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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
MORTON INTERNATIONAL, INC.
(NAME OF SUBJECT COMPANY)
MORTON INTERNATIONAL, INC.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(AND ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
619335102
(CUSIP NUMBER OF CLASS OF SECURITIES)
Raymond P. Buschmann
Vice President for Legal Affairs,
General Counsel and Secretary
Morton International, Inc.
100 North Riverside Plaza
Chicago, Illinois 60606-1596
(312) 807-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
WITH COPIES TO:
Eric S. Robinson
Andrew J. Nussbaum
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Morton International, Inc. (the
"Company" or "Morton"). The address of the principal executive offices of the
Company is 100 North Riverside Plaza, Chicago, Illinois 60606-1596. The title of
the class of equity securities to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (this "Statement" or this "Schedule 14D-9") relates
is the Company's common stock, par value $1.00 per share (the "Common Stock"),
together with the associated preferred stock purchase rights (the "Rights" and,
together with the Common Stock, the "Shares") issued pursuant to the Rights
Agreement, dated as of April 24, 1997, between the Company and First Chicago
Trust Company of New York, as Rights Agent, as amended by Amendment No. 1, dated
as of January 31, 1999 (the "Rights Agreement").
ITEM 2. TENDER OFFER OF BIDDER
This Statement relates to the tender offer (the "Offer") described in the
Tender Offer Statement on Schedule 14D-1, dated February 5, 1999 (as amended or
supplemented, the "Schedule 14D-1"), filed by Rohm and Haas Company, a Delaware
corporation ("Rohm and Haas" or "Parent"), and Morton Acquisition Corp.
(formerly known as Gershwin Acquisition Corp.), an Indiana corporation and a
wholly-owned subsidiary of Rohm and Haas ("Purchaser"), with the Securities and
Exchange Commission (the "Commission"), relating to an offer to purchase up to
80,916,766 (representing 67% of the issued and outstanding Shares as of January
29, 1999) of the Shares at a price of $37.125 per Share net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in Purchaser's Offer to Purchase dated February 5, 1999 (the "Offer to
Purchase") and in the related Letter of Transmittal (as amended or supplemented,
collectively, the "Offer Documents").
The Offer is being made in accordance with the Agreement and Plan of
Merger, dated as of January 31, 1999 (the "Merger Agreement"), among Rohm and
Haas, Purchaser and the Company. The Merger Agreement provides that, among other
things, subject to the satisfaction or waiver of certain conditions, following
completion of the Offer, and in accordance with the Indiana Business Corporation
Law ("IBCL"), Purchaser will be merged with and into the Company (the "Merger").
Following consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will become a wholly owned
subsidiary of Parent. As more fully described in Item 3(b)(i) below, at the
effective time of the Merger (the "Effective Time"), (i) if Purchaser shall have
purchased, pursuant to the Offer, an aggregate of 80,916,766 Shares (the
"Maximum Offer Number of Shares"), each Share issued and outstanding immediately
prior to the Effective Time (other than Shares held in the treasury of the
Company and each Share owned by Parent or Purchaser) shall be cancelled,
extinguished and converted into the right to receive a number (rounded to the
nearest one-millionth of a share) of fully paid and nonassessable shares of
Common Stock, par value $2.50 per share (the "Parent Common Stock"), of Parent
equal to the Exchange Ratio (as defined in Item 3(b)(i) below), and (ii) if
Purchaser shall have purchased, pursuant to the Offer, less than the Maximum
Offer Number of Shares, each Share issued and outstanding immediately prior to
the Effective Time (other than Shares held in the treasury of the Company and
Shares owned by Parent or Purchaser) shall be cancelled, extinguished and
converted into the right to receive (i) cash, in an amount equal to the product
of Cash Proration Factor One (as defined in Item 3(b)(i) below) multiplied by
$37.125 and (ii) a number (rounded to the nearest one-millionth of a share) of
fully paid and nonassessable shares of Parent Common Stock equal to the product
of (a) one minus Cash Proration Factor One multiplied by (b) the Exchange Ratio.
The Offer Documents state that the principal executive offices of Rohm and
Haas and Purchaser are located at 100 Independence Mall West, Philadelphia,
Pennsylvania 19106.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
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(b)(i) The Merger Agreement
The following is a summary of the Merger Agreement, which summary is
qualified in its entirety by reference to the Merger Agreement which is filed as
an exhibit to the Schedule 14D-9.
The Offer. The Merger Agreement provides for the commencement of the Offer
by Purchaser. The obligation of Purchaser to accept for payment Shares tendered
pursuant to the Offer is subject only to the satisfaction or waiver by Purchaser
of the conditions set forth in the paragraph below labelled "Conditions to the
Offer." Under the Merger Agreement, Purchaser may, in its sole discretion, waive
any such condition (other than the Minimum Condition (as defined below)) and
make any other changes in the terms and conditions of the Offer; provided that,
unless previously approved by the Company in writing, no change may be made
which (i) changes the Minimum Condition, (ii) decreases the price per Share
payable in the Offer, (iii) changes the form of consideration payable in the
Offer, (iv) increases or reduces the maximum number of Shares to be purchased in
the Offer, (v) amends the Offer Conditions or imposes additional conditions to
the Offer, or (vi) makes other changes to the terms or conditions to the Offer
that are adverse to the holders of Shares. Purchaser has agreed that, subject to
the terms and conditions of the Merger Agreement, including the Offer
Conditions, it will accept for payment and pay for Shares as soon as it is
permitted to do so under applicable law. Purchaser has agreed that unless the
Merger Agreement has been terminated pursuant to its terms and subject to the
following sentence, Purchaser will extend the Offer from time to time in the
event that, at a then-scheduled expiration date, all of the Offer Conditions
have not been satisfied or waived as permitted pursuant to the Merger Agreement,
each such extension not to exceed (unless otherwise consented to in writing by
the Company) the lesser of 10 additional business days or such fewer number of
days that Purchaser reasonably believes are necessary to cause such conditions
to be satisfied. If, however, on April 2, 1999 (subject to extension pursuant to
the proviso to this sentence), Purchaser has not consummated the Offer in
accordance with its terms, Purchaser has agreed to terminate the Offer without
the acceptance of any Shares previously tendered, and the parties have agreed,
upon the terms and conditions of the Merger Agreement, to seek to consummate the
Merger; provided, however, that such date may be further extended by Parent, but
in no event beyond April 17, 1999, if Parent reasonably believes that the
required approval pursuant to the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act" and the expiration or termination of all
waiting periods thereunder, the "HSR Condition") and the approval by the
Commission of the European Communities under EU Council Regulation 4064/89, as
amended (the "EU Approval") will be obtained during such extended period. In the
event that the Merger Agreement is terminated, Purchaser has agreed to, and
Parent has agreed to cause Purchaser to, promptly terminate the Offer without
accepting any Shares for payment.
Conditions to the Offer. Notwithstanding any other provision of the Offer
and subject to the terms of the Merger Agreement, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (relating to Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for any Shares tendered pursuant to the Offer, and
may postpone the acceptance for payment or, subject to the restriction referred
to above, payment for any Shares tendered pursuant to the Offer, and may amend
or, not prior to April 2, 1999 (subject to extension by Purchaser to not later
than April 17, 1999 if Parent reasonably believes that the HSR Condition will be
satisfied and the EU Approval will be obtained by such date (the "Final
Expiration Date")), terminate the Offer (whether or not any Shares have
theretofore been purchased or paid for) if, prior to the expiration of the
Offer, (i) a number of shares of Company Common Stock which, together with any
Shares owned by Parent or Purchaser, constitutes at least a majority of the
voting power (determined on a fully-diluted basis), on the date of purchase, of
all the securities of the Company entitled to vote generally in the election of
directors or on a merger shall not have been validly tendered and not properly
withdrawn prior to the expiration of the Offer (the "Minimum Condition") or (ii)
at any time on or after the date of the Merger Agreement and prior to the
acceptance for payment of Shares, any of the following conditions occurs or has
occurred and continues to exist:
(a) there shall have been instituted and pending any suit, action,
investigation or proceeding brought by any governmental authority before
any federal or state court or any order or preliminary or permanent
injunction shall have been entered in any action or proceeding before any
federal or state court or
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governmental, administrative or regulatory authority or agency, or any
other action shall have been taken, or statute, rule, regulation,
legislation, judgment or order enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to Parent, Purchaser, the Company or
any subsidiary or affiliate of Purchaser or the Company or the Offer or the
Merger, by any legislative body, court, government or governmental,
administrative or regulatory authority or agency which would reasonably be
expected to have the effect of: (i) making illegal, materially delaying or
otherwise restraining or prohibiting or making materially more costly the
making of the Offer, the acceptance for payment of, or payment for, some of
or all the Shares by Purchaser or any of its affiliates, the consummation
of the Merger or materially delaying the Merger; (ii) prohibiting or
materially limiting the ownership or operation by the Company or any of its
subsidiaries or Parent, Purchaser or any of Parent's affiliates of all or
any material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and any of its subsidiaries,
taken as a whole, or compelling Parent, Purchaser or any of Parent's
subsidiaries to dispose of or hold separate all or any material portion of
the business or assets of the Company and any of its subsidiaries, taken as
a whole, or Parent and its subsidiaries, taken as a whole, as a result of
the transactions contemplated by the Offer or the Merger Agreement; (iii)
imposing or confirming material limitations on the ability of Parent,
Purchaser or any of Parent's affiliates effectively to acquire or hold or
to exercise full rights of ownership of Shares, including but not limited
to the right to vote any Shares acquired or owned by Parent or Purchaser or
any of its affiliates on all matters properly presented to the shareholders
of the Company, including but not limited to the adoption and approval of
the Merger Agreement and the Merger or the right to vote any shares of
capital stock of any subsidiary directly or indirectly owned by the
Company; or (iv) requiring divestiture by Parent or Purchaser or any of
their affiliates of any Shares, except, in the case of clauses (i) through
(iv), where such events are consistent with or result from Parent's and the
Company's obligations under Section 6.9 of the Merger Agreement ("Further
Action; Reasonable Best Efforts");
(b) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to Material Adverse Effect
shall not be true and correct, or any such representations and warranties
that are not so qualified shall not be true and correct in any material
respect, in each case as if such representations and warranties were made
at the time of such determination (other than to the extent such
representations and warranties are made as of a specified date, in which
case, such representations and warranties shall not be so true and correct
as of such date);
(c) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(d) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been amended or terminated with the
consent of the Company; or
(e) (i) any waiting periods under the HSR Act shall have expired or
been terminated and the EU Approval shall have been received, in each case
to the extent applicable to the purchase of Shares pursuant to the Offer;
and (ii) any applicable waiting periods applicable to the purchase of
Shares pursuant to the Offer under any laws or regulations of any foreign
jurisdiction in which either the Company or Parent (directly or through
subsidiaries, in each case) has material assets or conducts material
operations, shall not have expired or been terminated, or any regulatory
approval applicable to the purchase of Shares pursuant to the Offer shall
not have been obtained, other than such failures to obtain, expire,
terminate or receive as would not have a material adverse effect on Parent
or the Company
which, in the reasonable judgment of Purchaser with respect to each and every
matter referred to above and regardless of the circumstances (including any
action or inaction by Purchaser or any of its affiliates but subject to the
terms of the Merger Agreement) giving rise to any such condition, makes it
inadvisable to proceed with the Offer or with such acceptance for payment of or
payment for Shares or to proceed with the Merger.
The foregoing conditions are for the benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition or may be waived by Purchaser in whole or in part at any
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time and from time to time in its sole discretion (subject to the terms of the
Merger Agreement). The failure by Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
The Merger. The Merger Agreement provides that, as soon as practicable
after the satisfaction or waiver of the conditions to the Merger set forth
therein, Purchaser will be merged with and into the Company in accordance with
the IBCL. As a result of the Merger, the separate corporate existence of
Purchaser will cease and the Company will continue as the Surviving Corporation.
Pursuant to the terms of the Merger Agreement, at the Effective Time and without
any further action on the part of the Company and Purchaser, the articles of
incorporation of the Company as in effect immediately prior to the Effective
Time shall be amended so as to read in their entirety as set forth in the Merger
Agreement and, as so amended, will be the articles of incorporation of the
Surviving Corporation. At the Effective Time and without any further action on
the part of the Company and Purchaser, the By-Laws of Purchaser shall be the
By-Laws of the Surviving Corporation. The Merger Agreement provides that the
directors of Purchaser immediately prior to the Effective Time will be the
initial directors of the Surviving Corporation and that the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation.
Conversion of Shares. The Merger Agreement provides that, except as
provided below in "Cash Alternative Structure," at the Effective Time, by virtue
of the Merger and without any action on the part of Purchaser, the Company or
the holders of any of the following securities: (i) if Purchaser has purchased,
pursuant to the Offer, 80,916,766 Shares, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held in the treasury
of the Company and Shares owned by Parent or Purchaser ("Cancellation Shares")
which will be cancelled without consideration therefor) will be cancelled,
extinguished and converted into the right to receive a number (rounded to the
nearest one-millionth of a share) of fully paid and nonassessable shares of
Parent Common Stock equal to the Exchange Ratio; (ii) if the Offer is terminated
on the Final Expiration Date but the Merger Agreement has not been terminated or
if Purchaser shall have purchased, pursuant to the Offer, less than 80,916,766
Shares (the number of Shares so purchased, the "Purchased Share Number"), each
Share issued and outstanding immediately prior to the Effective Time (other than
Cancellation Shares) will be cancelled, extinguished and converted into the
right to receive, (A) cash, in an amount equal to the product of Cash Proration
Factor One multiplied by $37.125 and (B) a number (rounded to the nearest
one-millionth of a share) of fully paid and non-assessable shares of Parent
Common Stock equal to the product of (x) one minus Cash Proration Factor One
multiplied by (y) the Exchange Ratio; and (iii) each Share of Purchaser issued
and outstanding immediately prior to the Effective Time will be converted into
and become one validly issued, fully paid and nonassessable share of identical
common stock of the Surviving Corporation.
If prior to the Effective Time, Parent or the Company, as the case may be,
should split, combine or otherwise reclassify the Parent Common Stock or the
Shares, or pay (or set a record date that is prior to the Effective Time with
respect to) a stock dividend or other stock distribution in Parent Common Stock
or Shares, or otherwise change the Parent Common Stock or Shares into any other
securities, or make any other such stock dividend or distribution with respect
to the Parent Common Stock or the Shares in capital stock of Parent or the
Company or of their respective subsidiaries in respect of the Parent Common
Stock or the Common Stock, respectively, then the Merger Agreement provides that
the Merger Consideration and the Exchange Ratio will be appropriately adjusted
to reflect such split, combination, dividend or other distribution or change to
provide the holders of Shares, the same economic effect as contemplated by the
Merger Agreement prior to such event.
For purposes of the Merger Agreement, the "Exchange Ratio" is equal to the
number (rounded to the nearest one-millionth) obtained by dividing $37.125 by
the Parent Common Stock Price (as defined below); provided that the Exchange
Ratio will not be less than 1.088710 or greater than 1.330645. The "Parent
Common Stock Price" is equal to the average per share closing price of the
Parent Common Stock on the NYSE Composite Transactions Tape for the twenty
trading-day period ending on the second trading day prior to the Effective Time.
"Cash Proration Factor One" means a fraction, of which (A) the numerator is
equal to
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(x) 80,916,766 minus (y) the Purchased Share Number, if any, and (B) the
denominator is equal to the number of Shares issued and outstanding immediately
prior to the Effective Time (other than Cancellation Shares) (the "Final
Outstanding Number").
The Merger Agreement provides that each holder of Shares exchanged pursuant
to the Merger who would otherwise have been entitled to receive a fraction of a
share of Parent Common Stock will receive, in lieu thereof, cash (without
interest) in an amount equal to the product of (i) such fractional part of a
share of Parent Common Stock multiplied by (ii) the average closing price of the
Parent Common Stock on the NYSE Composite Transactions Tape for the five trading
days immediately prior to the Effective Time. The consideration provided for
clauses (i) and (ii) in the paragraph above labelled "Conversion of Shares,"
together with the consideration provided for in the preceding sentence, is
referred to herein as the "Merger Consideration" (except as described below
under "Cash Alternative Structure").
Cash Alternative Structure. Pursuant to the terms of the Merger Agreement,
if (a) following the consummation of the Offer, either (x) the Parent
Stockholders Meeting (as defined below under "Meetings") has occurred and at
such meeting (or any adjournments thereof), the Parent Stockholder Approval (as
defined below under "Representations and Warranties") is not obtained or (y) the
Parent Stockholder Approval has not been obtained prior to the 45th day after
the Registration Statement (as defined below under "Meetings") is declared
effective by the Commission, (or, if there exists at such time any injunction or
other order which prohibits, restrains, enjoins or restricts Parent from holding
the Parent Stockholders Meeting or a stop order suspending the effectiveness of
the Registration Statement has been issued by the Commission, by not later than
the 30th day after such 45th day) or (b) all three of the following have
occurred: (i) the Offer is terminated at the Final Expiration Date and the
Merger Agreement has not been terminated, (ii) the Parent Stockholders Meeting
has occurred and at such meeting (or any adjournments thereof) the Parent
Stockholder Approval is not obtained and (iii) the Haas Family Stockholders,
which as of the date of the Merger Agreement owned approximately 39% of the
outstanding voting power of the Parent Common Stock, shall not have voted the
greater of (A) 95% of the shares of Parent Common Stock beneficially owned by
such entities and their affiliates as of the date of the Merger Agreement
(approximately 35% of the outstanding voting power of the Parent Common Stock as
of such date) and (B) such number of shares so owned by such entities on the
record date for the Parent Stockholders Meeting in favor of the Parent
Stockholders Approval, the Parent Stockholders Approval shall not be a condition
to consummation of the Merger, and the Merger Consideration to be received in
respect of shares of Common Stock in the Merger will be modified (the "Cash
Alternative Structure") as set forth below.
In the event that the Cash Alternative Structure is required to be
effected, then notwithstanding anything to the contrary provided for in the
Merger Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Purchaser, the Company or the holders of Parent Common
Stock or Common Stock, each Share issued and outstanding immediately prior to
the Effective Time (other than Cancellation Shares) will be cancelled,
extinguished and converted into the right to receive:
(i) if Purchaser has purchased, pursuant to the Offer, 80,916,766
Shares, (a) cash, in an amount equal to the product of (x) Cash Proration
Factor Two (as defined below), multiplied by (y) the product of the
Exchange Ratio and the Adjusted Parent Common Stock Price (as defined
below); and (b) a number (rounded to the nearest ten-thousandth of a share)
of fully paid and non-assessable shares of Parent Common Stock equal to the
product of (x) the Exchange Ratio multiplied by (y) one minus Cash
Proration Factor Two.
(ii) if the Offer is terminated but the Merger Agreement has not been
terminated or if the Purchased Share Number is less than 80,916,766, (a)
cash, in an amount equal to the sum of (x) the product of Cash Proration
Factor One, multiplied by $37.125 plus (y) the product of (A) Cash
Proration Factor Two minus Cash Proration Factor One, multiplied by (B) the
product of the Exchange Ratio and the Adjusted Parent Common Stock Price
and (b) a number (rounded to the nearest ten-thousandth of a share) of
fully paid and non-assessable shares of Parent Common Stock equal to the
product of (x) the Exchange Ratio multiplied by (y) one minus Cash
Proration Factor Two.
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"Cash Proration Factor Two" is a fraction, of which (A) the numerator is
equal to (x) the Final Outstanding Number minus (y) the Maximum Share-for-Share
Number and (B) the denominator of which is equal to the Final Outstanding
Number. The "Maximum Share-for-Share Number" (as defined below) is equal to (A)
the maximum number of shares of Parent Common Stock that may be issued by Parent
in the Merger without a vote of its stockholders pursuant to the Delaware
General Corporation Law (the "DGCL"), the applicable rules of the New York Stock
Exchange, Inc. or otherwise (taking into account all shares of Parent Common
Stock then outstanding or reserved for issuance in connection with any
securities, options or rights convertible into, exchangeable or exercisable for
Parent Common Stock (including, without limitation, Company Stock Options (as
defined below under "Stock Options") not cancelled pursuant to the Merger
Agreement)), divided by (B) the Exchange Ratio. The "Adjusted Parent Common
Stock Price" is equal to the average per share closing price of the Parent
Common Stock on the NYSE Composite Transactions Tape for the five trading-day
period ending on the second trading day prior to the Effective Time.
Stock Options. The Merger Agreement provides that as soon as practicable
following the date of the Merger Agreement, the Board of Directors of the
Company will adopt such resolutions or take such other actions as may be
required to adjust the terms of all outstanding employee or director stock
options to purchase shares of Common Stock and any related stock appreciation
rights ("Company Stock Options") granted under any stock option or stock
purchase plan, program or arrangement of the Company and its subsidiaries,
including without limitation, the 1989 Incentive Plan and the 1997 Incentive
Plan (collectively, the "Stock Plans"), to provide that, at the Effective Time,
each Company Stock Option outstanding immediately prior to the Effective Time
will (except to the extent that Parent and the holder of a Company Stock Option
otherwise agree prior to the Effective Time and except as otherwise provided in
the Merger Agreement with respect to any qualified stock options): (a) if such
Company Stock Option is or becomes exercisable before the Merger or as a
consequence of the transactions contemplated by the Merger Agreement and the
holder of such Company Stock Option elects by written notice to Parent prior to
the date 10 business days prior to the Effective Time to receive the payment
contemplated by this clause (a), be cancelled in exchange for a payment from the
Surviving Corporation (subject to any applicable withholding taxes) equal to the
product of (1) the total number of Shares subject to such Company Stock Option
and (2) the excess of $37.125 over the exercise price per Share subject to such
Company Stock Option; or (b) with respect to any Company Stock Option not
canceled pursuant to clause (a) above, be deemed to constitute an option to
acquire, on the same terms and conditions (including, if any, related stock
appreciation rights and limited stock appreciation rights) as were applicable
under such Company Stock Option, the number of shares of Parent Common Stock
equal to the product of (1) the number of shares of Common Stock issuable upon
exercise of such Company Stock Option and (2) the Exchange Ratio, at a price per
share equal to (1) the exercise price per share for the shares of Common Stock
otherwise purchasable pursuant to such Company Stock Option divided by (2) the
Exchange Ratio.
The Merger Agreement also provides that, except as provided therein or as
otherwise agreed to by the parties, the Stock Plans and any other plan, program
or arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any subsidiary will terminate as
of the Effective Time, and the Company will ensure that following the Effective
Time no holder of a Company Stock Option nor any participant in any Stock Plan
will have any right thereunder to acquire equity securities of the Company or
the Surviving Corporation. With respect to the Company Stock Options not
cancelled pursuant to clause (a) in the preceding paragraph, Parent will, as of
the Effective Time, reserve for issuance a number of shares of Parent Common
Stock equal to the number of shares which may become issuable upon exercise of
such Company Stock Options, such number not to be reduced except to the extent
such options or related stock appreciation rights are exercised, cancelled or
terminated pursuant to their terms.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company as to the Company's (and, subject to certain
exceptions, its subsidiaries') jurisdiction of organization and qualification,
capitalization, power and authority to enter into and consummate the
transactions pursuant to the Merger Agreement, absence of conflicts between
organizational documents, laws and agreements and the transactions pursuant to
the Merger Agreement, governmental consents in connection with the transactions
pursuant to the Merger
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Agreement, permits, filings with the Commission, financial statements, absence
of certain changes since June 30, 1998 (including the absence of any material
adverse effect with respect to the Company), litigation, employee benefit plans,
tax matters, environmental matters, "Y2K" compliance and intellectual property
matters.
The Merger Agreement includes representations and warranties of Parent and
Purchaser concerning Parent's (and subject to certain exceptions, its
subsidiaries') and Purchaser's jurisdiction of organization and qualification,
capitalization, power and authority to enter into and consummate the transaction
pursuant to the Merger Agreement, absence of conflicts between organizational
documents, laws and agreements and the transactions pursuant to the Merger
Agreement, governmental consents in connection with the transactions pursuant to
the Merger Agreement, permits, filings with the Commission, financial
statements, absence of certain changes since December 31, 1997 (including the
absence of any material adverse effect with respect to Parent), litigation,
employee benefit plans and environmental matters.
Agreements of the Company, Parent and Purchaser.
Conduct of Business of the Company Pending the Merger. In the Merger
Agreement, the Company agreed that, during the period from the date thereof to
the Effective Time, unless Parent otherwise consents in writing (which consent
shall not be unreasonably withheld) or except as permitted by the Merger
Agreement, the businesses of the Company and its subsidiaries will be conducted
in all material respects only in the ordinary course of business and in
substantially the same manner as previously conducted. The Company agreed that
(subject to certain exceptions), between the date of the Merger Agreement and
the Effective Time, neither the Company nor any of its subsidiaries would,
directly or indirectly do, or commit to do, any of the following without the
prior written consent of Parent, which consent may not be unreasonably withheld:
(a) amend or otherwise change its Articles of Incorporation or By-Laws
of the Company or the equivalent organizational documents or the agreement;
(b) issue, deliver, sell, pledge, dispose of or encumber, or authorize
or commit to the issuance, sale, pledge, disposition or encumbrance of, (i)
any shares of capital stock of any class, any Company voting debt or any
options, warrants, convertible securities or other rights of any kind to
acquire any shares of capital stock, or any Company voting debt or any
other ownership interest of the Company or any of its subsidiaries (except
for the issuance of Shares (and the related Rights) required to be issued
pursuant to the terms of Company Stock Options outstanding as of January
31, 1999) or (ii) any assets of the Company or any of its subsidiaries that
are, individually or in the aggregate, material to the business of the
Company and its subsidiaries, taken as a whole, except for sales of
products in the ordinary course of business and in a manner consistent with
past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock (other than (i) regular quarterly dividends
with usual record and payment dates for dividends consistent with past
practice (unless otherwise required by the Merger Agreement), in an amount
not to exceed $.13 per share, (ii) dividends by wholly owned subsidiaries
of the Company; and (iii) dividends required to be paid pursuant to the
terms of organizational documents of non-wholly owned subsidiaries in
effect on the date of the Merger Agreement;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock or any
securities convertible into or exercisable for any shares of its capital
stock, other than pursuant to Company Stock Options and Stock Plans in
accordance with their terms as in effect on the date of the Merger
Agreement;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money other than
short-term borrowings under the Company's existing credit facilities or
issue any debt securities or, other than in the ordinary course of business
and in amounts that are not material, assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of
any person, or make any loans or advances (other than loans or advances to
employees of the Company and
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<PAGE> 9
its subsidiaries in the ordinary course of business consistent with past
practice or guarantees of obligations of subsidiaries) or make any capital
contributions to, or investments in, any other person, other than in the
ordinary course of business and in amounts that are not material; (iii)
enter into any material contract or agreement other than in the ordinary
course of business consistent with past practice; or (iv) authorize any
single capital expenditure which is in excess of $10 million or capital
expenditures which are, in the aggregate, in excess of $50 million for the
Company and its subsidiaries taken as a whole (except to the extent such
expenditures were disclosed to Parent in the Company's budget as of the
date of the Merger Agreement);
(f) except to the extent required under existing employee and director
benefit plans, agreements or arrangements as in effect on the date of the
Merger Agreement and except for renewals in the ordinary course, increase
the compensation or fringe benefits of any of its directors, officers or
employees, except for increases in salary or wages or, in connection with a
promotion or change in position granted in the ordinary course, benefits
received by employees of the Company or its subsidiaries who are not one of
the 50 officers of the Company with the highest base salary in the ordinary
course of business in accordance with past practice, or grant any severance
or termination pay not currently required to be paid under existing
severance plans or contracts other than in the ordinary course of business
consistent with past practice to, or enter into any employment, consulting
or severance agreement or arrangement with any present or former director,
officer or other employee of the Company or any of its subsidiaries (other
than an agreement with an employee who is not one of the 50 officers of the
Company with the highest base salary), or, except as is required by law,
establish, adopt, enter into or amend or terminate any collective
bargaining agreement, Company Plan (as defined in the Merger Agreement) or
employee benefit arrangement that would have been Company Plans if they
were in effect as of the date of the Merger Agreement, including, but not
limited to, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(g) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(h) except as may be required by law, make any material tax election,
make or change any method of accounting with respect to taxes, file any
amended tax returns that may have a material adverse effect on the tax
position of the Company or any of its subsidiaries or settle or compromise
any material federal, state, local or foreign tax liability;
(i) settle or compromise any pending or threatened suit, action or
claim which is material to the Company or any of its subsidiaries, taken as
a whole, or which relates to the transactions contemplated by the Merger
Agreement;
(j) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries not constituting
an inactive subsidiary (other than the Merger);
(k) pay, discharge or satisfy any material claims, liabilities or
obligations, other than the payment, discharge or satisfaction (i) in the
ordinary course of business and consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against
in the financial statements of the Company, (ii) of liabilities incurred in
the ordinary course of business and consistent with past practice and (iii)
of liabilities required to be paid, discharged or satisfied;
(l) enter into any "non-compete" or similar agreement; or
(m) propose to do or agree to do any of the foregoing or propose to
take any action which would make any of the representations or warranties
of the Company contained in the Merger Agreement untrue and incorrect as of
the date when made if such action had then been taken, or would result in
any Offer Conditions not being satisfied.
8
<PAGE> 10
Conduct of Business of Parent Pending the Merger. In the Merger Agreement,
Parent agrees that, during the period from the date of the Merger Agreement to
the Effective Time Parent will use its reasonable best efforts to preserve
substantially intact its and its subsidiaries' current business organizations,
keep available the services of present officers and key employees and preserve
the present relationships of Parent and its subsidiaries to the end that their
goodwill and ongoing businesses shall be materially unimpaired at the Effective
Time. In the Merger Agreement, Parent agreed that (subject to certain
exceptions), between the date of the Merger Agreement and the Effective Time,
neither Parent nor any of its subsidiaries would directly or indirectly do, or
commit to do, any of the following without the prior written consent of the
Company, which consent may not be unreasonably withheld:
(a) amend or otherwise change its Certificate of Incorporation or
By-Laws (other than the Charter Amendment(as defined below under
"Meetings"));
(b) in the case of Parent only, declare, set aside, make or pay any
dividend or other distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock (other than regular
quarterly dividends with usual record and payment dates consistent with
past practice (unless otherwise required by the Merger Agreement), in an
amount not to exceed $.18 per share);
(c) in the case of Parent only, adopt a plan of complete or partial
liquidation or dissolution;
(d) in the case of Parent only, deliver, sell, dispose of, or
authorize or commit to the issuance, sale or disposition of any shares of
capital stock of any class, any voting debt of Parent or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of capital stock, or any voting debt of Parent (except for the
issuance of options in the ordinary course consistent with past practice
and except for issuances in connection with acquisitions or mergers
permitted by the Merger Agreement);
(e) in the case of Parent only, redeem, purchase or otherwise acquire,
directly or indirectly, any capital stock of Parent, other than pursuant to
options and benefit plans;
(f) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof if (i) the aggregate consideration is in excess of $500
million for any individual transaction and $750 million for all such
transactions or (ii) such acquisition would be reasonably likely to prevent
or materially delay the Offer or the Merger; or
(g) propose to do or agree to do any of the foregoing or any action
which would be reasonably likely to prevent or materially delay the Offer
or the Merger or make any of the representations or warranties of Parent or
Purchaser contained in the Merger Agreement untrue and incorrect as of the
date when made if such action had then been taken.
Coordination of Dividends. The Company and Parent agreed in the Merger
Agreement to coordinate with each other the declaration and payment of dividends
in respect of the Shares and the Parent Common Stock and the record dates and
the payment dates relating thereto, so that holders of Shares not receive two
dividends, or fail to receive one dividend, for any single calendar quarter with
respect to their Shares and/or shares of Parent Common Stock any such holder
receives in exchange therefor pursuant to the Merger.
Meetings. The Company agreed in the Merger Agreement that, acting through
its Board of Directors, it will call and hold a meeting of its shareholders as
soon as practicable following consummation of the Offer for the purpose of
considering and taking action on the Merger Agreement and the transactions
contemplated thereby (the "Company Shareholders Meeting") and except to the
extent otherwise required by the fiduciary duties of the Board of Directors of
the Company under applicable law, (i) include in the joint proxy statement to be
filed in connection with the Company Shareholders Meeting and the Parent
Stockholders Meeting referred to below (the "Proxy Statement") the unanimous
recommendation of the Board of Directors that the shareholders of the Company
vote in favor of the approval of the Merger Agreement and the transactions
contemplated thereby and (ii) use its reasonable best efforts to obtain the
necessary approval of the Merger Agreement and the transactions contemplated
thereby by its shareholders. In the Merger Agreement, the Company represented
that the approval of the Merger Agreement by the holders of a majority of all
votes
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<PAGE> 11
entitled to be cast by the Common Stock (the "Company Shareholder Approval") is
the only vote of the shareholders of the Company necessary to authorize the
Merger Agreement. Parent has agreed to cause Purchaser to, and Purchaser shall
vote all shares of Common Stock acquired by Purchaser pursuant to the Offer or
otherwise owned by Parent or Purchaser (the "Tendered Shares") in favor of the
approval of the Merger Agreement at the Company Shareholders Meeting or any
adjournment thereof. In addition, between the date of consummation of the Offer
and the date of the Company Shareholders Meeting, Parent and Purchaser have
agreed that neither shall sell, transfer, dispose of or encumber in any manner
or otherwise subject to any voting or other agreement with any third party any
of the Tendered Shares or any voting rights with respect thereto.
Parent agreed in the Merger Agreement that, acting through its Board of
Directors, it will call and hold a meeting (the "Parent Stockholders Meeting")
of its stockholders as soon as practicable following the consummation of the
Offer for the purpose of considering and taking action on the issuance of the
shares of Parent Common Stock and the Charter Amendment (as defined below) and
(i) include in the Proxy Statement relating thereto the recommendation of the
Board of Directors that the stockholders of Parent vote in favor of the approval
of the issuance of the shares of Parent Common Stock and the Charter Amendment
and the written opinion of Wasserstein Perella & Co., Inc. to the effect that,
as of the date of such opinion, the consideration to be paid by Parent to the
holders of shares of the Company Common Stock in the Offer and the Merger is
fair to Parent from a financial point of view and (ii) use its reasonable best
efforts to obtain the necessary approval of the issuance of the shares of Parent
Common Stock and the Charter Amendment by its stockholders. In the Merger
Agreement, Parent represented that (where the Cash Alternative Structure is not
required to be effected), (i) the issuance of the shares of Parent Common Stock
in the Merger pursuant to the Merger Agreement requires the approval of a
majority of the votes cast at a meeting at which there is a quorum by the
holders of the Parent Common Stock and the convertible preferred stock of
Parent, voting together and not as separate classes and (ii) the amendment to
the Certificate of Incorporation of Parent to increase the number of authorized
shares of Parent Common Stock to 400 million (the "Charter Amendment") requires
the approval of the holders of a majority of the outstanding shares of (A)
Parent Common Stock, voting as a class, and (B) Parent Common Stock and such
convertible preferred stock, voting together and not as separate classes
(collectively, the "Parent Stockholder Approval").
Parent and the Company agreed in the Merger Agreement to use their
reasonable best efforts to hold the Company Shareholders Meeting and the Parent
Stockholders Meeting on the same day. Parent agreed in the Merger Agreement to
use its reasonable best efforts, subject to compliance with the applicable rules
and regulations under the Exchange Act governing the solicitation of proxies, to
cooperate with the Company in obtaining the agreement of the record holders of
the shares of Parent Common Stock owned by the Haas Family Stockholders to enter
into a voting agreement with the Company substantially in the form provided by
the Company to Parent prior to the date of the Merger Agreement. In addition, as
soon as practicable following the date of the Merger Agreement, the Company and
Parent agreed to prepare and file with the Commission under the Exchange Act and
the rules and regulations promulgated thereunder the Proxy Statement and Parent
shall prepare and file with the Commission a registration statement on Form S-4
with respect to the issuance of Parent Common Stock (the "Registration
Statement"), in which the Proxy Statement will be included as a prospectus. Each
of the Company and Parent agreed to use its reasonable best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing.
Company Board Representation. Promptly upon the purchase by Purchaser of
Shares pursuant to the Offer and, from time to time thereafter, subject to the
terms of the Merger Agreement, Purchaser will be entitled by the terms thereof
to designate up to such number of directors (the "Parent Designees"), rounded up
to the next whole number, on the Board of Directors of the Company as will give
Purchaser representation on the Board of Directors equal to the product of the
total number of directors on such Board (giving effect to the directors elected
as described in this sentence) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Purchaser or any affiliate of Purchaser
bears to the total number of Shares then outstanding, and the Company has
agreed, at such time, promptly to take all action necessary to cause the Parent
Designees to be so elected, including either increasing the size of the Board of
Directors or securing the
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<PAGE> 12
resignations of incumbent directors or both. Following the appointment of the
Parent Designees as described in the previous sentence and prior to the
Effective Time, the Merger Agreement provides that the Board of Directors of the
Company will form a committee of the Board comprised solely of directors who are
not Parent Designees (the "Continuing Director Committee"), which committee will
be delegated sole responsibility for the following matters: (i) any amendment,
or waiver, of any term or condition of the Merger Agreement or the Articles of
Incorporation or By-Laws of the Company; (ii) any termination of the Merger
Agreement by the Company; (iii) any extension by the Company of the time for
performance of any of the obligations or other acts of Purchaser or Parent under
the Merger Agreement; (iv) any waiver, assertion or enforcement of the Company's
rights under the Merger Agreement; (v) any other consent, agreement or action by
the Company or the Company's Board of Directors with respect to the Merger
Agreement; (vi) the declaration of quarterly dividends in an amount not to
exceed $.13 per share of Company Common Stock; and (vii) permitted changes in
the composition, compensation or benefits of the senior management of the
Company and its operating divisions.
No Solicitation of Transactions. Pursuant to the Merger Agreement, the
Company, its affiliates and their respective officers, directors, employees,
representatives and agents agreed immediately to cease any existing discussions
or negotiations, if any, with any parties conducted prior to the date thereof
with respect to any Business Combination Proposal (as defined below). Prior to
the purchase of Shares pursuant to the Offer, the Merger Agreement provides that
the Company may, directly or indirectly, furnish information and access, in each
case only in response to a request for such information or access to any person
made after the date thereof which was not encouraged, solicited or initiated by
the Company or any of its affiliates or any of its or their respective officers,
directors, employees, representatives or agents after the date hereof, pursuant
to appropriate confidentiality agreements containing terms substantially similar
to those contained in the confidentiality agreement between the Company and
Parent dated November 24, 1998, and may participate in discussions and negotiate
with such person concerning any Business Combination Proposal, if, and only to
the extent that, (i) such person has submitted a written Business Combination
Proposal to the Company Board relating to any such transaction, (ii) the Company
Board, after consultation with its independent financial advisers, determines in
good faith that (x) the person making such Business Combination Proposal is
reasonably capable of completing such Business Combination Proposal, taking into
account the legal, financial, regulatory and other aspects of such Business
Combination Proposal and the person making such Business Combination Proposal
and (y) such Business Combination Proposal would reasonably be expected to be a
Superior Proposal (as defined below) and (iii) the Company Board determines in
good faith, based upon the advice of outside counsel to the Company, that,
assuming such Business Combination Proposal is a Superior Proposal, failure to
take such action would violate its fiduciary duties under applicable law. The
Company Board of Directors of the Company has agreed to notify Parent promptly
(but in any event within 24 hours) if any such proposal is made and shall in
such notice indicate in reasonable detail the identity of the offeror and the
material terms and conditions of any proposal and shall keep Parent promptly
advised of the status and material terms of any such inquiry, offer or proposal.
Except as described in this paragraph, the Company and its affiliates have
agreed pursuant to the Merger Agreement to use their reasonable best efforts to
cause their respective officers, directors, employees, representatives or agents
not to, directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent and
Purchaser, any affiliate or associate of Parent and Purchaser or any designees
of Parent or Purchaser) concerning any Business Combination Proposal; provided,
however, that nothing therein would prevent the Company Board from taking, and
disclosing to the Company's shareholders, a position contemplated by Rules 14d-9
and 14e-2 promulgated under the Exchange Act with regard to any tender offer or
from making any disclosure ("Required Disclosure") to its shareholders if the
Company Board shall conclude in good faith that such disclosure is required
under applicable law; provided, further, that the Company Board will not
recommend that the shareholders of the Company tender their shares of Common
Stock in connection with any such tender offer unless the Company Board has
determined in good faith, based upon the advice of outside counsel to the
Company, that failing to take such action would constitute a breach of the
Company Board's fiduciary duty under applicable law. The Company agreed,
pursuant to the Merger Agreement not to release any third party from, or waive
any provisions of, any confidentiality or standstill agreement to which the
Company is a
11
<PAGE> 13
party, unless the Board shall have determined in good faith, based upon the
advice of outside counsel, that failing to release such third party or waive
such provisions would constitute a breach of the Company Board's fiduciary duty
under applicable law. A "Business Combination Proposal" means any tender or
exchange offer, proposal for a merger, consolidation or other business
combination involving the Company or any of its material subsidiaries, or any
proposal or offer (in each case, whether or not in writing and whether or not
delivered to the stockholders of a party generally) to acquire in any manner,
directly or indirectly, a substantial equity interest in or a substantial
portion of the assets of the Company or any of its material subsidiaries, other
than pursuant to the transactions contemplated by the Merger Agreement. A
"Superior Proposal" is a Business Combination proposal that involves payment of
consideration to the Company's shareholders and other terms and conditions that,
taken as a whole, are superior to the Offer and the Merger.
Employee Benefits Matters. On and after the Effective Time, the Merger
Agreement provides that Parent will cause the Surviving Corporation and its
subsidiaries to promptly pay or provide when due all compensation and benefits
as provided pursuant to the terms of, and to honor in accordance with their
currently existing terms (except to the extent amended or terminated in
accordance with such terms), all compensation arrangements, employment
agreements and employee or director benefit plans, programs and policies in
existence as of the date thereof for all employees (and former employees) and
directors (and former directors) of the Company and its subsidiaries. Parent
agreed in the Merger Agreement to cause the Surviving Corporation, for the
period commencing at the Effective Time and ending on December 31, 2000, to
provide employee benefits under plans, programs and arrangements which, in the
aggregate, will provide benefits to the employees of the Surviving Corporation
and its subsidiaries (other than employees covered by a collective bargaining
agreement) which are no less favorable in the aggregate than those provided
pursuant to the plans, programs and arrangements (other than those related to
the equity securities of the Company) of the Company and its subsidiaries in
effect on the date of the Merger Agreement.
Directors' and Officers' Indemnification and Insurance. The Merger
Agreement provides that the Articles of Incorporation of the Surviving
Corporation will contain provisions no less favorable with respect to
indemnification than are set forth in the Articles of Incorporation of the
Company, which provisions will not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at the Effective Time
were directors, officers or employees of the Company. Parent agreed (subject to
certain limitations) in the Merger Agreement to cause to be maintained in effect
for six years from the Effective Time the current policies (or appropriate
substitute policies) of the directors' and officers' liability insurance
maintained by the Company with respect to matters or events occurring prior to
the Effective Time to the extent available; provided, however, that in no event
shall Parent or the Company be required to expend more than an amount per year
equal to 200% of current annual premiums paid by the Company . In addition,
Parent agreed in the Merger Agreement, for six years after the Effective Time,
that it will or will cause the Surviving Corporation to indemnify and hold
harmless each present and former director and officer of the Company, determined
as of the Effective Time (the "Indemnified Parties"), against any costs or
expenses incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters relating to their duties or actions in their
capacity as officers and directors and existing or occurring at or prior to the
Effective Time to the fullest extent permitted under applicable law.
Certain Other Actions. The Merger Agreement provides that, upon the terms
and subject to the conditions thereof, each of the parties thereto will use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by the Merger Agreement as soon as practicable,
including but not limited to (i) cooperating in the preparation and filing of
the Offer Documents, the Proxy Statement, the Registration Statement, any
required filings under the HSR Act or other foreign filings and any amendments
to any thereof; (ii) promptly making all required regulatory filings and
applications including without limitation, responding promptly to requests for
further information, to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company and its subsidiaries as are necessary for
the consummation of the transactions contemplated by the Merger Agreement and to
fulfill the conditions to the
12
<PAGE> 14
Offer and the Merger; (iii) avoiding the entry of, or having vacated or
terminated, any decree, order, or judgment that would restrain, prevent, or
delay the consummation of the Offer or the Merger, including but not limited to
defending through litigation on the merits any claim asserted in any court by an
party; and (iv) taking any and all reasonable steps necessary to avoid or
eliminate each and every impediment under any antitrust, competition, or trade
regulation law that is asserted by any governmental entity with respect to the
Offer or the Merger so as to enable the consummation of the Offer or the Merger
to occur as expeditiously as possible, including but not limited to, proposing,
negotiating, committing to and effecting, by consent decree, hold separate order
or otherwise, the sale, divestiture or disposition of such assets or businesses
of the Parent or the Company or any of their respective subsidiaries, (or
otherwise taking or committing to take any action that limits, in any material
respect, the freedom of action with respect to, or its ability to retain, any of
the businesses, product lines, or assets of Parent, the Company or their
respective subsidiaries) as may be required in order to avoid the entry of, or
to effect the dissolution of, any injunction, temporary restraining order, or
other order in any suit or proceeding, which would otherwise have the effect of
preventing or delaying the consummation of the Offer or the Merger; provided,
however, that Parent will not be required to agree to any hold separate order,
sale, divestiture, or disposition of assets or businesses of Parent or the
Company which account, in the aggregate, for more than $160 million in sales of
Parent or the Company, as the case may be, in the most recently completed fiscal
year. At the request of Parent, the Company will be required to agree to divest,
hold separate or otherwise take or commit to take any action that limits its
freedom of action with respect to, or its ability to retain, any of the
businesses, product lines or assets of the Company or any of its subsidiaries,
provided that any such action may be conditioned upon the consummation of the
Merger. Notwithstanding anything to the contrary contained in the Merger
Agreement, in connection with any filing or submission required or action to be
taken by Parent, the Company, or any of their respective subsidiaries to
consummate the Offer and the Merger or other transactions contemplated in the
Merger Agreement, the Company shall not, without Parent's prior written consent,
recommend, suggest, or commit to any sale, divestiture or disposition of assets
or businesses of the Company or its subsidiaries. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of the Merger Agreement, the proper officers and directors of each
party to the Merger Agreement shall use their reasonable best efforts to take
all such necessary action.
Parent Board of Directors. Effective at the Effective Time, Parent agreed
in the Merger Agreement to increase the size of its Board of Directors by adding
three directorships and to elect Mr. S. Jay Stewart and two other current
directors of the Company to be mutually agreed by the Company and Parent.
Conditions to the Merger.
Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger are, pursuant to the
Merger Agreement, subject to the satisfaction at or prior to the Effective Time
of the following conditions: (i) the Company Shareholder Approval having been
obtained; (ii) except if the Cash Alternative Structure is required, the Parent
Stockholder Approval having been obtained; (iii) no statute, rule, regulation,
executive order, decree, ruling, injunction or other order (whether temporary,
preliminary or permanent) having been enacted, entered, promulgated or enforced
by any United States, foreign, federal or state court or governmental authority
and being in effect which prohibits, restrains, enjoins or restricts the
consummation of the Merger; (iv) unless Purchaser has terminated the Offer
without terminating the Merger Agreement, Purchaser having purchased Shares
pursuant to the Offer; (v) the Parent Common Stock to be issued in the Merger
and such other shares to be reserved for issuance in connection with the Merger
having been approved for listing on the NYSE, subject to official notice of
issuance and (vi) the Registration Statement having been declared effective by
the Commission under the Securities Act of 1933, as amended (the "Securities
Act"), no stop order suspending the effectiveness of the Registration Statement
shall having been issued by the Commission and no proceedings for that purpose
initiated or threatened by the Commission.
Additional Conditions to Obligation of Parent and Purchaser to Effect the
Merger. If the Offer is terminated and the Merger Agreement has not been
terminated, then the obligations of Parent and Purchaser to consummate the
Merger are also subject, pursuant to the terms of the Merger Agreement, to the
satisfaction at or prior to the Effective Time of the following conditions: (i)
the representations and warranties
13
<PAGE> 15
of the Company set forth in the Merger Agreement that are qualified as to
material adverse effect being true and correct immediately prior to the
Effective Time (except to the extent such representations and warranties shall
have been made as of an earlier date, in which case such representations and
warranties being so true and correct as of such earlier date) with the same
force and effect as if then made; (ii) the representations and warranties of the
Company set forth in the Merger Agreement that are not qualified as to material
adverse effect (as defined in the Merger Agreement) being true and correct in
all material respects immediately prior to the Effective Time (except to the
extent such representations and warranties shall have been made as of an earlier
date, in which case such representations and warranties being true and correct
in all material respects as of such earlier date) with the same force and effect
as if then made; (iii) the Company having performed and complied in all material
respects with all agreements and covenants required to be performed or complied
with by it on or before the Effective Time; (iv) there not having been
instituted and continuing or pending any suit, action or proceeding brought by
any U.S. governmental authority before any federal or state court with respect
to the transactions contemplated by the Merger Agreement which would reasonably
be expected to have the effect of making illegal or otherwise restraining or
prohibiting the Merger; (v) All waiting periods under the HSR Act having expired
or having been terminated and the EU Approval having been received; (vi) any
applicable waiting periods applicable to the Merger under any laws or
regulations of any foreign jurisdiction in which either the Company or Parent
(directly or through subsidiaries, in each case) has material assets or conducts
material operations, having expired or been terminated, and all regulatory
approvals applicable to the Merger having been obtained, other than such waiting
periods and approvals the failure of which to be satisfied or obtained would not
have a material adverse effect on the Company or Parent.
Additional Conditions to Obligation of the Company to Effect the
Merger. If the Offer is terminated but the Merger Agreement has not been
terminated, then the obligations of the Company to consummate the Merger shall
also be subject to the satisfaction at or prior to the Effective Time of the
following conditions: (i) the representations and warranties of Parent and
Purchaser set forth in the Merger Agreement that are qualified as to material
adverse effect being true and correct immediately prior to the Effective Time
(except to the extent such representations and warranties were made as of an
earlier date, in which case such representations and warranties having been so
true and correct as of such earlier date) with the same force and effect as if
then made and (ii) the representations and warranties of Parent and Purchaser
set forth in the Merger Agreement that are not qualified as to material adverse
effect being true and correct in all material respects immediately prior to the
Effective Time (except to the extent such representations and warranties were
made as of an earlier date, in which case such representations and warranties
having been true and correct as of such earlier date) with the same force and
effect as if then made; (iii) Parent and Purchaser having performed and complied
in all material respects with all agreements and covenants required to be
performed or complied with by them on or before the Effective Time; (iv) all
waiting periods under the HSR Act having expired or been terminated and the EU
Approval having been received; and (v) any applicable waiting periods applicable
to the Merger under any laws or regulations of any foreign jurisdiction in which
either the Company or Parent (directly or through subsidiaries, in each case)
has material assets or conducts material operations, having expired or been
terminated, and all regulatory approvals applicable to the Merger having been
obtained, other than such waiting periods and approvals the failure of which to
be satisfied or obtained would not have a material adverse effect on Parent
after the Merger.
Termination. The Merger Agreement may be terminated pursuant to its terms
and the Offer and Merger contemplated thereby may be abandoned at any time prior
to the Effective Time, notwithstanding approval hereof by the shareholders of
the Company or the stockholders of Parent:
(i) by mutual written consent of Parent, Purchaser and the Company;
(ii) by Parent or the Company if any court of competent jurisdiction
or other governmental body located or having jurisdiction within the United
States or any country or economic region in which either the Company or
Parent, directly or indirectly, has material assets or operations, shall
have issued a final order, injunction, decree, judgment or ruling or taken
any other final action restraining, enjoining or otherwise prohibiting the
Offer or the Merger and such order, injunction, decree, judgment, ruling or
other action is or becomes final and nonappealable;
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(iii) unless the Offer has been consummated, by the Company if (a)
there has been a breach of any representation or warranty on the part of
Parent or Purchaser contained in the Merger Agreement which would have a
material adverse effect with respect to Parent, (b) there has been a breach
of any covenant or agreement on the part of Parent or the Purchaser
contained in the Merger Agreement which would have a material adverse
effect with respect to Parent or which materially adversely affects the
consummation of the Offer (unless the Offer has been terminated but the
Merger Agreement has not been terminated) or the Merger, and which, in the
case of clauses (a) and (b), has not been cured prior to the 20th business
day following notice of such breach, (c) the Merger has not been
consummated on or prior to November 30, 1999 (unless such failure is caused
by or results from the failure of any representation or warranty of the
Company to be true and correct in any material respect or the failure of
the Company to perform in any material respect any of its covenants or
agreements contained in the Merger Agreement) or (d) any person has made a
bona fide written offer to acquire the Company which was not solicited
after the date of the Merger Agreement (1) that the Board of Directors of
the Company determines in its good faith judgment is a Superior Proposal
and (2) as a result of which the Board of Directors determines in good
faith, based upon the advice of outside counsel, that failure to take such
action would violate its fiduciary duties under applicable law; provided,
however, that not less than two business days prior to such termination,
the Merger Agreement provides that Company must notify Parent of its
intention to terminate the Merger Agreement pursuant to the provision
described in this clause and must cause its respective financial and legal
advisers to negotiate during such two-day period with Parent to make such
adjustments in the terms and conditions of the Merger Agreement as would
enable the Company to proceed with the transactions contemplated therein on
such adjusted terms, and notwithstanding such negotiations and adjustments,
the Board concludes, in its good faith judgment, that the transactions
contemplated in the Merger Agreement on such terms as adjusted, are not at
least as favorable to the shareholders of the Company as such offer;
provided, further, that such termination under this clause will not be
effective until the Company has made payment of the termination fee
described below;
(iv) unless the Offer has been consummated, by Parent if (a) there has
been a breach of any representation or warranty on the part of the Company
contained in the Merger Agreement which would have a material adverse
effect with respect to the Company, (b) there has been a breach of any
covenant or agreement on the part of the Company contained in the Merger
Agreement which would have a material adverse effect on the Company or
which materially adversely affects the consummation of the Offer (unless
the Offer has been terminated and the Merger Agreement has not been
terminated) or the Merger, and which, in the case of clauses (a) and (b),
shall not have been cured prior to the 20th business day following notice
of such breach or (c) the Board of Directors of the Company has withdrawn
or modified in a manner adverse to Purchaser its approval or recommendation
of the Offer, the Merger Agreement or the Merger, has recommended another
Business Combination Proposal or has failed to publicly affirm its approval
or recommendation of the Offer, the Merger Agreement and the Merger within
15 days of Parent's request, which request may only be made with respect to
any Business Combination Proposal on a single occasion, after any Business
Combination Proposal has been disclosed to the Company's shareholders
generally, or shall have resolved to effect any of the foregoing;
(v) if the Offer has been terminated (but the Merger Agreement has not
been terminated) by Parent if the Merger has not been consummated on or
prior to November 30, 1999 (unless such failure is caused by or results
from the failure of any representation or warranty of Parent to be true and
correct in any material respect or the failure of Parent to perform in any
material respect any of its covenants or agreements contained in the Merger
Agreement);
(vi) unless the Offer shall have been consummated, by Parent or the
Company if the Company Shareholder Approval shall not have been obtained
upon a vote held at the Company Shareholders Meeting (or any adjournment
thereof); or
(vii) unless the Offer has been consummated or the Cash Alternative
Structure is required to be effected, by Parent or the Company if the
Parent Stockholder Approval has not been obtained upon a vote held at the
Parent Stockholders Meeting (or any adjournment thereof).
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Breakup Fees. If:
(i) (x) Parent or the Company terminates the Merger Agreement pursuant
to clause (vi) above, (y) on or prior to the date of the Company
Stockholders Meeting any person (including the Company but not including
Parent or Purchaser) has made a public announcement with respect to a Third
Party Acquisition (as defined below) that contemplates a direct or indirect
consideration (or implicit valuation) for Shares (including the value of
any stub equity) in excess of the Merger Consideration and (z) within 12
months following such termination, the Company, directly or indirectly,
enters into an agreement with respect to a Third Party Acquisition, or a
Third Party Acquisition occurs;
(ii) (x) the Company terminates the Merger Agreement pursuant to
clause (iii)(c) above at a time when Parent would have been permitted to
terminate the Merger Agreement pursuant to clause (iv)(b) above as a result
of a willful or bad faith breach of any covenant or agreement contained in
the Merger Agreement, (y) prior to such termination, any person (not
including Parent or Purchaser) has disclosed publicly or to the Company a
Third Party Acquisition that contemplates a direct or indirect
consideration (implicit valuation) for Shares (including the value of any
stub equity) in excess of the Merger Consideration and (z) within 12 months
following such termination, the Company directly or indirectly, enters into
an agreement with respect to a Third Party Acquisition, or a Third Party
Acquisition occurs; or
(iii) (x) the Company terminates the Merger Agreement pursuant to
clause (iii)(d) above or (y) the Company terminates the Merger Agreement
pursuant to clause (iii)(c) above and at such time Parent would have been
permitted to terminate the Merger Agreement under clause (iv)(c) above or
(z) Parent terminates the Merger Agreement pursuant to clause (iv)(c)
above;
then the Company shall pay to Parent a fee, in cash, of $140 million.
If Parent or the Company terminates the Merger Agreement pursuant to clause
(vii) above, (y) on or prior to the date of the Parent Stockholders Meeting any
person (including Parent but not including the Company) has made a public
announcement with respect to a Parent Third Party Acquisition (as defined below)
that directly or indirectly contemplates (or by its terms would require) the
rejection by the stockholders of Parent of the Parent Stockholder Approval
contemplated by the Merger Agreement, and (z) within 12 months following such
termination, Parent, directly or indirectly, enters into an agreement with
respect to a Parent Third Party Acquisition, or a Parent Third Party Acquisition
occurs, then Parent shall pay to the Company a fee, in cash, of $140 million.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger, tender offer or otherwise
by any person or group of persons acting in concert other than Parent, Purchaser
or any affiliate thereof (a "Third Party"); (ii) the acquisition by a Third
Party of 50.0% or more of the assets of the Company and its subsidiaries, taken
as a whole, in one transaction or a related series of transactions; (iii) the
acquisition by a Third Party of beneficial ownership of 35.0% or more of the
outstanding Shares in one transaction or a related series of transactions; or
(iv) the adoption by the Company of a plan of liquidation. "Parent Third Party
Acquisition" means (i) the acquisition of Parent by merger, tender offer or
otherwise by any person or group of persons acting in concert other than the
Company or any affiliate thereof (a "Parent Third Party"); (ii) the acquisition
by a Parent Third Party of 50.0% or more of the assets of Parent and its
subsidiaries, taken as a whole, in one transaction or a related series of
transactions; or (iii) the acquisition by a Parent Third Party of beneficial
ownership of 35.0% or more of the outstanding shares of Parent Common Stock in
one transaction or a related series of transactions unless immediately following
such acquisition, the Haas Family Stockholders beneficially owns a greater
percentage of the outstanding shares of Parent Common Stock than such Parent
Third Party.
(ii)Arrangements Between the Company, Rohm and Haas and Certain Directors
and Executive Officers of the Company.
In connection with the execution of the Merger Agreement, S. Jay Stewart,
the Chairman and Chief Executive Officer of the Company, has entered into a new
employment agreement with Rohm and Haas and the Company (the "Stewart
Agreement"), which will replace his existing employment agreement with the
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Company (Mr. Stewart's "Current Employment Agreement") effective as of the
Effective Time. Also in connection with the execution of the Merger Agreement,
William E. Johnston, the President and Chief Operating Officer of the Company,
and Christopher K. Julsrud, the Vice President, Human Resources of the Company,
have entered into amendments to their respective employment agreements with the
Company. These individuals' employment agreements as they existed prior to such
agreement and amendments, as well as Mr. Stewart's Current Employment Agreement,
are described under the caption "Change of Control Employment Agreements" in the
Information Statement on Schedule 14f that is attached to this Statement as
Annex B.
Pursuant to the Stewart Agreement, for a term of one year after the
Effective Time of the Merger, Mr. Stewart will serve as a Vice Chairman and a
member of the Board of Directors of Rohm and Haas. He will be a full-time
employee of Rohm and Haas, will be entitled to participate in all employee
benefit plans of Rohm and Haas on the same basis as other senior executives of
Rohm and Haas, and will receive during the one-year term of the agreement cash
compensation of $1.95 million (which represents the aggregate of his current
annual base salary, his target annual bonus under the Company's 1999 fiscal year
annual incentive plan, and his target long-term incentive plan award for the
award cycle that ends at the end of the Company's 1999 fiscal year). Mr.
Stewart's Current Employment Agreement provides for certain severance benefits
in the event that Mr. Stewart terminates his employment for "good reason" (as
defined in Mr. Stewart's Current Employment Agreement), and consummation of the
Offer or approval of the Merger by the Company's shareholders would constitute
such "good reason." Pursuant to the Stewart Agreement, if Mr. Stewart's
employment with Rohm and Haas is terminated at any time after the Effective Time
for any reason, Mr. Stewart will be entitled to receive severance benefits based
upon those provided for under his Current Employment Agreement assuming that it
would have been extended through its final termination date of September 30,
2003 (which is Mr. Stewart's mandatory retirement date). These severance
benefits include $2.185 million in cash (which represents the annualized amount
of cash severance, calculated based upon current compensation, to which he would
be entitled under his Current Employment Agreement) per year from the date of
termination through September 30, 2003 (pro rated for partial years). The
severance benefits Mr. Stewart will receive will also include continued welfare
and fringe benefits and perquisites for the same period, pension benefits not
less than he would have received had he remained employed during this period
with compensation not less than his current compensation, and lifetime medical
benefits for himself and his spouse not less favorable than those in effect
currently for senior executives of the Company who are entitled pursuant to the
Company's employment benefit plans to retire with full benefits. Mr. Stewart
will also continue (as under his Current Employment Agreement) to be entitled to
receive an additional payment to make him whole for any excise tax on "excess
parachute payments" for which he may be liable.
Pursuant to the amendment to Mr. Johnston's employment agreement (the
"Johnston Amendment"), Mr. Johnston will be employed by Rohm and Haas after the
Merger as a Senior Vice President of Rohm and Haas, a member of Rohm and Haas's
Executive Council, and the principal operating officer of Rohm and Haas and the
Company in Chicago. Pursuant to Mr. Johnston's employment agreement, the
consummation of the Offer or approval of the Merger by the Company's
shareholders would each constitute a "change of control" triggering the
effectiveness of the employment agreement for a three-year term. Upon
consummation of the Merger, Mr. Johnston would have "good reason" (as defined in
Mr. Johnston's employment agreement) to terminate his employment by virtue of
the change in his position. If he were to terminate his employment under such
provision, Mr. Johnston would be entitled to receive certain severance benefits,
including an amount in cash equal to three years' compensation (including base
salary and annual and long-term bonuses), a pension amount representing the
value of additional credits for these additional years, and continued welfare
benefits through the end of the term of his employment agreement. The Johnston
Amendment provides that, upon consummation of the Merger, Mr. Johnston will
receive a lump sum payment in cash equal to the cash severance benefits he would
have received under his employment agreement absent the Johnston Amendment. In
addition, following the termination of his employment for any reason during the
term of his employment agreement, Mr. Johnston will receive the pension and
welfare benefits provided for by his employment agreement. If his employment is
terminated by Rohm and Haas without "cause" or by Mr. Johnston for "good reason"
(as defined in the employment agreement as modified by the Johnston Amendment)
during the one-year period following the Effective Time, Mr. Johnston will also
receive cash
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severance pay (computed in the same manner as under his employment agreement)
for the balance, if any, of such one-year period. The Johnston Amendment also
makes clear that the supplemental executive retirement benefits to which Mr.
Johnston is currently entitled will remain applicable after the Merger. See the
description of the Supplemental Executive Retirement Program below the caption
"Pension Plans" in the Schedule 14f attached to this Statement as Annex B. Mr.
Johnston will also continue (as under his employment agreement) to be entitled
to receive an additional payment to make him whole for any excise tax on "excess
parachute payments" for which he may be liable.
Under the terms of Mr. Julsrud's employment agreement, like those of the
other executives party to similar agreements, if Mr. Julsrud is terminated by
the Company during the term of his employment agreement other than for "cause"
or if he terminates his employment for "good reason" (each as defined in his
employment agreement), then he is entitled to receive (among other severance
benefits) three extra years of age and service credit towards his pension
benefits and age and service credits through the third anniversary of the change
of control towards retiree medical and life benefits under the Company's
employee benefit plans. Under the terms of such plans, early retirement, pension
benefits, and medical and life benefits are available only for employees who
have reached age 55; however, Mr. Julsrud will not reach age 52 until September
of 1999. Pursuant to the amendment to Mr. Julsrud's employment agreement, Mr.
Julsrud will be deemed to have reached age 55 for the purposes of the
above-described severance benefits.
(iii) Effects of the Offer and the Merger Under Company Stock
Plans. Pursuant to the terms of the Company's stock option plans, upon the
first to occur of consummation of the Offer or approval of the Merger Agreement
by the shareholders of the Company, all outstanding stock options and shares of
restricted stock that are held by executive officers and other employees and
that have not previously vested will vest in full.
Certain options, including certain options held by executive officers, have
"limited stock appreciation rights," or "LSARs," associated with them. LSARs are
stock appreciation rights exercisable during the 90-day period beginning on the
day after the consummation of the Offer or the day after shareholders of the
Company approve the Merger Agreement, as applicable. Upon exercise of an LSAR,
the related option or portion thereof will be canceled and the holder will
receive a cash payment equal to (i) the excess of the "change of control price"
(as defined in the next sentence) over the exercise price for the option times
(ii) the number of Shares as to which the LSAR is being exercised. For purposes
of the LSARs, the "change of control price" means the higher of the Offer price
of $37.125 (or the value of the Merger Consideration, if the Offer is not
consummated) and (iii) the highest price at which Shares trade during the 60-day
period ending on the day the Offer is consummated (or the day the Morton
shareholders approve the Merger Agreement, if the Offer is not consummated).
Pursuant to the Merger Agreement, any options that remain outstanding as of
the Effective Time will be either cashed out or rolled over, as described above
in Section 3(b)(i), at the election of the holder of the option. Each option
that is to be cashed out will be canceled at the Effective Time in exchange for
a cash payment equal to (i) the excess of $37.125 per share over the exercise
price for the option times (ii) the number of Shares subject to the option. Each
option that is to be rolled over will be converted at the Effective Time into an
option to acquire shares of Rohm and Haas Common Stock, with the number of
shares and exercise price of the option being adjusted by multiplying the number
of Shares for which the option is exercisable by the Exchange Ratio, and
dividing the exercise price by the Exchange Ratio. All of the other terms and
conditions of the rolled-over option will remain the same (including any LSARs
associated therewith).
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of Morton (the "Board" or the "Board of Directors"),
at a meeting held on January 31, 1999, determined unanimously that the Offer and
the Merger are fair to, and in the best interests of, Morton and its
shareholders. At this meeting, the Board unanimously approved the Offer, the
Merger Agreement and the Merger, including for purposes of the "interested
shareholder" provisions of the Indiana Business Corporation Law and Morton's
Articles of Incorporation. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
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(B) BACKGROUND OF THE OFFER, REASONS FOR THE RECOMMENDATION
Background
In light of the increasing challenges facing specialty chemicals companies,
including intensifying competition from traditional competitors and the
emergence of strong European competitors, commoditization of certain product
lines resulting in declining profit margins and slowed earnings growth, changes
in global economic conditions, particularly in Asia, as well as accelerated
acquisition activity and globalization of chemical companies over the last
several years, during the summer of 1998 Morton commenced a review of the
strategic alternatives available to it. In connection with its review, Morton
engaged Goldman, Sachs & Co. ("Goldman Sachs") as its financial advisor to
assist the Company in its analysis and consideration of various strategic
alternatives. Over the next several months, Morton evaluated a range of
strategic alternatives, including the potential divestiture of non-core assets,
selected acquisitions to enhance the Company's portfolio of businesses and
achieve critical mass in selected business areas, and potential business
combination transactions with both larger and smaller chemical industry
participants. During this period, Morton and its financial advisor had contacts
with various parties to explore on a preliminary basis several of these
alternatives. The directors of Morton were periodically updated regarding these
contacts.
For several years, Rohm and Haas had been seeking acquisition candidates
that could expand its technological and market base and enhance the value of
Rohm and Haas for its stockholders. Rohm and Haas had identified Morton as one
of a few acquisition candidates that fit its objectives.
In October 1998, J. Lawrence Wilson, Rohm and Haas's Chairman and Chief
Executive Officer, contacted Mr. Stewart and stated that Rohm and Haas would be
interested in exploring a possible business combination transaction with Morton.
Mr. Stewart agreed to meet with Mr. Wilson and Rajiv L. Gupta, Rohm and Haas's
Vice Chairman designate, on November 11, 1998. At the meeting the executives
discussed a possible business combination transaction between the companies and
agreed that representatives of Morton's and Rohm and Haas's respective
managements would meet as the next step in evaluating such a transaction. On
November 24, 1998, the parties executed a confidentiality agreement and began to
exchange financial and other information relating to their respective
businesses.
On December 11, 1998, representatives of management of Rohm and Haas and
Morton met to discuss the rationale for, and benefits of, a possible business
combination, potential transaction structures and preliminary due diligence
requirements, and to establish a framework for continuing the discussions
between the two companies. Following that meeting, Mr. Wilson contacted Mr.
Stewart and indicated that Rohm and Haas would be interested in pursuing a
transaction with consideration consisting of 60% cash and 40% Rohm and Haas
stock that would value Morton, on a preliminary basis, in excess of $35 per
Morton share if Rohm and Haas management concluded that certain levels of cost
savings could be achieved. Messrs. Wilson and Stewart agreed that members of
senior management of Morton and Rohm and Haas would meet to define in more
detail the potential benefits that could be achieved by combining the two
companies.
On January 7, 1999 members of senior management of Morton and Rohm and Haas
met to begin quantifying the level of cost savings and other benefits that might
be achievable through a combination of the two companies.
Following this meeting, Rohm and Haas engaged Wasserstein Perella & Co.,
Inc. ("Wasserstein Perella") as its financial advisor and Simpson Thacher &
Bartlett as its legal advisor in connection with a possible transaction between
Rohm and Haas and Morton.
On January 13, 1999, Morton's and Rohm and Haas's respective financial and
legal advisors met to discuss potential structuring alternatives for a possible
transaction between the two companies as well as the timing and other
considerations relevant to the possible alternative transaction structures, in
preparation for a meeting between members of senior management of Morton and
Rohm and Haas scheduled for the next day. Rohm and Haas's advisors described a
"two-step" transaction structure in which Rohm and Haas would
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purchase 60% of Morton's outstanding shares in a cash tender offer followed by a
"back-end" merger in which the remaining Morton shares would be exchanged for
Rohm and Haas stock based on a fixed exchange ratio. Morton's advisors stated
Morton's preference for a single-step merger structure and discussed certain
issues relating to a two-step structure, including protections as to the value
of the consideration to be received by Morton's shareholders, the timing of the
second-step merger and assurance of completion. The parties' advisors also
discussed other aspects of a possible business combination, including the impact
on timing of the required regulatory approvals, and whether a tax-free
transaction for Morton shareholders could be achieved. Morton's advisors
indicated that Morton would seek a commitment from the Haas family and related
entities who control approximately 39% of the Rohm and Haas outstanding voting
power to support a transaction. Rohm and Haas's advisors also discussed certain
transaction protection mechanisms.
At a meeting on January 14, 1999, Mr. Wilson restated Rohm and Haas's
continuing interest in a transaction that would value Morton above a $35 per
share price and provide for a combination of 60% cash and 40% stock
consideration, but indicated that his management team had not yet been able to
conclude that the levels of cost savings necessary to justify such a price could
be obtained. At that meeting, representatives from Rohm and Haas's and Morton's
senior management continued their review of the companies' respective businesses
and explored additional opportunities for potential cost savings that might be
achieved through combining the two companies. After consulting with Morton's
senior management and its financial and legal advisors later that day, Mr.
Stewart informed Mr. Wilson that Morton would require a higher transaction price
and discussed Morton's concerns regarding transaction structure and timing.
Messrs. Wilson and Stewart agreed to continue their discussions on the financial
and other terms of a potential transaction early the following week.
During the period January 18, through January 21, 1999, Mr. Wilson and Mr.
Stewart held several telephone conversations. No specific decisions were reached
regarding the proposed transaction, but the parties agreed that representatives
of management and the legal and financial advisors of both companies would meet
on January 24th.
On January 24, 1999, members of Morton's and Rohm and Haas's senior
management and their financial and legal advisors met to discuss the financial
and other terms of a possible business combination transaction between the
companies. Rohm and Haas indicated that it would be willing to increase the
total consideration to be paid to Morton shareholders to $36 3/8 per Morton
share, consisting of 60% cash consideration and 40% stock consideration, with a
floating exchange ratio for the stock portion, subject to a collar, provided
that the transaction be structured as a cash tender offer followed by a back-end
merger. The parties continued to discuss the topics noted above, including
transaction structure, timing and conditions of closing, the percentages of cash
and stock in the transaction, the terms of a "collar" or similar mechanism to
provide some protection to Morton shareholders with respect to the value of the
Rohm and Haas stock to be received in the merger, and Rohm and Haas's request
for various deal protection provisions. In order to address Morton's requirement
that a two-step transaction structure minimize the risks to Morton's
shareholders as to timing and value, Rohm and Haas indicated its willingness, in
the event that Rohm and Haas stockholder approval was not obtained, to replace a
portion of the stock consideration with sufficient cash to complete the
transaction without such approval. The parties did not come to an agreement with
respect to the financial or other significant terms of the transaction,
including price and structure, and agreed to continue the ongoing discussions
between the companies' legal and financial advisors and to consider the
proposals discussed at the meeting.
On January 25, 1999, Mr. Wilson contacted Mr. Stewart and described a
proposal to increase the transaction value to $37 1/8 per Morton Share, with 67%
of Morton's Shares to be acquired for cash in a tender offer. Mr. Wilson
proposed providing for a collar mechanism along the lines that Morton had
proposed at the meeting on January 24th. Mr. Stewart indicated that he was
prepared to pursue discussions of a transaction based on Mr. Wilson's proposal.
Throughout the remainder of the week of January 25, the parties' legal and
financial advisors negotiated the terms and conditions of the proposed merger
agreement, and the parties and their advisors also conducted due diligence with
respect to the other party.
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On January 28, 1999, the Morton Board met to consider a possible business
combination transaction with Rohm and Haas. At the meeting, members of senior
management and representatives of Morton's legal and financial advisors reviewed
with the Board, among other things, the status of the ongoing discussions
between Rohm and Haas and Morton, factors affecting consolidation and
profitability in the chemicals industry and management's views on the
advisability of pursuing a transaction with Rohm and Haas. Morton's legal and
financial advisors also discussed the proposed terms and structure of a business
combination with Rohm and Haas. After considering these discussions, the Morton
Board agreed that management should pursue further discussions with Rohm and
Haas, subject to satisfactory resolution of certain issues related to timing and
certainty.
Teams from Morton and Rohm and Haas, including their respective legal and
financial advisors, met on January 29, 1999 to continue the negotiation of the
terms of the transaction and the draft merger agreement, including the collar
provision. Following these discussions, the parties agreed to base the initial
exchange ratio for the stock consideration component on Rohm and Haas's closing
price on January 29, with a collar adjustment mechanism at stock prices within a
10% range (on either side) of that closing price.
Throughout the remainder of the weekend, the parties negotiated the terms
of the Merger Agreement, including matters relating to transaction structure,
timing of the Offer and Merger, the nature and extent of any termination fees,
the conditions for consummation of the transaction and other matters described
above. In addition, the parties discussed the terms of the employment agreements
to be entered into at the time of execution of the Merger Agreement. See Item
3(b)(i) (Identity and Background -- Arrangements Between the Company, Rohm and
Haas and Certain Directors and Executive Officers of the Company).
On January 31, 1999, the Morton Board met to consider the proposed
transaction with Rohm and Haas. Representatives of Morton's senior management
and Morton's legal and financial advisors made presentations and reviewed, among
other things, the matters set forth below under "Factors Considered by the
Board." Morton's legal advisors reviewed with the Board the transaction terms
that had been negotiated since the Board meeting on January 28, 1999. Goldman
Sachs made a presentation including, among other things, a financial analysis of
the proposed transaction with Rohm and Haas and rendered its oral opinion,
subsequently confirmed in writing, that as of such date, and based upon and
subject to certain matters and assumptions, the Offer consideration and the
Merger Consideration to be received by the holders of Shares in the Offer and
the Merger, taken as a unitary transaction, are fair from a financial point of
view to such holders. Following discussion, the Morton Board unanimously
approved the Offer and the Merger and determined to recommend that Morton
shareholders accept the Offer, tender their Shares thereunder and approve the
Merger Agreement.
On January 31, 1999, the Rohm and Haas Board of Directors met to consider
the proposed transaction with Morton. Representatives of Rohm and Haas's senior
management and Rohm and Haas's legal and financial advisors made presentations
and reviewed, among other things, the transaction terms that had been negotiated
with Morton and the employment arrangements that had been agreed to with Messrs.
Stewart and Johnston. Wasserstein Perella made a presentation including, among
other things, a financial analysis of the proposed transaction with Morton and
rendered its oral opinion, subsequently confirmed in writing, to the effect
that, as of such date, subject to the various assumptions and limitations set
forth therein, the consideration payable pursuant to the Merger Agreement is
fair to Rohm and Haas from a financial point of view. Following discussion, the
Rohm and Haas Board of Directors, by a unanimous vote of the directors present,
approved and adopted the Merger Agreement and the transactions contemplated
thereby and resolved to recommend that stockholders of Rohm and Haas vote in
favor of the issuance of Rohm and Haas shares in connection with the Merger and
the amendment of Rohm and Haas's Certificate of Incorporation to increase to 400
million the number of authorized Rohm and Haas common shares.
After the requisite approvals were obtained from the Morton Board and the
Rohm and Haas Board, the Merger Agreement was executed on January 31, 1999. The
parties issued a joint press release announcing execution of the Merger
Agreement before the opening of the NYSE on February 1, 1999.
21
<PAGE> 23
Factors Considered by the Board of Directors
In reaching its recommendations described above in paragraph (a) of this
Item 4, the Morton Board considered a number of factors, including the
following:
1.Morton Operating and Financial Condition. The current and historical
financial condition and results of operations of the Company, as well as
the prospects and strategic objectives of Morton, including the risks
involved in achieving those prospects and objectives.
2.Rohm and Haas Operating and Financial Condition. The business,
operations, financial condition, operating results and prospects of Rohm
and Haas, as well as the potential for cost savings and other synergies
that could be created by combining the two companies.
3.Transaction Financial Terms/Premium to Market Price. The relationship
of the Offer price and the Merger Consideration to the historical market
prices of Company Common Stock. The Offer price and the Merger
Consideration, assuming that the price of the Rohm and Haas Common Stock
is between $27.90 and $34.10 during the measurement period prior to the
closing, represent a 43% premium over the price of the Company Common
Stock on January 29, 1999 (the last trading day prior to the Board
meeting at which the Morton Board approved the Offer and the Merger. The
Board recognized the degree of certainty in the value of the Offer and
Merger to Morton shareholders from the relatively high percentage (67%)
of cash to be paid for Morton Shares, as well as the collar mechanism
for the stock portion, described below.
4.Stock Consideration; "Collar" Mechanism for Exchange Ratio. The Board
noted that the stock portion of the Merger Consideration would permit
Morton shareholders to participate with respect to a portion of their
Shares in the combined company following consummation of the Merger,
receiving in the aggregate over 20% of the combined company's equity.
The Board considered the Exchange Ratio, as well as the terms of the
"collar", which provides a degree of protection to Morton's shareholders
with respect to the value of the shares of Rohm and Haas Common Stock to
be received in the Merger. The Board was aware that the consideration
received by Morton shareholders in the Offer and Merger would be taxable
for federal income tax purposes.
5.Management Analysis; Combination of Rohm and Haas and Morton. The
presentation of management and Morton's financial advisor and the
Board's review with respect to trends in the specialty chemicals
industry, including the acquisitions among industry participants to
achieve broader products and global scope and the need for a global
presence, and the strategic alternatives available to Morton, including
Morton's alternative to remain an independent public company and the
possibility of acquisitions or mergers with other specialty chemical
companies, as well as the risks and uncertainties associated with such
alternatives. The Board reviewed the expected benefits to Morton from a
combination with Rohm and Haas, including management's belief that the
two companies have similar corporate cultures, the complementary nature
of the two companies' products, the expanded geographic scope that Rohm
and Haas could bring to Morton's products and businesses, the experience
and reputation of Rohm and Haas in the industry and the expectation that
the Offer and Merger would create a leading specialty chemicals company
with a strong presence in all major regions of the world and substantial
opportunities for synergies.
6.Goldman Sachs Fairness Opinion. A presentation from Goldman Sachs,
including (i) analysis of the trading history of Company Common Stock
and Rohm and Haas Common Stock, (ii) a review of historical and pro
forma financial data for Rohm and Haas, Morton and the combined company,
(iii) an analysis of the market values and trading multiples of selected
publicly traded chemical companies, (iv) a review of selected recent
business combinations involving companies in the chemical industry and
(v) the oral opinion of Goldman Sachs, subsequently confirmed in
writing, that, based upon and subject to certain considerations and
assumptions, the Offer consideration and the Merger Consideration to be
received by the holders of Shares in the Offer and the Merger, taken as
a unitary transaction, are fair from a financial point of view to such
holders. A copy of the opinion rendered by Goldman Sachs to Morton's
Board, setting forth the procedures followed, the matters
22
<PAGE> 24
considered, the scope of the review undertaken and the assumptions made by
Goldman Sachs in arriving at its opinion, is attached hereto as Annex A and
incorporated herein by reference. MORTON'S SHAREHOLDERS ARE URGED TO READ THIS
OPINION IN ITS ENTIRETY. The Board was aware that Goldman Sachs becomes
entitled to certain fees described in Item 5 upon consummation of the
Offer and the Merger.
7.Timing of Completion. The Board considered the anticipated timing of
consummation of the transactions, including the structure of the
transactions as a tender offer for up to two-thirds of the outstanding
shares of Company Common Stock, which would allow shareholders to
receive the Offer consideration earlier than in the case of a cash-stock
merger, followed by the Merger in which, assuming the Offer is fully
subscribed, Company shareholders would receive Rohm and Haas Common
Stock based on the Exchange Ratio. The Board noted that if the Offer is
completed but Rohm and Haas's stockholders do not approve such issuance
of Rohm and Haas shares in the Merger, Rohm and Haas is obligated
pursuant to the terms of the Merger Agreement to provide the Cash
Alternative Structure, which would not require Rohm and Haas stockholder
approval. In addition, the Board was aware that, if the Offer cannot be
completed by the Final Expiration Date, the Offer will be terminated and
the parties will be obligated to consummate a single-step Merger which
could then be completed in approximately the same time period that would
generally be required to complete the transaction if it were initially
structured as a single-step merger. In this regard, the Board also noted
the support expressed publicly by the Haas family interests, who
collectively beneficially own approximately 39% of the voting power of
the Rohm and Haas Common Stock, for the Offer and the Merger, and that,
if the transaction were converted to a one-step merger, although Rohm
and Haas stockholder approval would be required for such a transaction,
the Haas family interests had indicated their support of the
combination.
8.Limited Conditions to Consummation. Rohm and Haas's obligation to
consummate the Offer and the Merger is subject to a limited number of
conditions, with no financing condition. The Board noted that if the
Offer is consummated and Rohm and Haas's stockholders do not approve the
necessary actions to enable Rohm and Haas to issue Rohm and Haas shares
in the Merger within 45 days following the effectiveness of the
registration statement relating to such issuance, Rohm and Haas is
obligated pursuant to the terms of the Merger Agreement to provide the
Alternative Cash Consideration, which would not require any Rohm and
Haas stockholder approval. The Board also considered the likelihood of
obtaining required regulatory approvals, and the terms of the Merger
Agreement regarding the obligations of both companies to pursue such
regulatory approvals.
9.Terms of Merger Agreement and Related Matters. The terms and conditions
of the Merger Agreement, including the terms of the termination
provisions and the amount and circumstances in which a fee could become
payable by Morton or Rohm and Haas, the course of the negotiations
resulting in the execution thereof, and the interests of certain Company
executives in the Offer and Merger (see Item 3(b) (ii) -- "Arrangements
Between the Company, Rohm and Haas and Certain Directors and Executive
Officers of the Company").
10.Effects on Other Constituencies. The effects of the Offer and the
Merger on Morton's employees, customers and other constituencies.
The foregoing includes all material factors considered by Morton Board. In
view of its many considerations, the Board did not find it practical to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered. In addition, individual members of the Board may have given
different weights to the various factors considered. After weighing all of these
considerations, the Board determined to recommend that Company shareholders
tender their Shares in the Offer.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Goldman Sachs was retained, pursuant to a letter agreement dated January
31, 1999, as financial advisor to the Company in connection with the possible
merger, business combination or other similar transaction involving all or a
substantial portion of the Company and Rohm and Haas or its affiliates. The
Company has
23
<PAGE> 25
agreed to pay Goldman Sachs a fee of $150,000 immediately upon execution of such
letter agreement, which will be applied against any transaction fee that becomes
payable pursuant to the letter agreement. Upon consummation of the Offer, the
Company has agreed to pay Goldman Sachs a fee of 0.55% of the aggregate
consideration paid to the Company's shareholders in the Offer. Upon consummation
of the Merger, the Company has agreed to pay Goldman Sachs a fee of 0.55% of the
aggregate consideration paid in the Merger (with Parent Common Stock issued in
the Merger valued based on the average of the last sales price for Parent Common
Stock during the twenty trading day period ending on the second trading day
prior to the Merger). The Company has also agreed to reimburse Goldman Sachs for
its reasonable expenses, including the fees and disbursements of Goldman Sachs'
attorneys, plus any sales, use or similar taxes in connection with Goldman
Sachs' engagement, and to indemnify Goldman Sachs against certain liabilities,
including liabilities under the U.S. federal securities laws.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs has
provided certain investment banking services to the Company from time to time,
including having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Merger Agreement.
Goldman Sachs also has provided certain investment banking services to Rohm and
Haas, its subsidiaries and affiliates from time to time, including having acted
as an agent on Rohm and Haas' medium term note program and having assisted Rohm
and Haas on certain share repurchase and hedging activities. Goldman Sachs also
may provide investment banking services to Rohm and Haas, its subsidiaries and
affiliates in the future.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Other than as set forth on Annex C to this Statement, to the best
knowledge of the Company, there were no transactions in the Shares effected
during the past 60 days by the Company or any executive officer, director,
affiliate or subsidiary of the Company.
(b) To the best knowledge of the Company, to the extent permitted by the
applicable securities laws, rules, and regulations, all of the Company's
executive officers, directors, and affiliates who own Shares presently intend to
tender such Shares to Purchaser pursuant to the Offer, except to the extent such
Shares are used to pay the exercise price or required tax withholding in
connection with the exercise of stock options.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Statement, the Company is not engaged in
any negotiation in response to the Offer which relates to or would result in (i)
an extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale, or transfer of
a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as set forth in this Statement, there are no transactions,
resolutions of the Board, agreements in principle, or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
As contemplated by the Merger Agreement, Morton and First Chicago Trust
Company of New York entered into Amendment No. 1, dated as of January 1, 1999
(the "Rights Plan Amendment"), to the Rights Agreement. The Rights Plan
Amendment provides, among other things, that the Rights will not become
exercisable or separate from the related Shares as a result of the execution,
delivery or performance of the Merger Agreement, the announcement or making of
the Offer, the acquisition of Shares pursuant to the Offer or the Merger, the
consummation of the Offer or the Merger, or any other transaction contemplated
by the Merger Agreement. The Rights Plan Amendment also provides that the Rights
will expire immediately prior
24
<PAGE> 26
to the consummation of the Offer or, if the Offer is not consummated, the
Merger. Pursuant to the Merger Agreement, the Company is not permitted otherwise
to amend the Rights Agreement. See Item 3(b)(i) -- "The Merger Agreement."
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1 Agreement and Plan of Merger, dated as of January 31, 1999,
among Rohm and Haas Company, Morton Acquisition Corp.
(formerly known as Gershwin Acquisition Corp.) and Morton
International, Inc. (incorporated by reference to Exhibit
(c)(1) to the Tender Offer Statement on Schedule 14D-1,
dated February 5, 1999, filed by Rohm and Haas Company and
Morton Acquisition Corp. relating to the Common Stock of
Morton International, Inc.)
2 Opinion of Goldman, Sachs & Co., dated January 31, 1999
(included as Annex A to the Schedule 14D-9).*
3 Joint Press Release of Rohm and Haas Company and Morton
International, Inc., dated February 1, 1999 (incorporated by
reference to Exhibit 99.1 to the Current Report on Form 8-K
of Morton International, Inc., filed with the Securities and
Exchange Commission on February 2, 1999).
4 Employment Agreement of S. Jay Stewart, dated as of January
31, 1999, by and among Rohm and Haas Company, Morton
International, Inc. and S. Jay Stewart.
5 Amendment, dated as of January 31, 1999, by and among Rohm
and Haas Company, Morton International, Inc. and William E.
Johnston, to Employment Agreement, dated as of March 20,
1990, between the Company and William E. Johnston.
6 Amendment, dated as of January 31, 1999, to Employment
Agreement, dated as of December 1, 1994 between Morton
International, Inc. and Christopher K. Julsrud.
7 Confidentiality Agreement, dated as of November 24, 1998,
between Morton International, Inc. and Rohm and Haas
Company.
8 Letter to Shareholders of Morton International, Inc., dated
February 5, 1999.*
</TABLE>
- ---------------
* Included with Schedule 14D-9 mailed to shareholders.
25
<PAGE> 27
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
MORTON INTERNATIONAL, INC.
By: /s/ THOMAS F. MCDEVITT
------------------------------------
Name: Thomas F. McDevitt
Title: V.P. and Chief Financial
Officer
Dated: February 5, 1999
26
<PAGE> 28
ANNEX A
[GOLDMAN SACHS LETTERHEAD]
PERSONAL AND CONFIDENTIAL
- ----------------------------------------
January 31, 1999
Board of Directors
Morton International, Inc.
100 North Riverside Plaza
Chicago, IL 60606
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the issued and outstanding shares of Common Stock, par
value $1.00 per share ("Company Common Stock"), of Morton International, Inc.
(the "Company") of the Offer Consideration and the Merger Consideration (as
defined below) proposed to be paid by Rohm and Haas Company ("Rohm & Haas" or
"Parent") in the Offer and the Merger (as defined below), taken as a unitary
transaction, pursuant to the Agreement and Plan of Merger, dated as of January
31, 1999, among Rohm & Haas, Morton Acquisition Corp. (formerly known as
Gershwin Acquisition Corp.), a wholly-owned subsidiary of Rohm & Haas
("Purchaser"), and the Company (the "Agreement"). The Agreement provides for a
tender offer for up to 80,916,766 shares of Company Common Stock (the "Offer")
pursuant to which Purchaser will pay $37.125 per share of Company Common Stock
in cash for each share of Company Common Stock accepted (the "Offer
Consideration"). The Agreement further provides that following completion of the
Offer, at the Effective Time (as defined in the Agreement), Purchaser will be
merged with and into the Company (the "Merger") and each issued and outstanding
share of Company Common Stock (other than shares of Company Common Stock to be
canceled pursuant to Section 2.6(c) of the Agreement) shall be converted into
the right to receive the Merger Consideration (as defined below).
The "Merger Consideration" shall consist of (a) subject to Section 2.14 of
the Agreement, if Purchaser shall have purchased, pursuant to the Offer, the
Maximum Offer Number (as defined in the Agreement) of shares of Company Common
Stock, a number of shares of Common Stock, par value $2.50 per share ("Parent
Common Stock"), of Rohm & Haas equal to the number (the "Exchange Ratio")
obtained by dividing $37.125 by the Parent Common Stock Price (as defined in
[GOLDMAN SACHS LETTERHEAD]
A-1
<PAGE> 29
Morton International, Inc.
January 31, 1999
Page 2
the Agreement); provided that the Exchange Ratio shall not be less than 1.088710
or greater than 1.330645 or (b) subject to Section 2.14 of the Agreement, if the
Offer is terminated pursuant to Section 1.1(b) of the Agreement or if Purchaser
shall have purchased, pursuant to the Offer, less than the Maximum Offer Number
of shares of Company Common Stock (the number of shares of Company Common Stock
so paid for and purchased, the "Purchased Share Number"), (i) cash, in an amount
equal to the product of Cash Proration Factor One (as defined in the Agreement)
multiplied by $37.125 and (ii) a number of shares of Parent Common Stock equal
to the product of (x) one minus Cash Proration Factor One multiplied by (y) the
Exchange Ratio.
Notwithstanding the foregoing, in the event that the Cash Alternative
Structure (as defined in the Agreement) is required to be effected, then the
Merger Consideration shall consist of (a) if Purchaser shall have purchased,
pursuant to the Offer, the Maximum Offer Number of shares of Company Common
Stock, (i) cash, in an amount equal to the product of (x) Cash Proration Factor
Two (as defined in the Agreement) multiplied by (y) the product of (I) the
Exchange Ratio multiplied by (II) the Adjusted Parent Common Stock Price (as
defined in the Agreement), and (ii) a number of shares of Parent Common Stock
equal to the product of (x) the Exchange Ratio multiplied by (y) one minus Cash
Proration Factor Two or (b) if the Offer is terminated pursuant to Section
1.1(b) of the Agreement or if the Purchased Share Number is less than the
Maximum Offer Number, (i) cash, in an amount equal to the sum of (x) the product
of (I) Cash Proration Factor One multiplied by (II) $37.125 plus (y) the product
of (I) (A) Cash Proration Factor Two minus (B) Cash Proration Factor One,
multiplied by (II) the product of (A) the Exchange Ratio multiplied by (B) the
Adjusted Parent Common Stock Price and (ii) a number of shares of Parent Common
Stock equal to the product of (x) the Exchange Ratio multiplied by (y)(I) one
minus (II) Cash Proration Factor Two.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company from time to time, including having acted as its financial advisor
in connection with, and having participated in certain of the negotiations
leading to, the Agreement. We also have provided certain investment banking
services to Rohm & Haas, its subsidiaries and affiliates from time to time,
including having acted as an agent on Rohm & Haas' medium term note program and
having assisted Rohm & Haas on certain share repurchase and hedging activities.
We also may provide investment banking services to Rohm & Haas, its subsidiaries
and affiliates in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Shareholders and Annual Reports on Form 10-K of the
Company for the two fiscal years ended June 30, 1998; the Registration Statement
on Form 10 for the Company dated March 24, 1997; Annual Reports to Stockholders
and Annual Reports on Form 10-K of Rohm & Haas for the five years ended December
31, 1997; certain interim reports to stockholders and Quarterly Reports on Form
10-Q of the Company and Rohm & Haas; certain other communications from the
Company and Rohm & Haas to their respective stockholders; and certain internal
financial analyses and forecasts for the Company and Rohm & Haas prepared by
their respective managements, including certain cost savings and operating
synergies projected by the managements of the Company and Rohm & Haas to result
from the transactions contemplated by the Agreement. We also have held
discussions with members of the senior management of the Company and Rohm & Haas
regarding the strategic rationale for, and the potential benefits of, the
transactions contemplated by the Agreement and the past and current business
operations, financial condition and future prospects of
A-2
<PAGE> 30
Morton International, Inc.
January 31, 1999
Page 3
their respective companies. In addition, we have reviewed the reported price and
trading activity for the Company Common Stock and the Parent Common Stock,
compared certain financial and stock market information for the Company and Rohm
& Haas with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the chemicals industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In addition, we have not
made an independent evaluation or appraisal of the assets and liabilities of the
Company or Rohm & Haas or any of their respective subsidiaries. Our advisory
services and the opinion expressed herein are provided for the information and
assistance of the Board of Directors of the Company in connection with its
consideration of the transactions contemplated by the Agreement and such opinion
does not constitute a recommendation as to whether or not any holder of shares
of Company Common Stock should tender such shares in connection with the Offer
or how any holder of shares of Company Common Stock should vote with respect to
the Merger.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the Offer
Consideration and the Merger Consideration to be received by the holders of
shares of Company Common Stock in the Offer and Merger, taken as a unitary
transaction, are fair from a financial point of view to such holders.
Very truly yours,
[GOLDMAN, SACHS & CO. SIGNATURE]
GOLDMAN, SACHS & CO.
A-3
<PAGE> 31
ANNEX B
MORTON INTERNATIONAL, INC.
100 NORTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606-1596
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about February 5, 1999 as
a part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Morton International, Inc. ("Morton" or the "Company") to
holders of the common stock, $1.00 par value (the "Common Stock" or "Shares"),
of the Company. You are receiving this Information Statement in connection with
the possible election of persons designated by Morton Acquisition Corp.
(formerly known as Gershwin Acquisition Corp.) ("Purchaser"), an Indiana
corporation and a wholly-owned subsidiary of Rohm and Haas Company ("Rohm and
Haas"), to a majority of the seats on the Board of Directors (the "Board of
Directors" or the "Board") of the Company. On January 31, 1999, the Company,
Rohm and Haas, and Purchaser entered into an Agreement and Plan of Merger (the
"Merger Agreement"), pursuant to which Purchaser is required to commence a
tender offer (the "Offer") to purchase up to 80,916,766 Shares (representing 67%
of the issued and outstanding Shares as of January 29, 1999) at a price of
$37.125 per Share net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in Purchaser's Offer to Purchase dated
February 5, 1999 (the "Offer to Purchase") and in the related Letter of
Transmittal (as amended or supplemented, collectively, the "Offer Documents"),
copies of which have been mailed to shareholders of the Company and are filed as
Exhibits (a)(1) and (a)(2), respectively, to the Schedule 14D-1 (as amended from
time to time, the "Schedule 14D-1") filed by Rohm and Haas and Purchaser with
the Securities and Exchange Commission (the "Commission"). The Merger Agreement
contemplates that, following consummation of the Offer, Purchaser will be merged
(the "Merger") with and into the Company with the Company as the surviving
corporation and shareholders of the Company receiving shares of the common
stock, $2.50 par value, of Parent in exchange for their Shares on the terms and
subject to the conditions of the Merger Agreement. The Offer, the Merger, and
the Merger Agreement are more fully described in the Solicitation/
Recommendation Statement on Schedule 14D-9 to which this Information Statement
forms Annex B, which was filed by the Company with the Commission on February 5,
1999 and which is being mailed to shareholders of the Company along with this
Information Statement.
This Information Statement is being mailed to you in accordance with
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 14f-1 promulgated thereunder. The information set forth herein
supplements certain information set forth in the Schedule 14D-9. Information set
forth herein related to Rohm and Haas, Purchaser or the Rohm and Haas Designees
(as defined herein) has been provided by Rohm and Haas. You are urged to read
this Information Statement carefully. You are not, however, required to take any
action in connection with the matters set forth herein.
GENERAL
The Common Stock is the only class of equity securities of the Company
outstanding which is entitled to vote at a meeting of the shareholders of
Morton. As of January 31, 1999, there were 120,774,431 shares of Common Stock
outstanding, and each share of such Common Stock is entitled to one vote. The
Board of Directors presently consists of ten members, divided into three
classes. Directors in each class are generally elected, on a rotating basis at
the annual shareholders meeting at which the term for such class expires, for
terms expiring at the third subsequent annual meeting of shareholders.
<PAGE> 32
RIGHTS TO DESIGNATE DIRECTORS AND ROHM AND HAAS DESIGNEES
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of the Shares pursuant to the Offer and from time to time thereafter, Purchaser
will be entitled to designate up to such number of directors of the Company (the
"Rohm and Haas Designees"), rounded up to the next whole number, as shall give
Purchaser representation on the Board of Directors equal to the product of the
total number of directors of the Board multiplied by the percentage that the
aggregate number of Shares owned by Purchaser or any of its affiliates bears to
the total number of Shares then outstanding. The Company is required, at such
time, to take all action necessary to cause the Rohm and Haas Designees to be
elected to the Board of Directors, including either increasing the size of the
Board of Directors or securing the resignations of incumbent directors or both.
In addition, subject to the exception described below related to the Continuing
Director Committee (as defined below), the Company will also use its reasonable
efforts to cause Rohm and Haas Designees designated by Purchaser to constitute
the same percentage of each committee of the Board of Directors as such Rohm and
Haas Designees constitute of the whole Board.
Immediately following the election of the Rohm and Haas Designees to the
Board of Directors and prior to the Effective Time of the Merger, the Board of
Directors shall form a committee comprising solely of directors who are not Rohm
and Haas Designees (each such person a "Continuing Director" and the committee
thus comprised, the "Continuing Director Committee"), and the Board shall
delegate to the Continuing Director Committee sole responsibility for the
following matters: (i) any amendment or waiver of any term or condition of the
Merger Agreement or the Restated Articles of Incorporation or Bylaws of the
Company; (ii) any termination of the Merger Agreement; (iii) any extension by
the Company of the time for performance of any of the obligations or other acts
of Purchaser or Rohm and Haas under the Merger Agreement; (iv) any waiver,
assertion, or enforcement of the Company's rights under the Merger Agreement;
(v) any other consent, agreement, or action by the Company or the Board of
Directors with respect to the Merger Agreement; (vi) the declaration of
quarterly dividends in an amount not to exceed $0.13 per share of Common Stock;
and (vii) subject to certain provisions of the Merger Agreement, changes in the
composition, compensation, or benefits of the senior management of the Company
and its operating divisions. In addition, prior to the Effective Time of the
Merger, without the consent of a majority of the Continuing Directors, the Rohm
and Haas Designees shall not propose, approve, or cause any action by the Board
of Directors that would violate the terms of the Merger Agreement or that would
require the consent of Rohm and Haas pursuant to the Merger Agreement. If Rohm
and Haas or Purchaser breaches its obligations under the Merger Agreement or the
Rohm and Haas Designees breach their obligations as explained above (including
by seeking to dissolve or otherwise impair the rights or authority of the
Continuing Director Committee), Rohm and Haas shall cause the Rohm and Haas
Designees to resign from the Board of Directors and will not otherwise seek to
elect directors to the Board.
The Rohm and Haas Designees will be selected by Rohm and Haas from among
the individuals listed below. Each of the following individuals has consented to
serve as a director of the Company if appointed or elected. None of the Rohm and
Haas Designees currently is a director of, or holds any positions with, the
Company. Rohm and Haas has advised the Company that, to the best of Rohm and
Haas's knowledge, except as set forth below, none of the Rohm and Haas Designees
or any of their affiliates beneficially owns any equity securities or rights to
acquire any such securities of the Company, nor has any such person been
involved in any transaction with the Company or any of its directors, executive
officers or affiliates that is required to be disclosed pursuant to the rules
and regulations of the Commission other than with respect to transactions
between Rohm and Haas and the Company that have been described in the Schedule
14D-1 or the Schedule 14D-9.
The name, age, present principal occupation or employment and five-year
employment history of each of the individuals are set forth below. Unless
otherwise indicated, each such individual has held his or her present position
as set forth below for the past five years and each occupation refers to
employment with Rohm and Haas, unless otherwise noted. Unless otherwise noted,
each such person is a citizen of the United States, and
B-2
<PAGE> 33
the business address of each person listed below is c/o Rohm and Haas Company,
100 Independence Mall West, Philadelphia, Pennsylvania 19106.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------- --------------------------------------------------
<S> <C>
William C. Andrews........................ Mr. Andrews, 52, vice president since 1997; business
director of monomers since 1998; previously corporate
controller from 1995 to 1998; assistant controller from
1992 to 1995 and director of finance and customer
service for the European region from 1989 to 1994.
Paul J. Baduini........................... Mr. Baduini, 51, vice president and director of ion
exchange resins since 1993.
Alan Barton............................... Dr. Barton, 42, vice president since 1998; director of
coatings since 1997; previously director of industrial
coatings from 1996 to 1997; European business manager of
architectural coatings from 1993 to 1996.
Bradley J. Bell........................... Mr. Bell, 46, Senior Vice President and Chief Financial
Officer since 1999; vice president, chief financial
officer and treasurer from 1997 to 1998; previously vice
president and treasurer of Whirlpool Corporation from
1987 to 1997.
Pierre Brondeau........................... Dr. Brondeau, 41, vice president since 1998; president
of Shipley Company since 1998; previously vice
president, chief operating officer of Shipley Company
from 1997 to 1998; director of sales, marketing and
research of Shipley Company from 1995 to 1996; research
director of plastic additives from 1993 to 1995.
A. Wayne Carney........................... Mr. Carney, 50, vice president since 1995; director of
formulation chemicals since 1990.
Patrick R. Colau.......................... Dr. Colau, 53, Senior Vice President and Director of the
performance polymers business group since 1999; vice
president 1995-1998; director of polymers and resins
from 1996 through 1998; previously chief operating
officer from 1994 to 1995 and chief executive officer
from 1992 to 1994 of Shipley Company.
Nance K. Dicciani......................... Dr. Dicciani, 51, Senior Vice President, director of the
specialty chemicals business group and director of the
European Region since 1999; vice president 1993-1998;
director of monomers and chairman of RohMax from 1996 to
1998; previously director for petroleum chemicals from
1991 to 1996.
Carlos Estevez............................ Mr. Estevez, 55, vice president since 1996; regional
director for Latin America from 1996 through 1998;
previously business director for agricultural chemicals
in Latin America from 1995 to 1996 and general manager
of Rohm and Haas Brazil and Southern Cone countries from
1992 to 1996. Mr. Estevez became director of
agricultural chemicals effective January 1, 1999.
</TABLE>
B-3
<PAGE> 34
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------- --------------------------------------------------
<S> <C>
J. Michael Fitzpatrick.................... Director since 1999. Dr. Fitzpatrick, 52, president and
chief operating officer since 1999; vice president since
1993; chief technology officer from 1996 through 1998;
previously director of research from 1993 to 1995 and
general manager of Rohm and Haas (UK) Limited and
European regional business director for polymers and
resins from 1990 to 1993.
Gail P. Granoff........................... Ms. Granoff, 47, Corporate Secretary and Assistant
General Counsel.
Maria L. Guerin........................... Dr. Guerin, 46, Vice President and director of human
resources since 1994.
Rajiv L. Gupta............................ Director since 1999, Mr. Gupta, 53, vice chairman, vice
president and regional director of Asia-Pacific from
1993 through 1998; previously director of plastics
additives from 1989 to 1993.
Nicholas Gutwein.......................... Mr. Gutwein, 38, vice president since 1998; director of
specialty polymers since 1997; previously director of
fiber and textile polymers from 1996 to 1997; director,
leather chemicals from 1992 to 1996.
Richard C. Shipley........................ Mr. Shipley, 53, vice president since 1995; Chairman and
CEO of Shipley Company since 1998; previously president
of Shipley Company from 1985 to 1998.
Gerard Tarzia............................. Mr. Tarzia, 38, vice president since 1998; business
manager, building products North America from 1997 to
1998; director, construction products from 1996 to 1997;
director general, Rohm and Haas Espana and business
manager, fibers, textiles, nonwovens and adhesives
Europe from 1995 to 1996; business manager, industrial
coatings Europe from 1993 to 1995. Mr. Tarzia became
director for biocides on January 1, 1999.
Charles M. Tatum.......................... Dr. Tatum, 51, Senior Vice President and Chief
Technology Officer since 1999; vice president 1990-1998;
director of plastics additives from 1994 through 1998;
previously director of research from 1989 to 1994.
David Underwood........................... Mr. Underwood, 41, vice president since 1998; North
American business manager of plastic additives from 1996
through 1998; previously business manager, systems for
polymers & resins from 1995 to 1996; general manager
Rohm and Haas Spain from 1991 to 1995. Mr. Underwood
became director of plastics additives effective January
1, 1999.
Robert P. Vogel........................... Mr. Vogel, 54, vice president and General Counsel since
1994; and general counsel responsible for legal, tax and
regulatory matters since 1994.
J. Lawrence Wilson........................ Director since 1977. Mr. Wilson, 62, chairman and chief
executive officer of Rohm and Haas since 1988; director
of Mead Corporation, The Vanguard Group of Investment
Companies and Cummins Engine Company, Inc.
</TABLE>
B-4
<PAGE> 35
CURRENT DIRECTORS OF THE COMPANY
The name, age, present principal occupation or employment and five-year
employment history of the current directors of the Company are set forth below.
Unless otherwise noted, each person is a citizen of the United States, and the
business address of each such person is c/o Morton International, Inc., 100
Riverside Plaza, Chicago, Illinois 60606-1596. Some of the current directors may
resign effective immediately following the consummation of the Offer by
Purchaser.
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND EMPLOYMENT HISTORY AGE DIRECTOR SINCE
- ------------------------------------------------- --- --------------
<S> <C> <C>
RALPH M. BARFORD is President of Valleydene Corp. Ltd., an 69 1971
investment company. He is also Chairman of GSW, Inc., a
manufacturer of consumer products, and a director of Bank
of Montreal, BCE Inc., Bell Canada, Hollinger, Inc. and
Northern Telecom Limited. He holds a Bachelor of Commerce
degree from the University of Toronto and an M.B.A. degree
from Harvard University. Mr. Barford is a citizen of
Canada.
JAMES R. CANTALUPO is Vice Chairman (since 1998) of 55 1996
McDonald's Corporation, a global foodservice retailer. He
also serves as Chairman (since 1998) and Chief Executive
Officer -- International (since 1991) for McDonald's
Corporation and is a member of its board of directors. He
is a graduate of the University of Illinois as well as a
certified public accountant.
W. JAMES FARRELL is Chairman (since May 1996) and Chief 56 1996
Executive Officer and a director (since 1995) of Illinois
Tool Works Inc. ("ITW"), a multinational manufacturer of
fasteners, components, assemblies and systems. Mr. Farrell
joined ITW in 1965, and since 1972 he has served in
numerous senior executive capacities before election to
his present positions. In addition, he is a director of
Premark International, Inc. and The Quaker Oats Company.
He holds a degree in Electrical Engineering from the
University of Detroit.
DENNIS C. FILL, prior to his retirement in 1998, was 69 1978
Chairman and Chief Executive Officer of ATL Ultrasound,
Inc., a medical electronics systems manufacturer. He is
also a director of Beckman Coulter, Inc. and Cytran, Inc.
Mr. Fill attended Ealing College, the Institute of Export
and the Borough Polytechnic branch of London University.
He is a citizen of the United Kingdom and served in the
Royal Air Force.
WILLIAM E. JOHNSTON is President and Chief Operating Officer 58 1996
of the Company (since October 1995), prior to which he was
(since 1993) its Executive Vice President, Administration
and (from 1981 until 1993) President of its Salt Group. He
is also a director of Unitrin, Inc. Mr. Johnston holds a
B.A. degree from St. Joseph's College and an M.B.A. degree
from the University of Chicago.
RICHARD L. KEYSER is Chairman of the Board (since September 56 1995
1997), Chief Executive Officer (since March 1995), and a
director (since 1992) of W. W. Grainger, Inc., a
nationwide distributor of maintenance, repair and
operating supplies. He joined Grainger in 1986 as a vice
president and subsequently served in several senior
executive capacities before assuming his present
positions. He has a B.S. in Nuclear Science from the U.S.
Naval Academy and an M.B.A. from Harvard University.
REBECCA A. MCDONALD is Executive Managing Director (since 46 1998
February 1999) of Enron International, Inc., a natural gas
and electricity company. Prior thereto, she served as
President and Chief Executive Officer (since 1997) of
Amoco Energy Development Company. From 1993 to 1997, Mrs.
McDonald served as President, Natural Gas Group,
Worldwide, for Amoco Corporation. She is also a director
of Granite Construction Incorporated. Mrs. McDonald holds
a B.S. degree from Stephen F. Austin University.
EDWARD J. MOONEY is Chairman (since July 1994), Chief 57 1995
Executive Officer (since April 1994) and a director (since
1988) of Nalco Chemical Company, a producer and marketer
of specialty chemicals and services for water and
industrial process treatment. Mr. Mooney was President of
Nalco from 1990 to 1999. In addition, he is a director of
FMC Corporation, as well as Northern Trust Corporation and
its subsidiary The Northern Trust Company. He has a B.S.
in Chemical Engineering and a J.D. degree from the
University of Texas.
</TABLE>
B-5
<PAGE> 36
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND EMPLOYMENT HISTORY AGE DIRECTOR SINCE
- ------------------------------------------------- --- --------------
<S> <C> <C>
S. JAY STEWART became Chairman and Chief Executive Officer 60 1986
of the Company in April 1994. Also, he has been a director
of the Company and its predecessors since 1986, and was
its President and Chief Operating Officer from 1986
through March 1994. In addition, he is a director of
Household International, Inc. and Autoliv, Inc. Mr.
Stewart holds a B.S. degree in Chemical Engineering from
the University of Cincinnati and an M.B.A. degree from
West Virginia University.
ROGER W. STONE is President and Chief Executive Officer 63 1987
(since November 1998) of Smurfit-Stone Container
Corporation, a multinational producer and marketer of
pulp, paper, and packaging products. Prior thereto, Mr.
Stone served as Chairman of the Board (since 1983),
President (since 1975), and Chief Executive Officer (since
1979) of Stone Container Corporation. Mr. Stone is also a
director of Abitibi-Consolidated, Autoliv, Inc.,
McDonald's Corporation, Option Care, Inc. and Venepal
S.A.C.A. He is a graduate of the University of
Pennsylvania Wharton School of Finance.
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 5, 1999, except as shown on the table below, to the
knowledge of the Company, no person or entity beneficially owned more than 5%
the Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
------------------------------------ -------------------- ----------------
<S> <C> <C>
Franklin Mutual Advisers, Inc. ............................ 6,682,775 (1) 5.5 %
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Capital Research and Management Company.................... 8,020,000 (2) 6.6 %
333 South Hope Street
Los Angeles, California 90071
</TABLE>
- ---------------
(1) According to the Schedule 13G filed by Franklin Mutual Advisers, Inc.
("FMAI") with the Commission on January 28, 1999, the shares of Common Stock
to which such Schedule 13G relates and the above table pertains are
beneficially owned by one or more open-end investment companies or other
managed accounts which, pursuant to advisory contracts, are advised by FMAI.
Pursuant to these advisory contracts, FMAI has been granted all investment
and voting power over the securities owned by such advisory clients.
(2) As reported on the Form 13F filed by Capital Research Management Company on
November 17, 1998.
The following table shows the Common Stock beneficially owned as of January
29, 1999, by each director and each executive officer named in the Summary
Compensation Table contained in this Information Statement and by all directors
and executive officers of the Company as a group. Each of the following persons
and members of the group had sole voting and investment power with respect to
the shares shown unless
B-6
<PAGE> 37
otherwise indicated. No director or executive officer owns more than 1% of the
Common Stock. Directors and officers as a group own 2.34% of the Common Stock.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED (1)
------------
<S> <C>
Ralph M. Barford............................................ 101,000
Walter W. Becky II.......................................... 144,753
James R. Cantalupo.......................................... 5,801(2)
W. James Farrell............................................ 1,500
Dennis C. Fill.............................................. 14,400
James J. Fuerholzer......................................... 157,816
Stephen A. Gerow............................................ 175,720
William E. Johnston......................................... 499,684
Richard L. Keyser........................................... 8,719(2)
Rebecca A. McDonald......................................... 500
Edward J. Mooney............................................ 2,400
S. Jay Stewart.............................................. 1,094,335
Roger W. Stone.............................................. 11,252(2)
All directors and executive officers as a group (22 persons
including those named above).............................. 2,897,848
</TABLE>
- ---------------
(1) Includes shares which the individuals have the right to acquire within 60
days upon the exercise of stock options which are exercisable presently or
within 60 days: Mr. Stewart, 831,865 shares; Mr. Johnston, 394,885 shares;
Mr. Fuerholzer, 138,144 shares; Mr. Gerow, 164,315 shares; and Mr. Becky,
117,257 shares; and all directors and officers as a group, 2,176,831 shares.
Also includes share interests in the Morton Savings and Investment Plan for
the following: Mr. Gerow, 2,405 shares; Mr. Johnston, 1,112 shares; and all
directors and officers as group, 21,009 shares.
(2) The shares owned by Messrs. Cantalupo, Keyser and Stone include,
respectively, 2,301, 5,719 and 5,752 shares of phantom stock credited as of
December 31, 1998 to their accounts under the Non-Employee Directors
Deferred Compensation Plan described below.
BOARD MEETING ATTENDANCE AND COMPENSATION OF DIRECTORS
The Board met seven times during the Company's most recently completed
fiscal year, which ended on June 30, 1998 (fiscal 1998). All of the directors
were present for 75% or more of the total meetings of the Board and Board
committees of which they were members.
Directors who are employees of the Company or any subsidiary thereof do not
receive compensation for service on the Board or Board committees. Non-employee
directors receive for their services a retainer of $28,000 per year, plus a fee
of $1,500 for each Board meeting attended.
In addition, non-employee directors who are chairmen of the Audit Committee
and Compensation Committee each receive additional annual retainers of $2,500;
the chairman of the Nominating & Organization Committee receives an additional
annual retainer of $1,500; and all committee chairmen and members receive $750
for attendance at each meeting of their particular committees.
Non-employee directors who are elected or continuing as such at annual
shareholders meetings also receive grants of 500 shares of Common Stock as of
the dates of each such meeting under the 1994 Non-Employee Director Stock Plan.
The value of the 500 shares received by each director as of the October 1998
annual meeting was $11,906.25.
The Company has a Non-Employee Directors Deferred Compensation Plan, under
which participants may elect to defer all or a portion of their cash (but not
stock) compensation. This plan utilizes phantom Company stock, plus amounts
equivalent to dividends paid thereon, to value deferred balances, which as a
B-7
<PAGE> 38
result fluctuate from time to time in accordance with the stock's market
performance. Distributions of plan balances are made in cash following a
participant's death or termination of service as a director, in amounts based on
the stock's market value at the time of the particular distribution.
COMMITTEES OF THE BOARD OF DIRECTORS
There are four standing committees of the Board: Audit, Compensation,
Executive and Nominating & Organization.
The Audit Committee recommends to the Board the independent auditors to be
selected to audit the Company's annual financial statements and reviews the fees
charged for such audits and for any special assignments given such auditors. The
committee also reviews the annual audit and its scope, including the independent
auditors' letter of comments and management's responses thereto; possible
violations of the Company's business ethics and conflicts of interest policies;
any major accounting changes made or contemplated; and the effectiveness and
efficiency of the Company's internal audit staff. In addition, the committee
confirms that no restrictions have been imposed by Company personnel on the
scope of independent auditors' examinations. Members of this committee are
Messrs. Cantalupo (Chairman), Farrell and Keyser, Mrs. McDonald and Mr. Mooney.
The committee met twice in fiscal 1998.
The Compensation Committee annually reviews and reports to the Board on
pension plan investment performance and makes recommendations to the Board with
respect to the creation and amendment of pension and welfare plans of the
Company and its subsidiaries. The committee also approves senior officers'
salaries and administers the Company's employee cash and stock incentive
compensation plan. Members of this committee are Messrs. Stone (Chairman),
Barford, Fill and Keyser. The committee met three times in fiscal 1998.
The Executive Committee has and may exercise all the powers and authority
of the Board in the management of its business and affairs, except that the
committee does not have the power to amend the Company's by-laws or articles of
incorporation (except to fix the designations, preferences and other terms of
any of its preferred stock), authorize the issuance of stock, authorize
distributions (other than pursuant to a formula set by the Board), adopt an
agreement of merger or consolidation, approve a plan of merger that does not
require a vote of shareholders under Indiana law, fill vacancies in the Board or
Executive Committee, or recommend to shareholders action that Indiana law
requires be approved by shareholders. Members of this committee are Messrs.
Stewart (Chairman), Cantalupo and Johnston, Mrs. McDonald and Mr. Stone. The
committee met once in fiscal 1998.
The Nominating & Organization Committee identifies and evaluates
individuals for potential directorships and makes recommendations accordingly to
the Board to fill vacancies or new positions on the Board, as well as recommends
to the Board the management slate of nominees for election as directors at
annual shareholders meetings. The committee also makes recommendations to the
Board regarding the size and composition of the Board and Board committees;
compensation of non-employee directors; and management succession. In addition,
the committee reviews the development of the management organization structure.
Members of this committee are Messrs. Barford (Chairman), Farrell, Fill and
Mooney. The committee met twice in fiscal 1998.
Written nominations by shareholders for directors will be considered by the
Nominating & Organization Committee provided they are received by the Corporate
Secretary of the Company at its principal executive offices pursuant to timely
advance written notice in accordance with its by-laws (a copy of which may be
obtained by written request to the Corporate Secretary of the Company) and
contain all information specified in such by-laws. No such nominations were
received for the 1998 Annual Meeting. For the Company's 1999 Annual Meeting, any
such nominations must be received by the Company between July 24 and August 24,
1999.
B-8
<PAGE> 39
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
For the period July 1, 1997 to June 30, 1998, the Company believes all
Section 16(a) filing requirements applicable to its officers and directors were
complied with, except that a Form 4 report inadvertently was not filed on a
timely basis for one transaction for Nancy A. Hobor, an officer of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised exclusively of directors who are
not and have never been Company employees. No Company executive officer serves
on the compensation committee of another company for which any member of the
Company's Compensation Committee serves as an executive officer.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board (the "Committee") approves senior
officers' salaries and administers the Company's cash and stock incentive
compensation plan. The purpose of this plan and the objectives of the Committee
are to
- pay for performance, motivating both long- and short-term performance on
behalf of Company shareholders;
- provide competitive compensation programs so as to be able to attract,
retain and motivate top management talent;
- place greater emphasis on at risk incentive compensation than on fixed
salaries, particularly for senior executives;
- base the incentive compensation of business unit executives in large part
on the performance of their operations, while including a component which
recognizes overall Company performance as well; and
- most importantly, join shareholder and management interests.
To further these objectives, the compensation of senior executive officers
includes four components: (1) base salaries, (2) annual bonus programs, (3) a
long-term incentive program and (4) stock options.
Periodically, the Committee arranges for studies by independent
compensation consulting firms comparing total compensation of the Company's
senior executive officers with compensation of executives in similarly sized
companies. These companies include, but are not limited to, companies
represented in the S&P Chemicals (Specialty) Index in the Stock Performance
Graph contained in this Information Statement, since the Company's competitors
for executive employees are not always the same as those for shareholders'
investments. The last such study, which was performed in August 1998, confirmed
that base salaries are slightly lower than the averages in the study group. The
study also showed that the Company continues to place emphasis on performance
based compensation, so that total compensation is above such averages when goals
are significantly exceeded.
BASE SALARIES
The Committee approves salary changes for senior executive officers in
accordance with the Company's written salary administration policy. This policy
is a long-standing one designed and periodically reviewed in consultation with
external compensation consultants. Salary ranges are established for various
positions through job evaluation and comparison with competitive salary data.
Within the ranges, adjustments are recommended on the basis of position within
the range, individual performance, and a corporate merit salary percentage
factor. Consistent with the Company's overall objectives, these adjustments,
combined with bonuses as outlined below, emphasize payment for performance.
B-9
<PAGE> 40
ANNUAL BONUS PROGRAMS
Following fiscal 1998, the Committee considered annual bonus payments based
on performance during that year. Under the annual bonus program applicable to
senior executive officers, award levels may range from zero to 120% of their
base salaries as of the beginning of the performance period, depending on salary
grade and attainment of Company and applicable business unit profit targets as
approved by the Committee. Company earnings per share ("EPS") from continuing
operations for fiscal 1998 improved over fiscal 1997 but fell below
expectations. Diluted EPS on a continuing basis (before the $15.0 million
special charge in fiscal 1998) increased 11% over 1997. Based on these factors
and the terms of such annual bonus program, the Committee approved one bonus
payment to a senior business unit executive officer.
LONG-TERM INCENTIVE PROGRAM ("LTIP")
Also following fiscal 1998, the Committee considered LTIP payments to
senior executive officers based on performance during the three-year period from
fiscal 1996 through fiscal 1998. LTIP participants are selected by the Committee
annually prior to the beginning of each particular three-year performance
period. Depending on the participant's salary grade, possible award levels range
from zero if less than 5% compound annual growth in Company or applicable
business unit profit goals as approved by the Committee is realized over the
three-year period to a maximum 240% of base salary if 20% or greater compound
annual growth is realized. Based on the terms of the LTIP for fiscal 1996
through fiscal 1998, the Committee approved LTIP payments to seven senior
executive officers ranging from 50% to 161% of their annual base salaries as of
the beginning of the performance period.
STOCK OPTIONS
In addition, the Committee authorizes stock option grants to selected
employees, currently including all executive officers, at approximate one-year
intervals. The Company's stock option guidelines were designed and have been
revised periodically with the assistance of external compensation consultants.
These guidelines provide for a specific number of options, the value of which is
derived from the midpoint of the salary range for each specific salary grade, as
periodically adjusted by means of a formula that utilizes the stock's average
market value during the last month of the most recent fiscal year. The formula
does not, however, consider an individual's previous option grants. All options
granted to executive officers in fiscal 1998 are for ten year terms, with an
exercise price equal to the stock's market value on the date of grant, and
become exercisable after one year of continued employment following the grant
date. Executive officers received grants in August 1997 (fiscal 1998) ranging
from 5,800 shares to 56,700 shares.
CHIEF EXECUTIVE OFFICER
The fiscal 1998 compensation of the Company's Chairman and Chief Executive
Officer, S. J. Stewart, was determined in accordance with the salary policy,
bonus programs and stock option guidelines previously discussed.
In August 1997 the Committee approved a stock option grant of 56,700 shares
and a salary increase of $30,000 (effective September 1, 1997) for Mr. Stewart.
His resulting base salary, $720,000, is slightly above the middle of the salary
range established for this position.
As previously discussed, Company earnings for fiscal 1998 were below
expectations and in accordance with the terms of the annual bonus program, no
annual incentive payment was made to Mr. Stewart. Under the terms of the LTIP,
the Committee approved a payment of $1,032,896 to Mr. Stewart, since the Company
exceeded the goal of 10% compound growth in earnings per share for the
three-year period from fiscal 1996 through fiscal 1998 by achieving an actual
compounded growth rate of approximately 15.5%.
LIMITATION ON DEDUCTIBILITY OF CERTAIN COMPENSATION
Section 162(m) of the Internal Revenue Code (the "Code") generally
disallows a tax deduction to public companies for annual compensation over $1
million paid to their chief executive officers and the four
B-10
<PAGE> 41
other most highly compensated executive officers that is not "performance-based"
(as defined in the Code). It is the Committee's general policy to avoid the loss
of tax deductibility whenever compliance with Section 162(m) would be consistent
with the Company's incentive compensation objectives. Consequently, the employee
incentive compensation programs in which the Company's most highly compensated
officers participate have been restructured to comply with the Code's definition
of performance-based compensation. Notwithstanding its general policy, however,
the Committee retains the discretion to authorize incentive payments that may
not be deductible if it believes that doing so would be in the best interests of
the Company and its shareholders.
The Compensation Committee
Roger W. Stone, CHAIRMAN
Ralph M. Barford
Dennis C. Fill
Richard L. Keyser
B-11
<PAGE> 42
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative shareholder returns on the
Common Stock, the Standard & Poor's 500 Stock Index, and the Standard & Poor's
Chemicals (Specialty) Index. Public trading of the Company Common Stock began on
May 1, 1997 when the Company was spun-off from its predecessor, also known as
Morton International, Inc. ("Old Morton"); public trading of Old Morton stock
ended on April 30, 1997. Consequently, the period covered on the graph is
limited to the Company's returns from May 1, 1997.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
'Morton S&P Chemicals
International, Inc.' S&P 500[ (Specialty) Index
<S> <C> <C> <C>
1-May-97 100 100 100
Jun-97 100.21 110.84 114.36
Sep-97 117.86 119.14 121.77
Dec-97 114.92 122.56 127.85
Mar-98 110.09 139.66 128.38
Jun-98 84.19 144.27 114.7
</TABLE>
B-12
<PAGE> 43
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned for each of the last
three years by (i) the Company's Chief Executive Officer, and (ii) the Company's
four most highly compensated executive officers other than the Chief Executive
Officer who were serving as executive officers at the end of the Company's most
recently completed fiscal year.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- ---------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND FISCAL COMPENSATION UNDERLYING LTIP PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#) ($)(2) ($)(3)
- ------------------ ------ --------- -------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
S. Jay Stewart................... 1998 $715,000 $ -0- $ -0- 56,700 $1,032,896 $21,450
Chairman and Chief 1997 685,833 661,991 3,031,697 66,689 1,440,000 20,575
Executive Officer 1996 660,833 654,528 174,365 74,797 1,070,000 19,825
- --------------------------------------------------------------------------------------------------------------------------
William E. Johnston.............. 1998 $465,417 $ -0- $ -0- 30,200 $ 426,070 $13,963
President and Chief 1997 443,750 387,821 959,056 35,306 500,000 13,313
Operating Officer 1996 396,000 299,992 153,861 66,428 500,000 11,880
- --------------------------------------------------------------------------------------------------------------------------
James J. Fuerholzer.............. 1998 $288,333 $ -0- $ -0- 18,800 $ -0- $ 8,650
Executive Vice President of 1997 275,417 152,673 -0- 22,360 67,556 8,263
Portfolio and Technology 1996 243,250 104,397 -0- 27,983 154,500 7,415
Development
- --------------------------------------------------------------------------------------------------------------------------
Stephen A. Gerow................. 1998 $270,167 $ -0- $ 149,395 11,300 $ 124,150 $ 8,105
President, Coatings Group 1997 259,167 225,000 -0- 13,469 268,250 7,775
1996 248,167 162,791 -0- 14,907 360,000 7,445
- --------------------------------------------------------------------------------------------------------------------------
Walter W. Becky, II.............. 1998 $229,417 $ 68,000 $ -0- 11,300 $ 96,720 $ 6,883
President, Salt Group 1997 217,000 151,113 -0- 13,861 $ -0- 6,510
1996 205,000 153,004 -0- 14,907 $ -0- 6,150
</TABLE>
- ---------------
(1) Amounts in this column consist of cash payments to the indicated individuals
pursuant to pre-fiscal 1991 stock option agreement provisions for
reimbursement of their income tax liability upon exercise of the related
options (for a description of such payments, see note (2) to the table
concerning Aggregated Option Exercises in Last Fiscal Year and Fiscal Year
End Option Values below).
(2) Amounts in this column consist of Long-Term Incentive Program awards earned
during three-year performance periods ending on the last day of the
indicated fiscal years and paid out approximately two months thereafter.
(3) Amounts in this column consist of Company contributions to the named
individuals' accounts in the Company's basic and supplemental Employee
Savings and Investment (defined contribution) Plans.
B-13
<PAGE> 44
OPTION GRANT TABLE
The following table provides information with respect to the stock option
grants made during the Company's most recently completed fiscal year to the
Company's executive officers named in the Summary Compensation Table above.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(2)
---------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE OR APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES BASE PRICE EXPIRATION -------------------------------------
NAME GRANTED(#) IN FISCAL YEAR (PER SHARE)(2) DATE 0% 5%($)(3) 10%($)(3)
---- ---------- -------------- -------------- ---------- --- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. Stewart.......... 56,700 6.4% $33.53 8/28/07 -0- $ 1,195,744 $ 3,030,136
Mr. Johnston......... 30,200 3.4% 33.53 8/28/07 -0- 636,886 1,613,935
Mr. Fuerholzer....... 18,800 2.1% 33.53 8/28/07 -0- 396,472 1,004,701
Mr. Gerow............ 11,300 1.3% 33.53 8/28/07 -0- 238,305 603,890
Mr. Becky............ 11,300 1.3% 33.53 8/28/07 -0- 238,305 603,890
All Shareholders..... N/A N/A N/A N/A -0- 2,621,705,667 6,643,916,901
All Optionees........ 883,740 100% 33.40 various(4) -0- 18,563,030 47,042,362
Optionees' Gain as %
of all
Shareholders'
Gain............... N/A N/A N/A N/A N/A 0.7% 0.7%
</TABLE>
- ---------------
(1) All options held by the named individuals include limited stock appreciation
rights ("LSARs"), which are issued in tandem with stock options. LSARs give
the holders thereof the right to receive cash in an amount equal to the
spread between the exercise price of the related options and the stock's
fair market value during the 90-day period following a change of control of
the Company (as such term may be defined from time to time by the Board of
Directors) in lieu of exercising the related options, which are canceled
upon exercise of LSARs.
(2) The exercise price shown for individual optionees is the fair market value
of the Common Stock on the date of grant (calculated as the average of its
high and low sales prices on that date reported on the New York Stock
Exchange Composite Tape). The exercise price shown for all optionees is the
weighted average of all options granted in fiscal 1998. Options become
exercisable one year following the dates of grant, and exercise prices may
be paid in cash or previously owned shares of Common Stock.
(3) The amounts shown in these two columns represent potential realizable values
using the options granted and exercise prices. The assumed rates of stock
price appreciation are set by Securities and Exchange Commission rules and
are not intended to forecast the future appreciation of Common Stock.
(4) The expiration dates of options granted during fiscal 1998 are 8/28/07,
9/14/07, 10/23/07, 1/22/08, 3/7/08, 4/1/08, 5/22/08 and 6/27/08.
B-14
<PAGE> 45
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
SHARES ACQUIRED VALUE REALIZED ------------------------------ ------------------------------
NAME ON EXERCISE(#) ($)(1) EXERCISABLE(2) UNEXERCISABLE EXERCISABLE(3) UNEXERCISABLE
---- --------------- -------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Stewart.......... -0- N/A 775,165 56,700 5,770,741 -0-
Mr. Johnston......... -0- N/A 364,685 30,200 3,083,793 -0-
Mr. Fuerholzer....... 5,015 $ 95,041 119,344 18,800 617,580 -0-
Mr. Gerow............ 9,000 189,754 153,015 11,300 1,333,845 -0-
Mr. Becky............ 9,564 157,412 105,957 11,300 710,820 -0-
</TABLE>
- ---------------
(1) The average of the Common Stock's high and low sales prices reported on the
New York Stock Exchange Composite Tape for the particular exercise dates
minus the applicable exercise prices, multiplied by the number of option
shares exercised.
(2) Non-qualified options in this column that were granted to the named
individuals prior to fiscal 1991 (provided they were executive officers on
the grant dates) include supplemental cash payment rights, pursuant to which
payments are made to optionees upon exercise of such options or the related
LSARs described in note (1) to the Option Grants Table above in
reimbursement of their income tax liability from such exercises and
payments.
(3) The average of the high and low trading prices of the Common Stock
(calculated as in note (1) above) on the last trading day of fiscal 1998
($25.375 per share), minus the applicable exercise prices, multiplied by the
number of option shares held. Such values do not include the supplemental
cash payment rights described in note (2) above.
LONG-TERM INCENTIVE PROGRAM (LTIP) -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE OR OTHER PERIOD NON-STOCK PRICE BASED PROGRAM
UNTIL MATURATION -----------------------------------
NAME OR PAYOUT THRESHOLD TARGET MAXIMUM
---- --------------------------- --------- -------- ----------
<S> <C> <C> <C> <C>
Mr. Stewart...................... 3 years $360,000 $720,000 $1,440,000
Mr. Johnston..................... 3 years 234,500 469,000 938,000
Mr. Fuerholzer................... 3 years 116,000 232,000 464,000
Mr. Gerow........................ 3 years 109,000 218,000 436,000
Mr. Becky........................ 3 years 92,500 185,000 370,000
</TABLE>
Individual target incentive awards under the LTIP are percentages of
participants' salaries ranging from 60% to 100%, depending on their salary
grades, subject to 20% plus or minus adjustments authorized prior to the
beginning of the applicable performance period by the Compensation Committee.
The target awards reported in the foregoing table require a 10% compound annual
growth in Company or applicable business unit profits and the achievement of
return on net assets ("RONA") goals over the three-year performance period
beginning on July 1, 1998, and ending on June 30, 2001. Maximum awards can be up
to two times target award levels to reflect 20% or greater compound earnings
growth and full achievement of RONA goals over the performance period, but are
zero if compound earnings growth is less than the 5% threshold level and minimum
RONA goal levels are not achieved.
In the event of a change in control of the Company (as defined in the
LTIP), the performance periods with respect to all outstanding incentive awards
would terminate and the related incentive awards would be payable. The amount
payable with respect to any award would be equal to the percent of target based
upon the greater of 100% or the weighted average of (i) the percent of target
earned to the most recent fiscal quarter prior to the change of control (the
"Measurement Date") and (ii) 100% of target from the Measurement Date to the end
of the three-year performance period.
B-15
<PAGE> 46
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
All individuals named in the Summary Compensation Table except Mr. Stewart
have change of control employment agreements with the Company. Mr. Stewart has
an employment agreement which is described below ("Current Employment
Agreement"). As described in Item 3(b) of the Schedule 14D-9 to which this
Information Statement is attached, in connection with the Merger Agreement, Mr.
Stewart entered into a new employment agreement (the "Stewart Agreement") with
the Company and Rohm and Haas that will replace his Current Employment Agreement
at the effective time of the Merger. In addition, also in connection with the
Merger Agreement, Mr. Johnston and Christopher Julsrud, who is the Vice
President, Human Resources of the Company, entered into amendments to their
respective employment agreements with the Company (the "Johnston Amendment" and
the "Julsrud Amendment," respectively). This section of this Information
Statement describes the change of control employment agreements of individuals
who have not entered into new agreements or amendments to existing agreements in
connection with the Merger Agreement, Mr. Stewart's Current Employment
Agreement, and the employment agreements of Messrs. Johnston and Julsrud as they
existed prior to the Johnston Amendment and Julsrud Amendment, respectively. For
a description of the Stewart Agreement and a description of the effects of the
Johnston and Julsrud Amendments, see Item 3(b) of the Schedule 14D-9.
The change of control employment agreements (the "agreements") become
operational for a three-year period beginning on the date of a change of control
of the Company as defined in such agreements, which would include consummation
of the Offer or approval of the Merger Agreement by the shareholders of the
Company. The agreements require continued employment of the executive following
the change of control on an equivalent basis to employment immediately before
such change of control. In the event that during the three-year period following
a change of control, the executive terminates the executive's employment for
good reason (as defined in the agreements) or for any reason during the
thirty-day period commencing one year after the change of control, or the
Company terminates the executive's employment without cause (as defined in the
agreements), the executive would be entitled to receive an immediate lump sum
payment in an amount equal to three times the sum of such executive's then
current salary, average long-term bonus and highest annual bonus plus the
actuarial equivalent of the additional pension benefits the executive would have
received if he or she had continued to receive service and earnings credits
under Company retirement plans during the three years after such termination
(except as reduced by payments under long-term bonus plans made to an executive
upon a change of control which relate to performance periods subsequent to such
termination). In addition, the executive's welfare and fringe benefits would
continue through the third anniversary of the change of control, and the
executive would be treated as having the equivalent extra years of age and
service credit for purposes of qualifying for retiree welfare benefits. The
agreements also provide that executives are to be made whole on an after-tax
basis with respect to excise taxes payable under Section 4999 of the Code as a
consequence of any payments made to them (whether or not under the agreements)
being classified as "parachute payments" as defined in Section 280G of the Code.
The Current Employment Agreement has a term that currently ends on March
31, 2002. As of March 31, 1999, that term automatically extends to March 31,
2003, and as of March 31, 2000, it extends to September 30, 2003 (Mr. Stewart's
normal retirement date) (in each case, unless three years' notice of termination
has been given). Mr. Stewart's Current Agreement also provides that in the event
of his voluntary or involuntary termination without cause following a change of
control of the Company, he is entitled to receive an immediate payment of salary
and bonuses plus credits and benefits similar to those described in the
preceding paragraph through the then current term of his agreement. For a
description of the Stewart Agreement entered into in connection with the Merger
Agreement, see Item 3(b) of the Schedule 14D-9.
SURVIVOR INCOME BENEFITS PLAN
All named Executive Officers participate in this plan, under which benefits
are payable to participants' surviving spouses (or dependent children if there
is no spouse) if a participant dies prior to age 65 while employed by the
Company. The benefit is approximately 50% of the participant's base pay at death
and
B-16
<PAGE> 47
continues until the participant would have attained age 65. Accruals were made
in fiscal 1998 for aggregate potential benefits payable under this plan, but no
specific amounts for individual participants were calculated.
POST-RETIREMENT LIFE INSURANCE PLAN
Messrs. Stewart and Johnston participate in this plan, under which life
insurance after retirement is provided at no cost to retirees in amounts equal
to their base salaries at retirement. Such coverage is in addition to that
provided under the Company's regular life insurance program. Accruals were made
in fiscal 1998 for aggregate potential benefits payable under all Company life
insurance plans, but no specific amounts for individual participants were
calculated.
PENSION PLANS
The following table contains estimated annual retirement benefits payable
under the Company's basic and excess defined benefit pension plans.
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 48,466 $ 64,621 $ 80,777 $ 96,948 $ 114,448
400,000 100,966 134,621 168,277 201,948 236,948
600,000 153,466 204,621 255,777 306,948 359,448
800,000 205,966 274,621 343,277 411,948 481,948
1,000,000 258,466 344,621 430,777 516,948 604,448
1,200,000 310,966 414,621 518,277 621,948 726,948
1,400,000 363,466 484,621 605,777 726,948 849,448
1,600,000 415,966 554,621 693,277 831,948 971,948
1,800,000 468,466 624,621 780,777 936,948 1,094,448
</TABLE>
All individuals named in the Summary Compensation Table participate in the
Company's pension plans. The number of full years of credited service at June
30, 1998, for each is as follows: Mr. Stewart, 25 years; Mr. Johnston, 21 years;
Mr. Fuerholzer, 40 years; Mr. Gerow, 8 years; and Mr. Becky, 23 years.
Upon reaching age 65, pension plan participants are eligible to receive
annual retirement income, on a straight-life annuity basis, in monthly
installments for life equal to 1.75% of salary plus annual bonus (as reported in
the Summary Compensation Table), averaged over the five consecutive calendar
years during which such compensation was highest out of the last ten years
completed before age 65, for each year of credited service, less 1.67% of
primary social security for each year of credited service (up to 30 years).
Mr. Stewart participated in a predecessor company's pension plan prior to
1984. Upon retirement, he will receive 2% of compensation (calculated as
described in the preceding paragraph), less 1.67% of primary social security,
for each year of credited service prior to 1984. For subsequent credited
service, he will receive benefits as described in the preceding paragraph.
Consequently, his benefits will slightly exceed those in the above table in
amounts varying with the extent of his pre-1984 credited service.
Mr. Johnston participates in a supplemental executive retirement program
("SERP"). Under the SERP, participants are entitled, upon normal or approved
early retirement, to receive amounts which, together with standard Company
pensions (including pensions of prior employers), equal 50% of their average
compensation (salary plus standard annual bonus) with respect to the five
consecutive highest earnings years out of the final ten years' service prior to
retirement. Consequently, unless reduced as described below, the estimated total
annual pension benefits of a SERP participant will approximate those shown in
the column of the foregoing pension table which sets forth benefits for
employees with 30 years of credited service.
If approved early retirement occurs prior to age 62, the SERP pension is
reduced by 0.33% for each full month from the early retirement date to age 62.
If a change in control of the Company occurs and thereafter the employment of
the SERP participant is terminated by the Company (other than for cause as
defined in
B-17
<PAGE> 48
the employment agreements) or the individual's status as a SERP participant is
terminated, the SERP pension vests as though the individual had retired early
with approval on the date of such termination.
In addition, SERP participants' rights under employment agreements
concerning pension benefits following a change of control are preserved.
B-18
<PAGE> 49
ANNEX C
TRANSACTIONS IN COMPANY COMMON STOCK
BY EXECUTIVE OFFICERS OF MORTON INTERNATIONAL, INC.
<TABLE>
<CAPTION>
TRANSACTION OPTION TRANSACTION
NAME DATE PRICE SHARES TYPE
---- ----------- ------ ------ ---------------
<S> <C> <C> <C> <C>
Raymond P. Buschmann....................... 12/18/98 $11.01 2,164 Option Exercise
12/28/98 100 Gift to Son
Nancy A. Hobor............................. 12/22/98 $10.26 1,846 Option Exercise
Lewis N. Liszt............................. 1/14/99 $13.83 1,400 Option Exercise
</TABLE>
PURCHASES BY MORTON INTERNATIONAL, INC.
OF COMPANY COMMON STOCK
<TABLE>
<CAPTION>
AVERAGE
DATE OF NUMBER OF PRICE PER TOTAL
PURCHASE SHARES SHARE COST
- -------- --------- --------- -------------
<S> <C> <C> <C>
12/22/98................................ 50,000 $24.01 $1,200,437.50
12/21/98................................ 127,800 $25.38 3,244,071.50
12/18/98................................ 62,000 $25.13 1,557,985.00
12/17/98................................ 50,000 $24.99 1,249,275.00
12/16/98................................ 42,800 $24.79 1,061,165.25
------- -------------
Total.............................. 332,600 $8,312,934.25
======= =============
</TABLE>
C-1
<PAGE> 50
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1 Agreement and Plan of Merger, dated as of January 31, 1999,
among Rohm and Haas Company, Morton Acquisition Corp.
(formerly known as Gershwin Acquisition Corp.) and Morton
International, Inc. (incorporated by reference to Exhibit
(c)(1) to the Tender Offer Statement on Schedule 14D-1,
dated February 5, 1999, filed by Rohm and Haas Company and
Morton Acquisition Corp. relating to the Common Stock of
Morton International, Inc.)
2 Opinion of Goldman, Sachs & Co., dated January 31, 1999
(included as Annex A to the Schedule 14D-9).*
3 Joint Press Release of Rohm and Haas Company and Morton
International, Inc., dated February 1, 1999 (incorporated by
reference to Exhibit 99.1 to the Current Report on Form 8-K
of Morton International, Inc., filed with the Securities and
Exchange Commission on February 2, 1999).
4 Employment Agreement of S. Jay Stewart, dated as of January
31, 1999, by and among Rohm and Haas Company, Morton
International, Inc. and S. Jay Stewart.
5 Amendment, dated as of January 31, 1999, by and among Rohm
and Haas Company, Morton International, Inc. and William E.
Johnston, to Employment Agreement, dated as of March 20,
1990, between the Company and William E. Johnston.
6 Amendment, dated as of January 31, 1999, to Employment
Agreement, dated as of December 1, 1994 between Morton
International, Inc. and Christopher K. Julsrud.
7 Confidentiality Agreement, dated as of November 24, 1998,
between Morton International, Inc. and Rohm and Haas
Company.
8 Letter to Shareholders of Morton International, Inc., dated
February 5, 1999.*
</TABLE>
- ---------------
* Included with Schedule 14D-9 mailed to shareholders.
C-2
<PAGE> 1
Exhibit 4
EMPLOYMENT AGREEMENT
This Employment Agreement by and among Rohm and Haas Company,
a Delaware corporation ("Parent"), Morton International, Inc., an Indiana
corporation (the "Company") and S. Jay Stewart (the "Executive") is dated as of
the 31st day of January, 1999.
WHEREAS, the Company, Parent and Gershwin Acquisition Company,
an Indiana corporation and a wholly owned subsidiary of Parent ("Sub"), have
entered into an Agreement and Plan of Merger dated as of the 31st day of
January, 1999 (the "Merger Agreement"), pursuant to which Sub will merge with
and into the Company (the "Merger"), following which the Company will be a
wholly owned subsidiary of Parent; and
WHEREAS, the Executive and the Company are parties to an
Executive Employment Agreement dated as of April 1, 1994 (the "Current
Employment Agreement"); and
WHEREAS, it is acknowledged by the parties hereto that upon
either the consummation of the Offer (as defined in the Merger Agreement) or the
approval of the Merger by the shareholders of the Company, the Executive will
have "Good Reason" to terminate his employment pursuant to the Current
Employment Agreement; and
WHEREAS, the Company and Parent have determined that it is in
the best interests of their respective shareholders to set forth, and the
Executive has agreed to set forth, their mutual agreement as to the rights and
entitlements of the Executive under the Current Employment Agreement from and
after the Effective Time and to provide for the continuing availability to the
Company and Parent of the Executive's services and expertise, all on the terms
and conditions set forth below;
NOW, THEREFORE, it is hereby agreed as follows:
1. Effect of this Agreement; Continued Employment. (a)
Effective Time. This Agreement shall become effective at the Effective Time (as
defined in the Merger Agreement).
(b) Position and Duties. From and after the date on which this
Agreement becomes effective until the first anniversary thereof (the "Employment
Term"), the Executive shall serve as a member of the Board of Directors of
Parent (the "Board"), and Parent shall employ the Executive, and the Executive
shall serve as a Vice Chairman of the Board, reporting directly to the Chairman
of the Board and Chief Executive Officer of the Company and to the Board. The
Executive's primary duties and responsibilities shall be to work to ensure a
smooth transition and integration of the businesses of Parent and the Company,
with such other duties and responsibilities not inconsistent with his position
as may be assigned to him from time by the Chairman of the Board and Chief
Executive Officer of the Company and the Board.
(c) Full-Time Employment. During the Employment Term, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive shall devote reasonable attention and time during normal
business hours to the business and affairs of
<PAGE> 2
Parent and the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement.
(d) Location. During the Employment Term, the Executive shall
be based at the Company's office in Chicago, Illinois, and shall be required to
be absent therefrom on travel status or otherwise only to the extent reasonably
necessary to discharge his duties hereunder.
2. Compensation. (a) Cash Compensation. During the Employment
Term, the Executive shall receive cash compensation, payable at such intervals
as Parent pays the base salary of its other senior executives, equal to
$1,950,000 on an annual basis (which sum represents the aggregate of (i) his
current annual base salary of $745,000, (ii) his target annual bonus under the
Company's 1999 fiscal year annual incentive plan of $540,000, and (iii) his
target long-term incentive plan award for the award cycle that ends at the end
of the Company's 1999 fiscal year of $665,000).
(b) Other Benefits. During the Employment Term: (i) the
Executive shall be entitled to participate in, and shall receive all benefits
under, savings and retirement plans, practices, policies and programs on the
same basis as other senior executives of Parent; and (ii) the Executive and/or
the Executive's family, as the case may be, shall be eligible for participation
in, and shall receive all benefits under, welfare benefit plans, practices,
policies and programs (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life insurance, group life
insurance, accidental death and travel accident insurance plans and programs) on
the same basis as other senior executives of Parent.
(c) Expenses. During the Employment Term, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by him (in accordance with the policies and procedures established for the
senior executive officers of Parent) in performing services hereunder, provided
that the Executive properly accounts therefor in accordance with Parent policy.
(d) Vacations. During the Employment Term, the Executive shall
be entitled to the number of paid vacation days determined by Parent for its
senior executive officers, but not less than five weeks in any calendar year or
portion thereof during which the Executive is employed. The Executive shall also
be entitled to all paid holidays given by the Company to its senior executive
officers.
(e) Perquisites. During the Employment Period, the Executive
shall be entitled to continue to receive all perquisites that he is receiving
from the Company as of the date hereof.
-2-
<PAGE> 3
3. Termination of Employment. (a) Upon any termination of the
Executive's employment for any reason after the Effective Time (whether or not
during the Employment Term), the Executive (or the Executive's family or estate,
as applicable) shall be entitled to the payments and benefits set forth below in
this Section 3. The date of such termination of employment is hereinafter
referred to as the "Date of Termination."
(b) The Company shall pay to the Executive (or the Executive's
estate, as applicable), in a lump sum in cash within 30 days after the Date of
Termination, the product of (i) $2,185,000 (which represents the annualized
amount of cash severance, calculated based upon current compensation, to which
he is entitled under the Current Employment Agreement) times (ii) a fraction,
the numerator of which is the number of days from the Date of Termination
through and including September 30, 2003, and the denominator of which is 365.
(c) From the Date of Termination through and including
September 30, 2003, or such longer period as any plan, program, practice, or
policy may provide, Parent shall continue welfare and fringe benefits and
perquisites to the Executive and/or the Executive's family at least equal in
value to those that would have been provided in accordance with the plans,
programs, practices and policies described in clause (i) of Section 2(b) and in
Section 2(e) if the Executive's employment and the Employment Term had continued
through September 30, 2003. From and after October 1, 2003, the Executive and
his spouse shall be entitled to receive retiree medical benefits ("Retiree
Medical Benefits") for life at least equal in value to those in effect as of the
date hereof for senior executives of the Company who retire with full benefits.
Notwithstanding the foregoing, the Executive may elect for himself and his
family (or his surviving spouse may elect) to cease receiving medical benefits
pursuant to the first sentence of this Section 3(c) and begin receiving medical
benefits pursuant to the second sentence of this Section 3(c) at any time after
the Date of Termination and before September 30, 2003.
(d) Beginning immediately following the Date of Termination,
Parent shall provide the Executive and the Executive's beneficiaries with
supplemental pension benefits ("Contract Pension Benefits") such that the
monthly Contract Pension Benefits, plus the monthly pension benefits received by
them pursuant to all qualified and nonqualified defined benefit pension plans of
Parent and the Company, are not less than the monthly benefits set forth in
Schedule I hereto, computed in accordance with Schedule I. Although the Contract
Pension Benefits will begin immediately following the Date of Termination, they
shall not be subject to any actuarial reduction for early payment.
(e) To the extent not theretofore paid or provided, or
otherwise specified in this Agreement, the Company shall timely pay or provide
to the Executive any other amounts or benefits required to be paid or provided
or which the Executive is eligible to receive under any plan, program, policy or
practice or contract or agreement of Parent, the Company or their respective
affiliates, in accordance with the terms thereof.
(f) The Executive shall not be required to mitigate the amount
of any payment, benefit or perquisite provided for in this Section 3 by seeking
other employment or otherwise, nor shall the amount of any payment, benefit or
perquisite provided for in this Section 3 be
-3-
<PAGE> 4
reduced by any compensation earned by the Executive as the result of employment
by another employer after the Date of Termination, or otherwise.
4. Unauthorized Disclosure; Inventions. (a) The Executive
shall not, without the written consent of the Board or a person authorized
thereby, use for his own purposes or disclose to any person, other than an
employee of Parent or the Company or a person to whom disclosure is reasonably
necessary or appropriate in connection with the performance by the Executive of
his duties hereunder, any confidential information obtained by him while in the
employ of Parent or the Company, including without limitation confidential
information with respect to any of Parent's or the Company's products,
improvements, formulas, designs or styles, processes, customers, methods of
distribution or methods of manufacture; provided, however, that confidential
information shall not include any information known generally to the public
(other than as a result of unauthorized disclosure by the Executive).
(b) (i) Any and all inventions made, developed or created by
the Executive (whether at the request or suggestion of Parent or the Company or
otherwise, whether alone or in conjunction with others, and whether during
regular hours of work or otherwise) during the Employment Term, which may be
directly or indirectly useful in, or relate to, the business of or tests being
carried out by Parent or the Company or any of its subsidiaries or affiliates,
will be promptly and fully disclosed by the Executive to an appropriate
executive officer of Parent and shall be Parent's exclusive property as against
the Executive, and the Executive will promptly deliver to an appropriate officer
of Parent all papers, drawings, models, data and other material relating to any
invention made, developed or created by him as aforesaid.
(ii) The Executive will, upon Parent's request and
without any payment therefor, execute any document necessary or advisable in the
opinion of Parent's counsel to direct issuance of patents to the Company with
respect to such inventions as are to be Parent's exclusive property as against
the Executive under this Section 4(b) or to vest in Parent title to such
inventions as against the Executive, the expense of securing any patent,
however, to be borne by Parent.
(c) The foregoing provisions of this Section 4 shall be
subject to and modified by any applicable law providing employee ownership of or
rights in inventions under certain circumstances, and shall be binding upon the
Executive's heirs, successors and legal representatives.
5. Certain Additional Payments. (a) Anything in this Agreement
to the contrary notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by Parent, the Company or
their respective affiliates to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 5) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"),
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<PAGE> 5
then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 5(c), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Ernst & Young LLP (the "Accounting Firm") which shall provide detailed
supporting calculations to Parent, the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by Parent or the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by Parent. Any Gross-Up Payment, as determined pursuant to this
Section 5, shall be paid by Parent to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon Parent, the Company and the Executive. As
a result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by Parent or the
Company should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that Parent exhausts its remedies
pursuant to Section 5(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by Parent or the Company to or for the benefit of the Executive.
(c) The Executive shall notify Parent in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
of the Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than ten business days after the Executive is informed in writing
of such claim and shall apprise Parent of the nature of such claim and the date
on which such claim is requested to be paid. The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on which
it gives such notice to Parent (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If Parent notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give Parent any information reasonably requested
by Parent relating to such claim,
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<PAGE> 6
(ii) take such action in connection with contesting
such claim as Parent shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by Parent,
(iii) cooperate with Parent in good faith in order
effectively to contest such claim, and
(iv) permit Parent to participate in any proceedings
relating to such claim;
provided, however, that Parent shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 5(c), Parent shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Parent shall determine;
provided, however, that if Parent directs the Executive to pay such claim and
sue for a refund, Parent shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, Parent's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by Parent pursuant to Section 5(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall promptly pay
to Parent the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by Parent pursuant to Section 5(c), a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and Parent does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
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<PAGE> 7
6. Successors. (a) This Agreement is personal to the Executive
and without the prior written consent of Parent shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b)This Agreement shall inure to the benefit of and be binding
upon Parent, the Company and their respective successors and assigns.
(c) Parent and the Company shall each require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of their respective businesses and/or assets to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that Parent or the Company (as applicable) would be required to perform
it if no such succession had taken place. As used in this Agreement, "Parent"
and the "Company" shall mean Parent and the Company, respectively, as
hereinbefore defined and any successor to their respective businesses and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
7. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
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<PAGE> 8
If to the Executive:
S. Jay Stewart
1086 Lake Road
Lake Forest, Illinois 60045
Facsimile: (847) 295-5338
If to Parent:
Rohm and Haas Company
100 Independence Mall West
Philadelphia, Pennsylvania 19106
Attention: Corporate Secretary
Facsimile: (215) 592-3227
with an additional copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow, Esq.
Facsimile: (212) 455-2502
If to the Company:
Morton International, Inc.
100 North Riverside Plaza
Chicago, Illinois 60606
Attention: Corporate Secretary
Facsimile: (312) 807-2101
with an additional copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Eric S. Robinson, Esq.
Facsimile: (212) 403-2000
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision (or
portion thereof) of this Agreement shall not affect the validity or
enforceability of any other provision (or portion thereof) of this Agreement.
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<PAGE> 9
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) From and after the Effective Time, this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof, including without limitation the Current Employment Agreement.
(f) This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
(g) The provisions of Sections 3, 4, 5, 6 and 7 of this
Agreement shall survive the end of the Employment Term, the termination of the
Executive's employment, and the termination of this Agreement for any reason,
except as specified in Section 7(h) below.
(h) This Agreement shall be null and void, ab initio, and of
no further effect if the Merger Agreement is terminated before the Effective
Time.
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<PAGE> 10
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from their respective Boards
of Directors, Parent and the Company have each caused these presents to be
executed in its name on its behalf, all as of the day and year first above
written.
/s/ S. Jay Stewart
----------------------------------------
S. Jay Stewart
MORTON INTERNATIONAL, INC.
By /s/ Christopher K. Julsrud
-------------------------------------
ROHM AND HAAS COMPANY
By /s/ J. Lawrence Wilson
-------------------------------------
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<PAGE> 1
Exhibit 5
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to the Employment Agreement by and between
Morton International, Inc., an Indiana corporation (the "Company"), and William
E. Johnston (the "Executive") dated as of March 22, 1990 (the "Employment
Agreement") is made by and among the Company, Rohm and Haas Company, a Delaware
corporation ("Parent") and the Executive and is dated as of the 31st day of
January, 1999.
WHEREAS, the Company, Parent and Gershwin Acquisition Corp.,
an Indiana corporation and a wholly owned subsidiary of Parent ("Sub"), have
entered into an Agreement and Plan of Merger dated as of the 31st day of
January, 1999 (the "Merger Agreement"), pursuant to which Sub will merge with
and into the Company (the "Merger"), following which the Company will be a
wholly owned subsidiary of Parent; and
WHEREAS, it is acknowledged by the parties hereto that upon
consummation of the Merger, the Executive will have "Good Reason" to terminate
his employment pursuant to the Employment Agreement; and
WHEREAS, the Company and Parent have determined that it is in
the best interests of their respective shareholders, and the Executive has
agreed, to provide for the continued employment of the Executive following the
Merger and to amend and clarify the Employment Agreement in certain respects as
set forth below;
NOW, THEREFORE, it is hereby agreed as follows:
1. In General. Capitalized terms used and not defined in this Amendment
shall have the meanings assigned to them in the Employment Agreement. It is
acknowledged and agreed that the Employment Period will have begun before the
Effective Time (as defined in the Merger Agreement) as a result of prior events
contemplated by the Merger Agreement.
2. New Position. As of the Effective Time, clause (A) of Section
4(a)((i) of the Employment Agreement shall be amended to read in its entirety as
follows:
the Executive shall serve as a member of the Executive Council
of Parent, with the title of Senior Vice President, and as
principal operating officer of Parent and the Company in
Chicago, Illinois, with such duties and responsibilities
commensurate with such position as may be assigned to him from
time to time by a Vice Chairman or the Chief Operating Officer
of Parent (it being understood that he will not have reporting
obligations to more than one of such persons at any one time),
and
3. Severance. At the Effective Time, the Executive shall be paid in a
lump sum in cash the amount described in Section 6(d)(i) of the Employment
Agreement, calculated if he had exercised his right to terminate his employment
for Good Reason at the Effective Time. In consideration of the foregoing
payment, the Executive shall cease to be entitled to receive the
<PAGE> 2
payment described in Section 6(d)(i) of the Employment Agreement upon the
subsequent termination of his employment for any reason. However, in the event
of the termination of the Executive's employment during the period of one year
following the Effective Time by Parent other than for Cause or Disability, or by
the Executive for Good Reason, the Executive shall be entitled to receive a lump
sum in cash within 30 days after the Date of Termination equal to the aggregate
of the following amounts: (a) the product of (i) the Multiplier (as defined
below) and (ii) the sum of (A) the Annual Base Salary, (B) the Highest Annual
Bonus and (C) the Greater Long-Term Bonus; and (b) all Accrued Obligations
(except to the extent previously paid); and (c) a lump-sum retirement benefit
equal to the difference between (I) the actuarial equivalent of the benefits
under the Retirement Plans which the Executive would receive if the Executive's
employment continued at the compensation level provided for in Sections 4(b)(i)
and 4(b)(ii) of the Employment Agreement for a period equal to one year times
the Multiplier, assuming for this purpose that all accrued benefits are fully
vested, and (II) the actuarial equivalent of the Executive's actual benefit
(paid or payable), if any, under the Retirement Plans; provided, that for
purposes of this sentence the term "Good Reason" shall only relate to events
occurring after the Effective Time and shall mean "Good Reason" as defined in
Section 5(c) of the Employment Agreement except that the reference in clause (i)
to Section 4(a) of the Employment Agreement shall be deemed to refer to said
Section 4(a) as amended by Section 2 of this Amendment, and the last two
sentences of said Section 5(c) shall be disregarded. The Executive shall also
remain entitled to receive the other payments and benefits provided for in the
Employment Agreement (other than Section 6(d)(i) thereof) in the event of a
termination of his employment during the Employment Period (it being
acknowledged that any such termination by the Executive will be for Good Reason
for such purposes). For purposes of this Section 3, the "Multiplier" shall mean
a fraction, the numerator of which is the number of days from the Date of
Termination through the first anniversary of the Effective Time, and the
denominator of which is 365.
4. Assumption by Parent. As of the Effective Time, Parent shall be
considered to have assumed the Employment Agreement and expressly agreed to
perform the Employment Agreement in the same manner and to the same extent as
the Company, as required by Section 11(c) of the Employment Agreement. To
effectuate the foregoing, as of the Effective Time: (a) all references to "the
Company" in Sections 3, 5, 9(b), 9(c) and 9(d) of the Employment Agreement shall
be deemed to refer to Parent instead of the Company; (b) all references to "the
Company" in Sections 6, 8, 9(a), 10, and 12(d) of the Employment Agreement shall
be deemed to refer to Parent as well as the Company; (c) all references to "the
Board" in Section 5(b) of the Employment Agreement shall be deemed to refer to
the Board of Directors of Parent; (d) the reference in Section 10(a) to "the
Chief Executive Officer" shall be deemed to refer to the Chief Executive Officer
of Parent; and (e) notices to Parent under the Employment Agreement shall be
given in accordance with Section 12(b) to Parent at the address provided for in
the Merger Agreement. It is acknowledged that from and after the Effective Time,
Parent shall be considered an "affiliated company" of the Company as that term
is used in the Employment Agreement.
5. Supplemental Executive Retirement Program. It is acknowledged and
agreed that in addition to his rights and entitlements pursuant to the
Employment Agreement, as amended hereby, the Executive is entitled to certain
supplemental retirement benefits (the "SERP
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<PAGE> 3
Benefits") from the Company pursuant to the Supplemental Executive Retirement
Program (the "SERP") set forth in the letter agreement dated February 16, 1982,
between P. Michael Phelps, on behalf of MortonNorwich, and the Executive, the
letter agreement dated April 26, 1984 between P. Michael Phelps, on behalf of
Morton Thiokol, Inc., and the Executive (the "1984 Letter") (which incorporates
by reference certain definitions set forth in the Executive Employment Contract
dated November 20, 1981 between Morton-Norwich Products, Inc. and the Executive
(the "Prior Employment Agreement")), and the memorandum entitled "SERP
Clarifications" dated March 7, 1989 from Morton Thiokol, Inc. to "Participants
in The Supplemental Executive Retirement Program ("SERP")." Without limiting any
of the Executive's rights under the SERP, it is acknowledged and agreed that
notwithstanding any provision of the Employment Agreement or the SERP, (i) the
Executive is not entitled to receive any benefits pursuant to the Prior
Employment Agreement (which remains in effect only to the extent that certain
provisions thereof are incorporated by reference to the 1984 Letter), (ii) the
Retirement Plans referred to in Section 6(d)(i)(C) of the Employment Agreement
shall not be considered to include the SERP, (iii) the consummation of the
transactions contemplated by the Merger Agreement will constitute a "change of
control" for purposes of the SERP, and (iv) upon a termination of the
Executive's employment following the Merger by the Executive for "Good Reason"
or by Parent without "Cause," or as a result of the Executive's Disability, in
each case as defined in the Employment Agreement, or upon the Executive's death
at any time after the beginning of the Employment Period (as defined in the
Employment Agreement) (whether or not during employment), the Executive (or in
the event of his death at a time when he is married, his surviving spouse) shall
have a vested, nonterminable right to the SERP Benefits provided for in Section
2 of the 1984 Letter.
6. Miscellaneous. (a) Except as specifically set forth in this
Amendment, the Employment Agreement and the SERP are hereby ratified and
confirmed without amendment.
(b) This Amendment may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
(c) This Amendment shall be null and void, ab initio, and of no further
effect if the Merger Agreement is terminated before the consummation of the
Offer (as defined in the Merger Agreement).
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<PAGE> 4
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from their respective Boards
of Directors, Parent and the Company have each caused these presents to be
executed in its name on its behalf, all as of the day and year first above
written.
/s/ William E. Johnston
----------------------------------------
William E. Johnston
MORTON INTERNATIONAL, INC.
By /s/ Christopher K. Julsrud
-------------------------------------
ROHM AND HAAS COMPANY
By /s/ J. Lawrence Wilson
-------------------------------------
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<PAGE> 1
Exhibit 6
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to the Employment Agreement by and between
Morton International, Inc., an Indiana corporation (the "Company"), and
Christopher K. Julsrud (the "Executive") dated as of December 1, 1994 (the
"Employment Agreement") is dated as of the 31st day of January, 1999.
WHEREAS, the Company, Rohm and Haas Company, a Delaware
Corporation ("Parent"), and Gershwin Acquisition Company, an Indiana corporation
and a wholly owned subsidiary of Parent ("Sub"), have entered into an Agreement
and Plan of Merger dated as of the 31st day of January, 1999 (the "Merger
Agreement"), pursuant to which Sub will merge with and into the Company (the
"Merger"), following which the Company will be a wholly owned subsidiary of
Parent; and
WHEREAS, the Company and the Executive have agreed to amend
the Employment Agreement in certain respects as set forth below;
NOW, THEREFORE, it is hereby agreed as follows:
1. Capitalized terms used and not defined in this Amendment
shall have the meanings assigned to them in the Employment Agreement. It is
acknowledged that the Employment Period will have begun before the Effective
Time (as defined in the Merger Agreement) as a result of prior events
contemplated by the Merger Agreement.
2. As of the Effective Time, clause C. of Section 6(d)(i) of
the Employment Agreement shall be amended by adding the following additional
language at the end thereof but before the word "less":
provided, that if the Executive had attained the age of 50 as
of the Change of Control Date, for purposes of calculating the
benefits described in clause (a) of this sentence, it shall
also be assumed that the Executive would have attained the age
of 55 as of the end of the three-year period referred to
therein;
3. As of the Effective Time, Section 6(d)(ii) of the
Employment Agreement shall be amended by adding the following additional
language at the end thereof:
; and provided, further, that if the Executive had attained
the age of 50 as of the Change of Control Date, for purposes
of the determination called for by this sentence, the
Executive shall be considered to have remained employed until
the later of the end of the Employment Period and the
Executive's attainment of the age of 55, and then terminated
employment.
4. (a) Except as specifically set forth in this Amendment, the
Employment Agreement is hereby ratified and confirmed without amendment.
<PAGE> 2
(b) This Amendment may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
(c) This Amendment shall be null and void, ab initio, and of
no further effect if the Merger Agreement is terminated before the consummation
of the Offer (as defined in the Merger Agreement).
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its respective Board of
Directors, the Company has caused these presents to be executed in its name on
its behalf, all as of the day and year first above written.
/s/ Christopher K. Julsrud
----------------------------------------
Christopher K. Julsrud
MORTON INTERNATIONAL, INC.
By /s/ S. Jay Stewart
--------------------------------------
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<PAGE> 1
Exhibit 7
CONFIDENTIALITY AGREEMENT
In connection with considering a possible transaction (a "Transaction")
between our two companies (each party being hereinafter referred to,
collectively with its respective subsidiaries, affiliates and divisions, as a
"Company"), each Company (in its capacity as a provider of information hereunder
being referred to as a "Provider"), may make available to the other Company (in
its capacity as a recipient of information hereunder being referred to as a
"Recipient") from time to time certain information concerning its business,
financial condition, operations, assets and liabilities. As a condition to such
information being provided to each Recipient and its Recipient Representatives
(as hereinafter defined), each Recipient agrees to treat any information
concerning the Provider (whether prepared by the Provider, such Provider's
Representatives (as hereinafter defined), or otherwise and irrespective of the
form of communication) which is furnished hereunder to the Recipient or to such
Recipient's Representatives now or in the future by or on behalf of the Provider
(collectively referred to in this agreement as the "Confidential Information")
in accordance with the provisions of this agreement, and to take or abstain from
taking certain other actions hereinafter set forth. As used in this agreement, a
"Recipient's Representatives" or a "Provider's Representatives" shall include
the directors, officers, employees, agents, partners or advisors of such
Recipient or Provider (including, without limitation, attorneys, accountants,
consultants, bankers and financial advisors).
1. CONFIDENTIAL INFORMATION. The term "Confidential Information" also
shall be deemed to include all notes, analyses, compilations, studies,
interpretations or other documents prepared by either Recipient or such
Recipient's Representatives which contain, reflect or are based upon, in whole
or in part, the information furnished to such Recipient or such Recipient's
Representatives pursuant hereto. The term "Confidential Information" does not
include information which (i) is or becomes generally available to the public
other than as a result of a breach of this agreement by a Recipient or such
Recipient's Representatives, (ii) was within the Recipient's or such Recipient's
Representative's possession prior to its being furnished to the Recipient or
such Recipient's Representatives by or on behalf of the Provider; provided that
the source of such information was not known by the Recipient to be bound by a
confidentiality agreement with, or other contractual, legal or fiduciary
obligation of confidentiality to, the Provider or any other party in relation to
that information, or (iii) is or becomes available to the Recipient or such
Recipient's Representatives on a non-confidential basis from a source other than
the Provider or any of its Representatives, provided that such source is not
known by the Recipient to be bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, the Provider
or any other party with respect to such information.
2. USE OF CONFIDENTIAL INFORMATION. Each Recipient agrees that such
Recipient and such Recipient's Representatives shall use the Confidential
Information solely for the purpose of evaluating a possible Transaction between
the Companies; that the Confidential Information will be kept confidential; and
that the Recipient will not disclose any Confidential Information in any manner
whatsoever; provided that any of such Confidential Information may be disclosed
to Recipient's Representatives to the extent of their need to know such
information for the sole purpose of assisting the Recipient in the evaluation of
a possible Transaction between the Companies and on the condition that such
Recipient's Representatives are informed by the Recipient of the confidential
nature of such information and that by receiving such information they are
agreeing to be bound by the confidentiality obligations in this agreement. In
any event, each Recipient agrees to be responsible for any breach of this letter
agreement by any of its Recipient's Representatives.
3. NON-DISCLOSURE OF DISCUSSIONS. In addition, each Recipient agrees
that, without the prior written consent of the Provider, such Recipient and such
Recipient's Representatives will not make any public announcement or public
statement concerning, or disclose to any other person, the fact that any
Confidential Information has been made available hereunder, that discussions or
negotiations are taking place concerning a possible Transaction involving the
Companies or any of the terms, conditions or other facts with respect thereto
(including the status hereof); provided that such Recipient may make such public
announcement, public statement or disclosure if in the opinion of such
Recipient's outside counsel or General Counsel, such public announcement, public
statement or disclosure is necessary to avoid committing a violation of law or
of any rule or regulation of any securities association, stock exchange or
national securities quotation system on which such Recipient's securities are
listed or trade. In such event, the Recipient shall use its best efforts to give
advance notice to the Provider and to consult with the Provider on timing and
content of any such public announcement or public statement or disclosure.
4. REQUIRED DISCLOSURE. In the event that either Recipient or any of such
Recipient's Representatives are requested or required (by oral questions,
interrogatories, requests for information or documents in legal proceedings,
<PAGE> 2
subpoena, civil investigative demand or other similar process) to disclose any
Confidential Information or any of the facts disclosure of which is prohibited
under paragraph (3) of this agreement, such Recipient shall provide the Provider
with prompt written notice of any such request or requirement so that the
Provider may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this agreement. If, in the absence of a
protective order or other remedy or the receipt of a waiver, the Recipient or
any of such Recipient's Representatives are nonetheless, in the opinion of the
Recipient's or (in the case of disclosure requested or required of a Recipient's
Representative) such Recipient's Representative's outside counsel or General
Counsel, legally compelled to disclose Evaluation Material or else stand liable
for contempt or suffer other censure or penalty, such Recipient or such
Recipient's Representatives may, without liability hereunder disclose only that
portion of the Confidential Information which such counsel advises is legally
required to be disclosed; provided that such Recipient shall exercise reasonable
efforts to preserve the confidentiality of the Confidential Information,
including, without limitation, by cooperating with the Provider to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information.
5. TERMINATION OF DISCUSSIONS. If either Company decides that it does not
wish to proceed with discussions or negotiations relating to a Transaction with
the other, it will promptly notify the other of that decision. In that case, or
at any time upon the request of either party for any reason, each Company will
promptly deliver to the other all Confidential Information (and all copies
thereof) furnished to such Company in its capacity as a Recipient or such
Recipient's Representatives by or on behalf of the other Company in its capacity
as Provider pursuant hereto. In the event of such a decision, all other
Evaluation Material prepared by either Company in its capacity as a Recipient or
such Recipient's Representatives shall, at the Recipient's option, be destroyed
or returned and no copy thereof shall be retained and the Recipient shall
provide to the other Company a certificate of compliance with this sentence.
Notwithstanding the return or destruction of the Evaluation Material, each
Company in its capacity as a Recipient and such Recipient's Representatives will
continue to be bound by such Recipient's respective obligations of
confidentiality and other obligations hereunder for a period of five (5) years
from the date hereof.
6. STANDSTILL. For a period of three (3) years from the date hereof, each
Company agrees that neither it nor any of its affiliates (as defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) will (nor will it assist, provide or arrange financing to or for others
or encourage others to) directly or indirectly, acting alone or in concert with
others, unless specifically requested in writing in advance by the other
Company's Board of Directors, Chairman or Chief Executive Officer.
A. acquire or agree, offer, seek or propose to acquire, ownership
(including, but not limited to, beneficial ownership as defined in Rule
13d-3 under the Exchange Act) of more than 1% of any class of voting
securities issued by the other Company, or any rights or options to acquire
such ownership (including from a third party);
B. propose a merger, consolidation or similar transaction involving
the other Company;
C. offer, seek or propose to purchase, lease or otherwise acquire all
or a substantial portion of the assets of the other Company;
D. seek or propose to influence or control the management or policies
of the other Company or to obtain representation on the other Company's
Board of Directors, or solicit or participate in the solicitation of any
proxies or consents with respect to the securities of the other Company;
E. enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing;
or
F. seek or request permission to do any of the foregoing or seek any
permission to make any public announcement with respect to any of the
foregoing.
provided that (i) it is understood that the provisions of this paragraph shall
not prohibit the ongoing discussions continuing to be pursued by the management
of the respective Companies in accordance with the provisions of this agreement,
and (ii) if a Company enters into a definitive agreement with a third party
pursuant to which such third party will make a tender or exchange offer for, or
otherwise acquire (by merger, consolidation, purchase or otherwise) 50% or more
of the common stock or other equity interests, assets or earning power of such
other Company, then the other Company shall be permitted to contact privately
the chairman of the board of directors of such Company (or any person
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designated by such chairman) and submit to such chairman or other person an
offer to acquire Voting Securities or assets of such Company and/or a request to
negotiate with such Company with respect to such offer.
7. NONSOLICITATION. For a period of two (2) years from the date hereof,
each Company agrees that it will not directly or indirectly solicit to employ
any current employee of the other Company; provided, however, that the foregoing
shall not apply to (i) any such employee who has left the employment of the
other Company prior to the commencement of such solicitation, or (ii)
generalized searches for employees by use of advertisements in the media.
8. MISCELLANEOUS. Each Company agrees that unless and until a definitive
agreement between the parties with respect to any transaction has been executed
and delivered, neither Company will be under any legal obligation of any kind
whatsoever with respect to a transaction by virtue of this or any written or
oral expression with respect to such a transaction by any of our respective
Representatives except for the matters specifically agreed to in this agreement.
Each Company further acknowledges that neither Company shall have any obligation
to furnish Confidential Information to the other or to authorize or pursue with
the other any transaction. Each Company acknowledges and agrees that each
reserves the right, in it sole and absolute discretion, to reject any and all
proposals and to terminate discussions and negotiations with the other at any
time subject to the provisions set forth herein. The agreements set forth in
this agreement may be modified or waived only by a separate writing between the
parties hereto.
9. INJUNCTIVE RELIEF. It is further understood and agreed that money
damages would not be a sufficient remedy for any breach of this agreement by
either party or any of its Representatives and that the non-breaching party
shall be entitled to equitable relief, including injunction and specific
performance, as a remedy for any such breach. Such remedies shall not be deemed
to be the exclusive remedies for a breach of this letter agreement but shall be
in addition to all other remedies available at law or equity.
10. NO REPRESENTATION OR WARRANTY. Each Company understands and
acknowledges that neither Company, in its capacity as a Provider, nor such
Provider's Representatives, makes any representation or warranty, express or
implied, as to the accuracy or completeness of the Evaluation Material furnished
by or on behalf of such Provider and shall have no liability to the other
Company in its capacity as a Recipient or to any of such Recipient's
Representatives relating to or resulting from the use of the Evaluation Material
furnished to such Recipient or any errors therein or omissions therefrom. Only
those representations or warranties which are made in a final definitive
agreement regarding any transactions contemplated hereby, when, as and if
executed, and subject to such limitations and restrictions as may be specified
therein, will have any legal effect.
11. COMMONALITY OF INTEREST. To the extent that any Evaluation Material
may include materials subject to the attorney-client privilege, work product
doctrine or any other applicable privilege concerning pending or threatened
legal proceedings or governmental investigations, each Company understands and
agrees that the Companies have a commonality of interest with respect to such
matters and it is the desire, intention and mutual understanding of both
companies that the sharing of such material is not intended to, and shall not,
waive or diminish in any way the confidentiality of such material or its
continued protection under the attorney-client privilege, work product doctrine
or other applicable privilege. All Evaluation Material provided by either
Company that is entitled to protection under the attorney-client privilege, work
product doctrine or other applicable privilege shall remain entitled to such
protection under these privileges, this agreement, and under the joint defense
doctrine.
12. COMPLIANCE WITH SECURITIES LAWS. Each Company, in its capacity as a
Recipient, acknowledges and agrees that such Recipient is aware (and that such
Recipient's Representatives are aware or, upon receipt of any Evaluation
Material, will be advised by such Recipient) of the restrictions imposed by the
Unites States federal securities laws and other applicable foreign and domestic
laws on a person possessing material non-public information about a public
company and that such Recipient and such Recipient's Representatives will comply
with such laws.
13. NO WAIVER. Any forbearance or delay by either party in exercising any
right, power or privilege under the terms of this agreement shall not be
construed as a waiver thereof or of a right thereafter to enforce the same.
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14. NOTICES; CONSENTS. Any notice or consent called for by this agreement
shall be in writing or by means of an electronic communication method which
produces a written record, and shall be sent or transmitted to the respective
parties at the address shown below:
<TABLE>
<S> <C>
if to Morton: Morton International, Inc.
100 North Riverside Plaza
Chicago, Illinois 60606
Attention: Chief Executive Officer
if to RandH: Rohm and Haas Company
100 Independence Mall West
Philadelphia, Pennsylvania 19106
Attention: Chief Executive Officer
</TABLE>
15. SUCCESSORS AND ASSIGNS. This agreement shall inure to the benefit of
the parties hereto and shall be binding upon their respective successors and
assigns.
16. GOVERNING LAW. This agreement shall be governed by Illinois law,
without reference to its conflict of laws principles.
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IN WITNESS WHEREOF, the parties have cause this agreement to be executed
and delivered by their duly authorized representatives, this 24th day of
November, 1998.
MORTON INTERNATIONAL, INC.
By: /s/ S. JAY STEWART
----------------------------------------
Name: S. Jay Stewart
Title: Chairman and Chief
Executive Officer
ROHM AND HAAS COMPANY
By: /s/ BRADLEY J. BELL
----------------------------------------
Name: Bradley J. Bell
Title: Vice President and Chief
Financial Officer
5
<PAGE> 1
Exhibit 8
[Morton Logo]
February 5, 1999
Dear Shareholders:
I am pleased to inform you that Morton International, Inc. has entered into
a merger agreement with Rohm and Haas Company, pursuant to which a wholly-owned
subsidiary of Rohm and Haas has commenced a tender offer to purchase up to
80,916,766 shares (67% of Morton's outstanding shares) of Morton common stock
for $37.125 per share in cash. The tender offer is conditioned upon, among other
things, a minimum of a majority of Morton's shares outstanding on a fully
diluted basis being tendered and not withdrawn. The tender offer will be
followed by a merger, in which each share of Morton common stock not purchased
in the tender offer will be converted into the right to receive a number of
shares of Rohm and Haas common stock (or a combination of Rohm and Haas stock
and cash if fewer than 80,916,766 shares are purchased in the tender offer). The
number of Rohm and Haas shares issued in the merger in exchange for each Morton
share will be determined by reference to the average closing price of Rohm and
Haas common stock during the twenty trading day period ending two days before
the merger. If that average price is at least $27.90 and not more than $34.10,
the value of the Rohm and Haas shares (based on such average price) will be
$37.125. The merger agreement provides that the exchange ratio will be not less
than 1.088710 and not greater than 1.330645.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE ROHM AND HAAS
OFFER AND MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF MORTON AND ITS
SHAREHOLDERS AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE ROHM AND HAAS OFFER AND
TENDER THEIR SHARES OF COMMON STOCK PURSUANT TO IT.
Pursuant to the merger agreement, if the tender offer is completed but Rohm
and Haas does not receive the approvals by its stockholders necessary to issue
the full amount of Rohm and Haas stock in the merger, the merger consideration
will be adjusted to reduce the stock portion of the consideration such that
holders of Morton shares will receive, in the aggregate, the maximum number of
Rohm and Haas shares that may be issued by Rohm and Haas in the merger without a
stockholder vote under applicable laws and stock exchange regulations, with the
remainder of the consideration paid in cash. Furthermore, if the tender offer is
not completed in the first part of April, Rohm and Haas has agreed to terminate
the tender offer and the parties have agreed to seek to consummate a one-step
merger, subject to the approval of each company's shareholders and other
customary conditions. In such one-step merger, each Morton share would be
converted (based on the current number of outstanding Morton shares) into the
right to receive $24.874 in cash plus Rohm and Haas common stock based on an
exchange ratio that, within the trading average described above, would be valued
at $12.251.
Enclosed are the Rohm and Haas Offer to Purchase, dated February 5, 1999,
Letter of Transmittal and other related documents. These documents set forth the
terms and conditions of the tender offer. Attached is a copy of Morton's
Schedule 14D-9, as filed with the Securities and Exchange Commission. The
Schedule 14D-9 describes in more detail the reasons for your Board's conclusions
and contains other information relating to the tender offer. We urge you to
consider this information carefully.
Your Board of Directors and the management and employees of Morton thank
you for your continued support.
Sincerely,
/s/ S. Jay Stewart
S. Jay Stewart
Chairman and Chief Executive Officer
