subsidiary or
-----------------
affiliate) shall have the right to deduct from all payouts of opportunities
hereunder any federal, state, local or foreign taxes required by law to be
withheld with respect to such payouts.
7. Amendment and Termination. The board of directors of the Company may
-------------------------
amend the Plan at any time and from time to time. Any such amendment may be made
without approval of the Company's shareholders unless and except to the extent
such approval is required in order to satisfy the shareholder approval
requirements of Section 162(m) of the Code. The Company's board of directors may
terminate the Plan at any time.
B-2
8. Unfunded Plan. The Plan shall be unfunded. The Company shall not be
-------------
required to establish any special or separate fund or to make any other
segregation of assets to assure the payout of any award under the Plan.
9. Miscellaneous.
-------------
9.1 Governing Law. The Plan and any award made under the Plan
-------------
shall be subject to and construed in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of laws, and
applicable federal law.
9.2 Section 162(m) of the Code. It is intended that amounts
--------------------------
payable pursuant to awards made under the Plan shall constitute "qualified
performance-based compensation" and thus be exempt from the annual $1 million
limitation on the deductibility of executive compensation. The Plan and each
award made under the Plan will be interpreted, construed and applied
accordingly.
9.3 Effective Date. Subject to its approval by the shareholders,
--------------
the Plan shall become effective for the 2006 fiscal year and shall remain
effective until the first annual meeting of shareholders in the 2011 fiscal
year, subject to the right of the board of directors of the Company to terminate
the Plan. Any award made under the Plan prior to approval of the shareholders
shall be effective as of the date made (unless the Committee specifies otherwise
at the time an award is made), but no award may be paid out prior to approval of
the Plan by the shareholders. In addition, if the shareholders fail to approve
the Plan, any award made under the Plan shall be cancelled. The performance
criteria specified in the Plan shall be re-submitted for shareholder approval as
and when required by Treasury Department regulations in order to ensure
compliance with the shareholder approval requirements of Section 162(m) of the
Code on an ongoing basis.
B-3
AMCOL INTERNATIONAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 11, 2006
As a shareholder of AMCOL International Corporation (the "Company"), I
acknowledge receipt of Notice of Annual Meeting and accompanying Proxy Statement
and appoint John Hughes, Lawrence E. Washow and Paul C. Weaver, or any one of
them, with full power of substitution as proxies, to vote all shares of stock of
the Company that I am entitled to vote, at the annual meeting of shareholders to
be held on Thursday, May 11, 2006, 11:00 a.m., Central Daylight Savings time,
and at any adjournment thereof, at the Hilton Hotel Northbrook, 2855 North
Milwaukee Avenue, Northbrook, Illinois.
1. The election of Robert E. Driscoll, III, Daniel P. Casey and Dale E.
Stahl to three-year terms as Class II directors.
[ ] FOR ALL NOMINEES EXCEPT [ ] WITHHELD AUTHORITY TO VOTE FOR
NOMINEES WRITTEN BY THE ALL NOMINEES
UNDERSIGNED BELOW
2. The approval of the AMCOL International Corporation 2006
Long-Term Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The approval of the AMCOL International Corporation Annual
Cash Incentive Plan.
[ ] 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 ALL OF THE NOMINEES
FOR DIRECTOR, FOR THE APPROVAL OF THE 2006 LONG-TERM INCENTIVE PLAN AND FOR THE
ANNUAL CASH INCENTIVE PLAN. 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 _____________, 2006
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SIGNATURE OF SHAREHOLDER
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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, trustee
and guardians should so indicate when signing.
PROXY VOTING INSTRUCTIONS
MAIL - Date, sign and mail your proxy card in the envelope provided as soon as
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possible.
-OR-
TELEPHONE - Call toll-free 1-800-PROXIES from any touch-tone telephone and
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follow the instructions. Have your control number and proxy card available when
you call.
-OR-
INTERNET - Access www.voteproxy.com and follow the on-screen instructions. Have
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your control number available when you access the web page.
COMPANY NUMBER
ACCOUNT NUMBER
CONTROL NUMBER