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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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MELAMINE CHEMICALS, INC.
(NAME OF SUBJECT COMPANY)
MELAMINE CHEMICALS, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $.01 PAR VALUE PER SHARE,
AND ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS
(TITLE OF CLASS OF SECURITIES)
585332
(CUSIP NUMBER OF CLASS OF SECURITIES)
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WAYNE D. DELEO
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
MELAMINE CHEMICALS, INC.
HIGHWAY 18 WEST
DONALDSONVILLE, LOUISIANA 70346
(504) 473-3121
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO:
L. R. MCMILLAN, II
JONES, WALKER, WAECHTER,
POITEVENT, CARRERE & DENEGRE, L.L.P.
201 ST. CHARLES AVENUE
NEW ORLEANS, LOUISIANA 70170-5100
(504) 582-8000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Melamine Chemicals, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 39041 Highway 18 West, Donaldsonville, Louisiana 70346. The
title of the class of equity securities to which this statement relates is the
common stock, $0.01 par value per share, of the Company (the "Common Stock")
and the associated Preferred Share Purchase Rights ("Rights") issued pursuant
to the Rights Agreement described in Item 8 below. The Common Stock and
associated Rights are referred to herein as the "Shares."
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to a tender offer by MC Merger Corp. ("Offeror"), a
Delaware corporation, which is wholly owned by Borden Chemical, Inc.
("Parent"), a Delaware corporation, which is itself wholly owned by Borden,
Inc. ("Borden"), a New Jersey corporation, disclosed in a Tender Offer
Statement on Schedule 14D-1, dated October 15, 1997 (the "Schedule 14D-1"), to
purchase all of the outstanding Shares at a price of $20.50 per share (the
"Offer Price"), net to each seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated October 15, 1997 (the
"Offer to Purchase"), and the related Letter of Transmittal (which together
constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 9, 1997 (the "Merger Agreement"), among Parent, Offeror and the
Company. Borden has guaranteed Parent's obligations under the Merger
Agreement. The Merger Agreement provides, among other things, that as soon as
practicable after the consummation of the Offer and the satisfaction or waiver
of the other conditions set forth in the Merger Agreement, Offeror will be
merged with and into the Company (the "Merger"), and the Company will continue
as the surviving corporation (the "Surviving Corporation"). At the time of the
consummation of the Merger (the "Effective Time"), each then outstanding Share
(other than Shares owned by the Company, Parent, the Offeror, or any other
wholly owned subsidiary of Parent, or by stockholders, if any, who are
entitled to and who properly exercise and perfect appraisal rights under the
Delaware General Corporation Law (the "DGCL")) will be converted automatically
into the right to receive $20.50 in cash without interest thereon. The Merger
Agreement has been filed herewith as Exhibit (c)(1) and is incorporated herein
by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Offeror, Parent and Borden are located at 180 East Broad Street, Columbus,
Ohio 43215.
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.
(b) Set forth below is each material contract, agreement, arrangement and
understanding, and each actual or potential conflict of interest between the
Company or its affiliates and (i) its executive officers, directors or
affiliates or (ii) Offeror, its executive officers, directors or affiliates.
CERTAIN AGREEMENTS
Certain contracts, arrangements, agreements and undertakings between the
Company and certain of its directors and executive officers are described in
"The Board of Directors -- Compensation of Directors," "Executive Compensation
and Certain Transactions with Management -- Compensation Committee and Long-
Term Incentive Plan Committee Report on Executive Compensation," "-- Summary
of Executive Compensation," and "-- Compensation Pursuant to Plans" in the
Company's Information Statement furnished pursuant to Section 14(f) of the
Securities Exchange Act of 1934 (the "Exchange Act") and Rule 14f-1
thereunder, which appears as Schedule I hereto. Information regarding the
Company's Amended and Restated Long-Term Incentive Plan and 1996 Long-Term
Incentive Plan appears below under the caption "-- The Merger Agreement --
Company Stock Plans."
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THE MERGER AGREEMENT
A copy of the Offer to Purchase is enclosed with this Schedule 14D-9. The
summary of the Merger Agreement contained in the Offer to Purchase is
incorporated herein by reference. Such summary should be read in its entirety
for a more complete description of the terms and provisions of the Merger
Agreement, which has been filed as Exhibit (c)(1) hereto and is also
incorporated herein by reference. The following is a summary of certain
portions of the Merger Agreement that relate to arrangements among the
Company, Offeror, Parent, and the Company's executive officers and directors.
This summary is qualified in its entirety by reference to the Merger
Agreement.
Board Representation. The Merger Agreement provides that promptly upon
acceptance of the Shares for payment by Offeror pursuant to the Offer, Offeror
shall be entitled to designate such number of directors, rounded up to the
next whole number, as will give Offeror representation on the Board of
Directors of the Company (the "Board") equal to the percentage of the
outstanding Shares held by Offeror, and the Company shall, at such time, at
the election of Offeror either increase the size of the Board or use its best
efforts to cause the appropriate number of directors who are currently members
of the Board to resign and Offeror's designees to be appointed or elected;
provided, however, that until the Effective Time there shall be at least three
members of the Board who currently are members of the Board and who are not
designees, officers, directors, employees or affiliates of Parent or Offeror
or employees of the Company (the "Independent Directors"). The Merger
Agreement provides that if the number of Independent Directors shall be
reduced below three for any reason, the Board shall, subject to the approval
of the remaining Independent Directors, if any, fill the vacancy or vacancies
by designating one or more persons who were directors on October 9, 1997 and
are not officers, directors, employees or affiliates of Parent or Offeror or
employees of the Company. Information required pursuant to Section 14(f) of
the Exchange Act and Rule 14f-1 thereunder with respect to the foregoing is
furnished in Schedule I hereto.
Company Stock Plans. The Merger Agreement provides that under the terms of
the Company's Amended and Restated Long-Term Incentive Plan, effective July
31, 1987 (the "1987 Incentive Plan"), outstanding options granted thereunder
will terminate upon the consummation of the Offer, and the option holders will
be entitled, in exchange for their terminated options, to immediate payment by
the Company of an amount in cash equal to (i) the excess of the Offer Price
over the per share exercise price of the option multiplied by (ii) the number
of Shares that would have been received upon exercise of the terminated
option. As of October 10, 1997, executive officers of the Company as a group
held options under the 1987 Incentive Plan to purchase an aggregate of 215,000
Shares, of which 168,334 were vested.
Additionally, the Merger Agreement provides that under the Company's 1996
Long-Term Incentive Plan, effective September 9, 1996 (the "1996 Incentive
Plan"), all outstanding options granted thereunder accelerated and became
fully exercisable upon the Board's approval of the Offer and the Merger on
October 9, 1997. In accordance with the terms of the Merger Agreement and the
1996 Incentive Plan, the Company will cause the Personnel and Compensation
Committee of the Board to cancel all outstanding options granted under the
1996 Incentive Plan and will pay to each holder of such cancelled options,
upon consummation of the Offer, an amount in cash equal to the product of (i)
the excess of the Offer Price over the per share exercise price of each of the
cancelled options, multiplied by (ii) the number of Shares that would have
been received upon exercise of the cancelled options. As of October 10, 1997,
executive officers and directors of the Company as a group held options
granted under the Company's 1996 Incentive Plan to purchase an aggregate of
77,453 Shares, all of which were vested.
Director and Officer Indemnification and Insurance. The Merger Agreement
provides that the Company, and, from and after the Effective Time, the
Surviving Corporation, shall indemnify, defend and hold harmless the present
and former officers, directors, employees and agents of the Company against
all losses, expenses, claims, damages, liabilities, judgments and settlement
amounts that are paid or incurred in connection with actions or omissions
occurring on or prior to the Effective Time (including without limitation the
transactions contemplated by the Merger Agreement) to the fullest extent
permitted or required under Delaware law and, in
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the case of indemnification by the Surviving Company, to the fullest extent
permitted under Delaware law, the certificate of incorporation and the by-laws
of the Company in effect on October 9, 1997, including provisions relating to
advances of expenses in the defense of any action or suit.
The Merger Agreement also provides that the certificate of incorporation and
bylaws of the Surviving Corporation shall contain provisions no less favorable
with respect to exculpation and indemnification of directors and officers than
are set forth in the certificate of incorporation and bylaws of the Company,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at or prior to the
Effective Time were directors, officers, agents or employees of the Company or
who were otherwise entitled to indemnification pursuant thereto. The Company's
certificate of incorporation contains a provision that eliminates any
liability of the Company's directors for monetary damages for breach of their
fiduciary duty of care, subject to certain exceptions. In addition, the
Company's bylaws contain a provision requiring the Company to indemnify any
officer or director of the Company to the full extent permitted by the DGCL.
In addition, the Merger Agreement provides that Parent will cause the
Surviving Company to honor in accordance with their respective terms each of
the indemnity agreements between the Company and each of its officers and
directors as in effect on October 9, 1997 and will not terminate such
agreements prior to or after the Effective Time.
The Merger Agreement further provides that Company shall, and after the
consummation of the Offer, Parent shall cause the Company to maintain in
effect for not less than six years after the Effective Time, and for so long
thereafter as any claim asserted during such time has not been fully
adjudicated by a court of competent jurisdiction, the current policies of
directors' and officers' liability insurance maintained by the Company on
October 9, 1997 with respect to matters occurring through the Effective Time
and covering parties who are covered by such current policies. The Merger
Agreement further provides that, prior to consummation of the Offer, the
Company shall endeavor to, and shall be permitted to, satisfy its obligation
to maintain such insurance policies by extending coverage thereunder pursuant
to a six year "tail" policy, provided that the lump sum payment to purchase
such coverage does not exceed $250,000. If such a "tail" policy cannot be
purchased on such terms prior to the consummation of the Offer, then the
Company will be obligated under the Merger Agreement to endeavor to obtain
such coverage at the lowest premium cost reasonably available, provided that
the Company shall not be obligated to pay annual payments that exceed 200% of
the annual premium payment in effect on the date of the Merger Agreement.
Change of Control Agreements. The Merger Agreement provides that Parent
shall honor all change of control agreements between the Company and its
employees disclosed to it pursuant to the Merger Agreement. The terms of these
agreements are described in Schedule I hereto.
CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of the Confidentiality and
Standstill Agreement (the "Confidentiality Agreement") dated July 24,1997
between the Company and Parent filed as Exhibit (c)(2) hereto and incorporated
herein by reference. The summary is qualified in its entirety by reference to
the Confidentiality Agreement. Pursuant to the Confidentiality Agreement,
Parent agreed, among other things, to keep confidential certain nonpublic or
proprietary information of the Company furnished to Parent by or on behalf of
the Company and to use the confidential information solely for the purpose of
evaluating a possible transaction with the Company. Parent also agreed that
for a period of two years from the date of the Confidentiality Agreement,
neither Parent nor any of its affiliates shall, directly or indirectly,
without the prior written invitation of the Board, (i) in any manner, alone or
in concert with others, acquire, agree to acquire or make any proposal to
acquire, any securities or property of the Company or any of its subsidiaries,
(ii) enter into or agree, offer, seek or propose to enter into or otherwise be
involved in or part of, directly or indirectly, any merger, acquisition
transaction or other business combination relating to the Company, (iii) make
any solicitation of proxies to vote, or seek to advise or influence any person
with respect to the voting of, any voting securities of the Company, or (iv)
otherwise seek, alone or in concert with others, to control or influence the
management, Board or policies of the
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Company. The negotiations and other actions that led to the execution and
delivery of the Merger Agreement and the Tender Agreement (referred to below)
occurred at the request of the Company's Board of Directors in accordance with
the Confidentiality Agreement.
TENDER AGREEMENT
ChemFirst, Inc. ("ChemFirst"), which holds approximately 23% of the
outstanding Shares, has agreed to tender pursuant to the Offer all of the
Shares held by it under a Tender Agreement dated as of October 9, 1997 by and
among ChemFirst, Parent and Offeror. Under the terms of this agreement,
ChemFirst has further agreed to, among other things, vote all of the Shares
held by it in favor of the Merger and against any other agreement or action
that would impede, interfere with, delay or postpone the Merger or the Offer.
BUSINESS DEALINGS WITH PARENT
In the ordinary course of its business, the Company sells melamine crystal
to Parent and its affiliates for their use in connection with the
manufacturing of thermosetting resins. For the fiscal years ended June 30,
1995, 1996 and 1997, the Company sold $2.3 million, $2.4 million and $2.6
million of melamine crystal to Parent and its affiliates, respectively, which
constituted 5.0%, 4.3% and 4.4% of the Company's total sales for such
respective periods.
BONUS TO OFFICER
On October 1, 1997, the Board authorized the Company to pay Wayne D. DeLeo,
the Company's vice president and chief financial officer, a special cash bonus
in the amount of $50,000 on November 30, 1997 in recognition of Mr. DeLeo's
extraordinary service over the prior year in connection with negotiating a
technology sharing agreement and exploring the Company's strategic
alternatives.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board
The Board has approved, by unanimous vote of the directors present, the
Offer, the Merger and the Merger Agreement, has determined that the
consideration to be paid for the Shares in connection with the Offer and the
Merger is fair to the stockholders of the Company, and has determined that the
Offer and the Merger are otherwise in the best interests of the Company and
its stockholders. The Board recommends that all stockholders accept the Offer
and tender their Shares pursuant thereto.
(b) Background; Reasons for the Recommendation
(1) Background. The Company was formed in 1968 by Ashland Inc. ("Ashland")
and a predecessor of ChemFirst, each of which owned 50% of the Company's stock
prior to the Company's initial public offering in August 1987. At all times
since the Company's initial public offering Ashland and ChemFirst have each
held approximately 23% or more of the outstanding Shares.
From time to time over the last several years, the Company's Board has
considered a variety of strategic alternatives designed to enhance stockholder
value through expansion, diversification or a change of control. Such
alternatives have included the expansion of the Company's melamine plant in
Donaldsonville, Louisiana (including the possible construction of the
Company's own urea plant), domestic and international joint ventures to build
new melamine plants, strategic partnerships, technology licensing
arrangements, and change of control transactions, such as a merger or
management buyout. Over the same period, the Company has explored with its
principal stockholders various ways that they might be able to liquidate their
investment in the Company.
On June 10, 1997, the Company's president and chief executive officer,
Frederic R. Huber, was approached by the chief executive officer of another
company (the "Initial Bidder"), who expressed an interest in acquiring
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the Company for cash at an unspecified price. On June 11, Mr. Huber and two
other officers of the Company met with the Initial Bidder's chief executive
officer to gain a better understanding of the Initial Bidder's proposal and
its ability to finance an acquisition of the Company.
At a special meeting of the Board held on June 12, 1997, Mr. Huber advised
the Board that the Initial Bidder appeared seriously interested in making such
an acquisition and capable of doing so, and the Board authorized management to
continue to discuss that possibility with the Initial Bidder. Thereafter, the
Company entered into a confidentiality and standstill agreement with the
Initial Bidder, and the Initial Bidder commenced a due diligence review of the
Company.
On June 27, 1997, while discussions continued with the Initial Bidder, James
W. Crook, the chairman of the board of the Company, received a letter from
Paul W. Chellgren, the chairman of the board and chief executive officer of
Ashland, offering, subject to certain conditions, to acquire all of the
outstanding common stock of the Company not already owned by Ashland for
$12.50 per share. Ashland publicly disclosed the offer in a Schedule 13D
report, which was filed with the Securities and Exchange Commission ("SEC") on
June 30.
At a special meeting of the Board held on July 3, 1997, the Board authorized
management to engage an investment banking firm to assist the Company with its
evaluation of Ashland's offer, its continuing discussions with the Initial
Bidder, and its evaluation of any other alternatives. Pursuant to that
authority, the Company engaged Goldman, Sachs & Co. ("Goldman Sachs") as its
financial advisor on July 10 to assist the Company in evaluating its options.
During the week of July 21, 1997, at the request of the Board, Goldman Sachs
commenced discussions with selected parties that it and management believed
might be interested in and capable of acquiring the Company. Several of those
parties, including Parent, entered into confidentiality and standstill
agreements and engaged in varying degrees of due diligence activities,
including management presentations, site visits and access to confidential
financial, technical and other information. Ashland declined to enter into a
confidentiality and standstill agreement substantially in the form entered
into by other prospective purchasers, and consequently did not engage in
similar due diligence activities.
On August 14, 1997, Mr. Crook received a letter from Mr. Chellgren in which
Ashland increased its offer from $12.50 to $14.75 per share. Mr. Chellgren
reiterated Ashland's previously stated unwillingness to enter into a
standstill agreement, but stated that it was still Ashland's strong preference
to work with the Company toward a negotiated transaction. Ashland publicly
disclosed the increased offer in an amendment to its Schedule 13D, which was
filed with the SEC on August 15.
The Company publicly announced on August 26, 1997 that it was continuing to
review the Ashland offer and other alternatives, including the possible sale
to buyers other than Ashland. In response to that announcement, Mr. Chellgren
sent a letter to Mr. Crook on August 26 stating that Ashland was pleased that
the Company was conducting a structured process to solicit acquisition
proposals from other potential buyers and confirming that Ashland's $14.75
offer remained outstanding. Ashland publicly disclosed its August 26 letter in
an amendment to its Schedule 13D, which was filed with the SEC on August 27.
During the weeks of September 7 and 14, 1997, the Company provided the
prospective purchasers, including Parent but not Ashland, with a proposed form
of merger agreement and each such prospective purchaser was asked to provide
the Company with a firm offer and a proposed mark-up of the draft agreement.
The Company received final proposals from the remaining prospective
purchasers, including Parent, in late September. During that time,
representatives of the Company and the prospective purchasers negotiated the
terms and form of merger agreement and related agreements and held discussions
regarding various legal and business issues, including the price and other
financial terms of the proposed transaction.
Contemporaneously with the merger negotiations, the Company was also engaged
in negotiations with Mississippi Chemical Company ("MCC") and MCC's wholly
owned subsidiary, Triad Nitrogen, Inc. ("TNI"),
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regarding (i) a 25-year extension of a feedstock agreement with TNI, pursuant
to which the Company purchases from TNI all of its requirements of urea and
ammonia, the principal raw materials for its melamine production operations,
and (ii) a 27-year extension of its site lease, pursuant to which the Company
leases from TNI the land on which its plant and administrative offices are
located. The feedstock and site lease agreements would otherwise expire in
2000, subject, in the case of the site lease, to the Company's option to
extend. Most of the prospective purchasers, including Parent, had indicated
that satisfactory extensions of those agreements would be a condition to their
willingness to enter into a merger agreement with the Company.
At a special meeting of the Board on the afternoon of October 1, 1997,
management, Company counsel and representatives of Goldman Sachs reported on
the status of discussions and negotiations with all prospective purchasers,
including Ashland, and compared the principal terms offered by each
prospective purchaser. Goldman Sachs also discussed the Company's stock price
history and various financial analyses. At the conclusion of that meeting, the
Board determined that Parent had submitted the most attractive proposal and
authorized management, Company counsel and Goldman Sachs to attempt to
complete their negotiations of a definitive merger agreement. At the direction
of the Board, Goldman Sachs provided Ashland with an update regarding the
process. Over the next four days, management and Company counsel continued to
work with Parent's counsel to finalize the Merger Agreement and related
documents.
At a special meeting of the Board on October 6, 1997, management, Company
counsel, and representatives of Goldman Sachs reported on the status of
negotiations with Parent and reviewed the terms of the Offer and the Merger,
and Goldman Sachs discussed again its analyses. Additionally, management
reported on the status of negotiations with TNI concerning the proposed
extensions of the feedstock and site lease agreements. Because MCC and TNI had
not yet completed their review of those agreements and Parent had conditioned
its proposal on satisfactory resolution of such agreements, action on the
Merger Agreement was deferred until those agreements could be finalized and
approved by MCC and TNI.
At a special meeting of the Board on October 9, 1997, management reported
that the feedstock and site lease agreements had been approved by MCC and TNI
and would be executed that afternoon in a form acceptable to Parent. In
addition, management, Company counsel and Goldman Sachs reported that there
had been no substantive change in the status of negotiations with Parent with
respect to the Merger Agreement and that management recommended approval of
the Merger Agreement in substantially the form presented to the Board at the
October 6 meeting. Additionally, Goldman Sachs furnished to the Board its
opinion that, as of such date and based upon and subject to certain matters
and assumptions, the cash consideration of $20.50 per Share to be received by
the holders of the Shares in connection with the Offer and the Merger was fair
from a financial point of view to such holders. Following discussion, the
Board approved, by unanimous vote of the directors present, the Merger
Agreement and determined to recommend that stockholders accept the Offer and
tender their Shares pursuant thereto. The Merger Agreement was executed and
publicly announced on the evening of October 9, 1997. On October 10, 1997,
Ashland issued a press release indicating that, based on the limited
information then available, it would be willing to withdraw its $14.75 per
share offer and tender its Shares in connection with the Offer.
Two members of the Board, David D'Antoni and Scotty B. Patrick, are officers
of Ashland. As a result, from the time that Ashland first indicated an
interest in acquiring the Company on June 27, 1997, through the approval of
the Merger Agreement on October 9, 1997, Messrs. D'Antoni and Patrick did not
receive any information regarding the status of discussions with other
prospective bidders, did not participate in any Board deliberations regarding
those discussions, and did not vote on any of the matters described above,
other than the approvals of the feedstock and site lease agreements.
Accordingly, statements to the effect that certain matters pertaining to
Parent's proposal were approved by the Board refer only to the votes of the
other six directors (all of whom participated in the applicable Board
meetings). Shortly after the execution of the Merger Agreement, Messrs.
D'Antoni and Patrick advised the Company that they fully supported the Offer
and the Merger.
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(2) Reasons for the Recommendation. In approving the Merger Agreement and
the transactions contemplated thereby, and in recommending that all
stockholders of the Company tender their Shares pursuant to the Offer, the
Board considered a number of factors, including:
(a) the terms of the Merger Agreement;
(b) the financial condition, results of operations, business and
prospects of the Company;
(c) the significant competition in the Company's markets from other
large, well-financed chemical manufacturers;
(d) the difficulties faced by any single-product, single-plant company in
achieving growth and expansion, and the difficulties experienced in recent
years by the Company in attempting to achieve these objectives;
(e) that the $20.50 per Share cash consideration to be received by the
stockholders represents a significant premium over the trading price of the
Shares in late June 1997, immediately prior to the commencement of the
process described above;
(f) the opinion dated October 9, 1997 of Goldman Sachs that, as of
October 9, 1997 and based upon and subject to certain matters and
assumptions, the cash consideration of $20.50 per Share to be received by
the holders of Shares in the Offer and the Merger was fair from a financial
point of view to such holders;
(g) that the Merger Agreement, while not permitting the Company to
continue to solicit or initiate discussions with other prospective
purchasers, permits the Company under certain specified circumstances to
furnish information to, and negotiate or participate in discussions with,
third parties;
(h) that before recommending the Offer and the Merger Agreement, the
Company, with assistance from Goldman Sachs, solicited acquisition interest
from third parties that did not result in alternative proposals on more
favorable terms;
(i) the reasonableness of the termination fee requirements in the Merger
Agreement; and
(j) the limited number of conditions to the obligations of Parent and
Offeror to consummate the Offer and the Merger, including the absence of a
financing condition in the Offer.
The Board did not assign relative weights to the foregoing factors or
determine that any factor was of more importance than other factors. Rather,
the Board viewed its conclusions and recommendations as being based on the
totality of the information presented to and considered by it.
A copy of the written opinion of Goldman Sachs, which sets forth the factors
considered, assumptions made and any limitations on its review, is attached as
Exhibit (a)(6) to this Schedule 14D-9. Stockholders are urged to read the
opinion of Goldman Sachs carefully and in its entirety.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated July 10, 1997 (the "Engagement
Letter"), the Company retained Goldman Sachs to act as its financial advisor
in connection with the possible sale of all or part of the Company. Under the
terms of the Engagement Letter, the Company paid Goldman Sachs an initial fee
of $150,000 upon execution of the Engagement Letter and agreed to pay Goldman
Sachs an opinion fee of $500,000 upon delivery of a fairness opinion and a
transaction fee payable upon consummation of the Offer equal to 1.75% of the
aggregate consideration up to $12.50 per Share plus 3% of the aggregate
consideration in excess of $12.50 per Share against which the initial fee and
opinion fee are creditable. In addition, the Engagement Letter provides that
the Company will reimburse Goldman Sachs for its out-of-pocket expenses and
will indemnify Goldman Sachs against certain liabilities, including
liabilities arising under the federal securities laws.
In the past, Goldman Sachs has performed certain investment banking services
for the Company and Parent and has received customary fees for such services.
In the ordinary course of its business, Goldman Sachs and its
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affiliates may actively trade the equity securities of the Company for their
own accounts and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) On August 6, 1997, pursuant to the 1996 Incentive Plan and in accordance
with customary practice, the Company issued options to purchase an aggregate
of 70,000 Shares at $13.875 per Share to the executive officers of the Company
indicted below:
<TABLE>
<CAPTION>
NAME: SHARES SUBJECT TO OPTIONS:
----- --------------------------
<S> <C>
James W. Crook................................. 15,000
Frederic R. Huber.............................. 15,000
Martin Lapari.................................. 15,000
Wayne D. DeLeo................................. 15,000
William A. Sorensen............................ 10,000
</TABLE>
(b) On August 26, 1997, Mr. Crook, the Company's chairman, exercised an
option to purchase 50,000 Shares at an exercise price of $12.75 per Share.
(c) On September 11, 1997, the Company paid a special bonus to Mr. Lapari,
the Company's vice president of manufacturing and engineering, in the amount
of $67,187.50, less applicable withholding taxes, representing the aggregate
value of an option to purchase 20,000 Shares that expired on August 26, 1997.
(d) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director and affiliate of the Company currently intends to tender to Offeror
all Shares held of record or beneficially by such persons.
(e) As indicated above, ChemFirst has entered into an agreement with Parent
and Offeror whereby it has agreed to tender its Shares in connection with the
Offer.
(f) As indicated above, in a press release dated October 10, 1997, Ashland
indicated that, based on the limited information then available, it would be
willing to withdraw its $14.75 per Share offer and tender its Shares in
connection with the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, no negotiation is being
undertaken or is underway by the Company in response to the Offer that 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) There are no transactions, board resolutions, agreements in principle,
or signed contracts in response to the Offer, other than as described in Item
3(b) or in Item 8 of this Schedule 14D-9 (which is hereby incorporated herein
by reference), that relate to or would result in one or more of the matters
referred to in Item 7(a)(i), (ii), (iii) or (iv).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
RIGHTS AGREEMENT
The Board entered into a Rights Agreement (the "Rights Agreement") dated as
of November 5, 1990, with Wachovia Bank and Trust Company, N.A. (now Wachovia
Bank, N.A.), as Rights Agent (the "Agent"), which
8
<PAGE>
was amended by an Amendment dated as of August 7, 1991 (the "First
Amendment"), a Second Amendment to Rights Agreement dated as of August 3, 1994
(the "Second Amendment"), a Third Amendment of Rights Agreement dated as of
October 9, 1997 (the "Third Amendment") and a Fourth Amendment of Rights
Agreement dated as of October 9, 1997 (the "Fourth Amendment"), each between
the Company and the Agent. The purpose of the Rights Agreement is to protect
the stockholders of the Company against rapid accumulations of Shares by
hostile bidders and unsolicited coercive tender offers at inadequate prices by
offerors who decline to negotiate with the Board as the representative of the
stockholders. The Rights may cause substantial ownership dilution to a person
or group who attempts to acquire the Company without the approval of the
Board.
Pursuant to the Rights Agreement, on November 5, 1990, the Board declared a
dividend of one share purchase right (a "Right") for each outstanding share of
Common Stock. Under certain conditions, each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock, no par value, (the "Preferred Shares"),
of the Company at a price of $30 per one one-hundredth of a Preferred Share,
subject to adjustment. The Rights, which do not have any voting privileges,
expire on November 15, 1998, and may be redeemed by the Company at a price of
$0.01 per Right at any time prior to the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 10% or more of the
outstanding Shares.
The Rights may not be exercised until the earlier to occur of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired beneficial ownership
of 10% or more of the outstanding Shares (or any outstanding Shares in the
case of Ashland and ChemFirst) or (ii) 10 business days (or such later date as
may be determined by action of the Board prior to such time as any Person
becomes an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a person or group of 10% or
more of such outstanding Shares (or any outstanding Shares in the case of
Ashland and ChemFirst) (the earlier of such dates being called the
"Distribution Date"). The Rights Agreement provides that, until the
Distribution Date, the Rights will be transferred with and only with the
Shares.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its assets or earning power are
sold, proper provision will be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right. In the event any person
becomes an Acquiring Person, proper provision shall be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring
Person (which will thereafter be void), will thereafter have the right to
receive upon exercise that number of Shares bearing a market value of two
times the exercise price of the Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
Common Shares and prior to the acquisition by such person or group of 50% or
more of the outstanding Shares, the Board may exchange the Rights (other than
Rights owned by such person or group which have become void), in whole or in
part, at an exchange ratio of one Share, or one one-hundredth of a Preferred
Share (or of a share of a class or series of the Company's preferred stock
having equivalent rights, preferences and privileges), per Right (subject to
adjustment).
The purpose of the First Amendment, the Second Amendment and the Third
Amendment was to extend the Final Expiration Date to November 15, 1991, 1994
and 1998, respectively. Consistent with the Board's approval and adoption of
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, and its recommendation that all stockholders accept the
Offer and tender their Shares in response to it, the Board approved on October
9, 1997 a Fourth Amendment to the Rights Agreement exempting the Merger
Agreement, the Offer and the Merger from the restrictions imposed on offerors
generally by the Rights Agreement and providing that the Rights will expire at
the consummation of the Offer.
9
<PAGE>
CERTIFICATE OF INCORPORATION
Article Ninth of the certificate of incorporation of the Company contains
provisions that are intended to protect stockholders against a second-step
forced merger with a hostile acquiror at an inadequate price following a
successful unsolicited coercive tender offer. For the reasons described in the
preceding paragraph, the Board voted on October 9, 1997 to exempt the Offer and
the Merger from the restrictions imposed by Article Ninth.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
(a)(1)*+ Offer to Purchase dated October 15, 1997.
(a)(2)*+ Letter of Transmittal.
(a)(3) Press release issued by Parent and the Company dated October 9,
1997 (incorporated by reference to the Company's Current Report on
Form 8-K, dated October 9, 1997).
(a)(4)* Letter to stockholders of the Company dated October 15, 1997.
(a)(5)+ Form of Summary Advertisement dated October 15, 1997.
(a)(6)* Opinion dated October 9, 1997 of Goldman Sachs & Co.
(c)(1)+ Agreement and Plan of Merger dated as of October 9, 1997 by and
among the Company, Parent and Offeror.
(c)(2) Confidentiality and Standstill Agreement dated July 24, 1997
between the Company and Parent.
(c)(3) 1996 Long-Term Incentive Compensation Plan (incorporated by
reference to the Company's Registration Statement on Form S-8
filed on October 3, 1997 (Registration Number 333-37127)).
(c)(4) Amended and Restated Long-Term Incentive Plan (incorporated by
reference to the Company's Annual Report on Form 10-K filed on
September 26, 1997 for the fiscal year ended June 30, 1997).
(c)(5) Form of Director Indemnity Agreement (incorporated by reference to
the Company's registration statement on Form S-1 filed on June 23,
1987 (Registration Number 33-15181)).
(c)(6) Form of Change of Control Agreement (incorporated by reference to
the Company's Annual Report on Form 10-K filed on September 26,
1997 for the fiscal year ended June 30, 1997).
(c)(7)+ Tender Agreement dated as of October 9, 1997 among Parent, Sub and
ChemFirst.
</TABLE>
- --------
* Included in materials delivered to stockholders of the Company.
+ Filed as an exhibit to Offeror's Tender Offer Statement on Schedule 14D-1
dated October 15, 1997 and incorporated herein by reference.
10
<PAGE>
SIGNATURES
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.
Date: October 15, 1997
MELAMINE CHEMICALS, INC.
/s/ Frederic R. Huber
By __________________________________
Frederic R. Huber
President and Chief Executive
Officer
<PAGE>
SCHEDULE I
MELAMINE CHEMICALS, INC.
HIGHWAY 18 WEST
DONALDSONVILLE, LOUISIANA 70346
----------------
INFORMATION STATEMENT
PURSUANT TO SECTION 14(F)
OF THE
SECURITIES EXCHANGE ACT OF 1934
AND
RULE 14F-1 THEREUNDER
----------------
This Information Statement is being furnished as part of the
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
of Melamine Chemicals, Inc. (the "Company") to be mailed on or about October
16, 1997 to stockholders of record of the Company in connection with the
transactions contemplated by the Agreement and Plan of Merger (the "Merger
Agreement") dated as of October 9, 1997, by and among the Company, Borden
Chemical, Inc. ("Parent") and MC Merger Corp. (the "Offeror"). Capitalized
terms used herein and not otherwise defined shall have the meanings set forth
in the Schedule 14D-9. You are receiving this Information Statement in
connection with the possible election of persons designated by the Offeror to
hold at least a majority of the positions on the board of directors of the
Company (the "Board"). The Merger Agreement requires the Company, upon
acceptance for payment by the Offeror for the Shares pursuant to the Offer, at
the election of the Offeror to either increase the size of the Board or use
its best efforts to cause an appropriate number of the members of the Board to
resign and for the Offeror's designees to be elected or appointed to the Board
under the circumstances described therein. See "The Board of Directors--Right
of Offeror to Designate Directors."
Pursuant to the Merger Agreement, the Offeror commenced the Offer on October
15, 1997. The Offer is scheduled to expire on November 13, 1997, unless the
Offer is extended. The Merger Agreement provides that, following the
consummation of the Offer and the satisfaction or waiver of certain
conditions, the Offeror will be merged with and into the Company (the
"Merger"). As a result of the Offer and the Merger, the Company will become a
wholly-owned subsidiary of Parent.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 promulgated thereunder. You are urged to
read this information statement carefully. You are not, however, required to
take any action in connection with this Information Statement.
The information contained in this Information Statement concerning the
Offeror's designees has been furnished to the Company by Parent and the
Offeror, and the Company assumes no responsibility for the accuracy or
completeness of such information.
<PAGE>
THE BOARD OF DIRECTORS
GENERAL
The common stock, $.01 par value per share, of the Company (the "Common
Stock") is the only class of voting securities of the Company outstanding.
Each share of Common Stock entitles the holder to cast one vote with respect
to matters submitted to the Company's stockholders for their consideration or
approval. As of October 14, 1997, there were 5,627,934 shares of Common Stock
outstanding. Pursuant to authority granted to it under the Company's by-laws,
the Board has fixed the size of the Board at eight members. All eight of the
Company's current directors serve staggered three-year terms. Each director
holds office until such director's successor is elected and qualified or until
such director's earlier resignation or removal. Vacancies in the Board may be
filled by the Board; any director chosen to fill a vacancy will hold office
until the next election of directors for the class of directors to which he
has been allocated or until his successor is elected and qualified.
RIGHT OF OFFEROR TO DESIGNATE DIRECTORS
The Merger Agreement provides that upon acceptance for payment for the
Shares by the Offeror pursuant to the Offer, the Offeror will be entitled to
designate such number of directors, rounded up to the next whole number, that
will confer upon the Offeror representation on the Board equal to at least
that number of directors equal to the product of (i) the total number of
directors on the Board and (ii) the percentage that the number of Shares so
purchased by the Offeror bears to the number of Shares outstanding, and the
Company is required, at such time, at the option of the Offeror to either
increase the size of the Board or to use its best efforts to cause the
appropriate number of directors to resign and the Offeror's designees to be
appointed or elected. The Offeror has informed the Company that each of the
Offeror's designees named herein has consented to act as a director. Until the
consummation of the Merger, the Company is required to maintain on the Board,
to the extent they are willing to serve, at least three directors who were
directors on October 9, 1997 and who are not designees, officers, directors,
employees or affiliates of Parent or the Offeror, or employees of the Company.
OFFEROR DESIGNEES
The Offeror and Parent have advised the Company that they currently intend
to designate one or more of the persons listed on Schedule I to the Offer to
Purchase, which Schedule I is incorporated herein by reference, to serve as
directors of the Company. The Offeror and Parent have advised the Company that
all of such persons have consented to act as directors of the Company, if so
designated.
Sch I-2
<PAGE>
CURRENT DIRECTORS OF THE COMPANY
The following table sets forth certain information as of October 14, 1997
regarding the current directors of the Company. Unless otherwise indicated,
each director has been engaged in the principal occupation shown for more than
the past five years.
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION AND DIRECTORSHIPS IN OTHER DIRECTOR TERM
PUBLIC CORPORATIONS SINCE EXPIRES
---------------------------------------------------------- -------- -------
<S> <C> <C>
Nilon H. Prater, 68.......................................... 1991 1997
Retired Corporate Executive: Director, Calgon Carbon
Corporation; Director, Harsco Corporation; Director, Koppers
Industries, Inc.
Daniel D. Reneau, 57......................................... 1987 1997
President, Louisiana Tech University
David J. D'Antoni, 52........................................ 1992 1998
President, Ashland Chemical Company and Senior Vice
President, Ashland Inc.; Director, State Auto Financial
Corporation
Frederic R. Huber, 62........................................ 1996 1998
President and Chief Executive Officer, Melamine Chemicals,
Inc.
R. Michael Summerford, 49.................................... 1983 1998
Vice President and Chief Financial Officer, ChemFirst, Inc.
(or a predecessor company); Director, Getchell Gold
Corporation
James W. Crook, 67........................................... 1972 1999
Chairman of the Board of the Company; Director, ChemFirst,
Inc.
Charles M. McAuley, 64....................................... 1979 1999
Retired Corporate Executive(1)
Scotty B. Patrick, 62........................................ 1968 1999
Group Vice President, Petrochemical and Technical, Ashland
Chemical Company
</TABLE>
- --------
(1) From April 1992 to August 1994, Mr. McAuley served as President, Chief
Executive Officer and a Director of FirstMiss Gold Inc.
----------------
During the fiscal year ended June 30, 1997, the Board held five meetings.
All of the directors attended 75% or more of the aggregate number of meetings
of the Board and committees of which they were members.
The Board has no nominating committee. The Board has an Audit Committee on
which Messrs. Patrick, Prater and McAuley serve. The Audit Committee has
general responsibility for meeting from time to time with representatives of
the Company's independent public accountants in order to obtain an assessment
of the financial position and results of operations of the Company and to
report to the Board with respect thereto. The Committee met two times during
fiscal year 1997. The Board also has a Personnel and Compensation Committee
(the "Compensation Committee") on which Messrs. Prater, Summerford and Reneau
serve. The Compensation Committee has general responsibility for the
administration of certain of the Company's employee benefit plans and of the
Company's compensation structure. The Compensation Committee met four times
during fiscal year 1997. The Long-Term Incentive Plan Committee, on which
Messrs. Reneau and Prater serve, administers the 1996 Incentive Plan and
determines the type, size and recipients of awards granted thereunder. This
committee met once during fiscal year 1997.
COMPENSATION OF DIRECTORS
During the period July 1, 1996 through June 30, 1997, non-employee directors
were compensated for their services at the rate of $800 per month and $800 per
day for attendance at board and committee meetings. The Chairman of each
committee receives an additional $100 per meeting. Each non-employee director
is also
Sch I-3
<PAGE>
entitled to receive a grant of stock options each year. The number of options
granted to each non-employee director is equal to the amount of cash
compensation paid to the director by the Company for services as a director
during the preceding twelve months divided by the per share fair market value
of the Common Stock. On November 13, 1996, Mr. McAuley was granted an option
to purchase 1,909 shares; Mr. Prater was granted an option to purchase 1,698
shares; and Messrs. Reneau and Summerford were each granted an option to
purchase 1,923 shares. Messrs. D'Antoni and Patrick have waived their right to
receive directors' fees and options. Directors are reimbursed for travel
expenses to and from meetings upon request. No fees are paid for informal
meetings or meetings held by telephone conference call. The Company furnishes
each director with $50,000 in accidental death and dismemberment insurance
protection at an annual premium cost of approximately $31 per director.
SECURITY HOLDINGS OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN BENEFICIAL OWNERS
HOLDINGS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of October 14, 1997
concerning the beneficial ownership of the Company's Common Stock by each
director and each executive officer named in the Summary Compensation Table
appearing elsewhere herein. Unless otherwise noted, all shares shown as
beneficially owned are held with sole voting and investment power.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
BENEFICIALLY OF
NAME OWNED CLASS
- ---- ------------ -------
<S> <C> <C>
Current Directors and Executive Officers
James W. Crook....................................... 121,667(1) 2.1%
David J. D'Antoni.................................... 11,370(2) (3)
Frederic R. Huber.................................... 86,141(4) 1.5%
Charles M. McAuley................................... 2,109(5) (3)
Scotty B. Patrick.................................... 21,000 (3)
Nick H. Prater....................................... 2,698(6) (3)
Daniel D. Reneau..................................... 2,547(7) (3)
R. Michael Summerford................................ 2,123(8) (3)
Wayne D. DeLeo....................................... 57,042(9) 1.0%
Martin F. Lapari..................................... 53,589(10) (3)
William A. Sorensen.................................. 30,834(11) (3)
Offeror Designees
Persons listed on Schedule 1 to the Offer to Pur-
chase............................................... -- (3)
All directors, Offeror Designees and executive offi-
cers as a group..................................... 391,120(12) 6.5%
</TABLE>
- --------
(1) Includes 56,667 shares which Mr. Crook may purchase under immediately
exercisable options. Does not include 1,275,000 shares held by ChemFirst
with respect to which Mr. Crook shares voting and investment power as a
member of the ChemFirst Board of Directors.
(2) Includes 10,870 shares owned by Mr. D'Antoni's wife and son.
(3) Less than 1%.
(4) Includes 800 shares owned by Mr. Huber's wife, children and mother-in-law
and 63,333 shares which Mr. Huber may purchase under immediately
exercisable options.
(5) Includes 1,909 shares which Mr. McAuley may purchase under immediately
exercisable options.
(6) Includes 1,698 shares which Mr. Preter may purchase under immediately
exercisable options.
(7) Includes 24 shares owned by Mr. Reneau's son and 1,923 shares which Mr.
Reneau may purchase under immediately exercisable options.
(8) Includes 1,923 shares which Mr. Summerford may purchase under immediately
exercisable options.
(9) Includes 47,500 shares which Mr. DeLeo may purchase under immediately
exercisable options.
Sch I-4
<PAGE>
(10) Includes 40,000 shares which Mr. Lapari may purchase under immediately
exercisable options.
(11) Includes 30,834 shares which Mr. Sorensen may purchase under immediately
exercisable options.
(12) Includes 238,334 shares that executive officers may purchase under
immediately exercisable options.
HOLDINGS OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding ownership of the
Company's Common Stock by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock. Unless
otherwise noted, all shares shown as beneficially owned are held with sole
voting and investment power.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OWNED CLASS
- ---------------- ------------ -------
<S> <C> <C>
Ashland Inc............................................ 1,275,000(1) 22.7%
5200 Blazer Parkway
Dublin, OH 43017
ChemFirst, Inc......................................... 1,275,000(2) 22.7%
700 North Street
Jackson, MS 39215-1249
The Killen Group, Inc.................................. 465,925(3) 8.3%
1189 Lancaster Avenue
Berwyn, PA 19312
Laifer Capital Management, Inc......................... 430,300(4) 7.6%
45 West 45th Street
New York, NY 10036
Dimensional Fund Advisors, Inc......................... 370,000(5) 6.6%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
SAFECO Corporation..................................... 326,200(6) 5.8%
SAFECO Plaza
Seattle, WA 98185
</TABLE>
- --------
(1) As reported on Amendment No. 3 to Schedule 13D dated October 10, 1997 and
filed with the SEC.
(2) As reported on Schedule 13G dated February 8, 1988 and filed with the SEC.
Pursuant to a Tender Agreement, dated October 9, 1997, between ChemFirst,
Parent and Offeror, Parent and Offeror now hold voting power of these
Shares with respect to certain matters as described more fully in the
Schedule 14D-1.
(3) As reported on Amendment No. 4 to Schedule 13G dated February 14, 1997 and
filed with the SEC. Sole voting power is held only with respect to 144,500
of such shares.
(4) As reported on Form 13F dated August 13, 1997 and filed with the SEC. Sole
voting power is held only with respect of 294,900 of such shares.
(5) As reported on Amendment No. 5 to Schedule 13G dated February 5, 1997 and
filed with the SEC. Dimensional Fund Advisors Inc. ("Dimensional"), a
registered investment advisor, is deemed to have beneficial ownership of
370,000 shares of the Common Stock as of December 31, 1996, all of which
shares are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in series of the DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares. Sole voting power is held only with respect of 252,900 of such
shares.
(6) As reported on Form 13F dated June 30, 1997 and filed with the SEC.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and greater-than-10% stockholders to file with
the SEC reports of beneficial ownership of the Company's Common Stock. During
1997, Mr. William A. Sorensen, the Company's Vice President of Sales and
Marketing, inadvertently filed late one report relating to one transaction.
Sch I-5
<PAGE>
EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS WITH MANAGEMENT
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation paid
by the Company for services rendered in all capacities during the fiscal years
ended June 30, 1995, 1996 and 1997 by each person who served as Chief
Executive Officer and each other executive officer who received compensation
totaling $100,000 or more for services rendered during the most recently
completed fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------ ------------
NUMBER OF
SHARES
NAME AND PRINCIPAL FISCAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
------------------ ------ -------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Frederic R. Huber....... 1997 $209,250 $198,361 10,000 $8,370
President and Chief 1996 191,735 71,050 15,000 7,669
Executive Officer 1995 179,907 86,394 15,000 7,196
Wayne D. DeLeo.......... 1997 $140,828 $101,550 10,000 $5,440
Vice President and 1996 120,185 44,100 10,000 4,635
Chief Financial Officer 1995 109,859 28,547 7,500 4,233
Martin F. Lapari........ 1997 $135,013 $ 96,376 10,000 $5,216
Vice President of 1996 114,841 42,140 10,000 4,429
Manufacturing and
Engineering 1995 104,976 27,277 7,500 4,045
William A. Sorensen..... 1997 $110,750 $ 72,074 7,500 $4,430
Vice President of 1996 100,372 37,100 5,000 4,015
Sales and Marketing 1995 95,457 20,684 0 1,935
</TABLE>
- --------
(1) Amount represents the Company's matching contribution to the 401(k)
retirement plan.
STOCK OPTIONS
Set forth below is information on stock options granted in fiscal year 1997:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
OPTION GRANTS IN LAST FISCAL YEAR ANNUAL RATE OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
----------------------------------------------- ----------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED(1) IN FISCAL YEAR PRICE DATE 5% 10%
- ---- ------------ -------------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Frederic R. Huber....... 10,000 17.4% $7.125 8/13/06 $44,809 $113,554
Wayne D. DeLeo.......... 10,000 17.4% 7.125 8/13/06 44,809 113,554
Martin F. Lapari........ 10,000 17.4% 7.125 8/13/06 44,809 113,554
William A. Sorensen..... 7,500 13.0% 7.125 8/13/06 33,607 85,166
</TABLE>
- --------
(1) The options become exercisable in three equal annual increments beginning
one year after granted and will terminate in exchange for their cash value
upon consummation of the Offer.
Sch I-6
<PAGE>
Set forth below is information on the options exercised in fiscal year 1997
and the fiscal year-end value of unexercised options to purchase Common Stock
held by the named executives:
AGGREGATE OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT FISCAL
ACQUIRED VALUE AT FISCAL YEAR-END YEAR-END
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(1)
- ---- ----------- -------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Frederic R. Huber....... 40,000 $190,000 35,000/25,000 $258,750/147,500
Wayne D. DeLeo.......... 17,500 98,125 23,333/19,167 79,790/115,210
Martin F. Lapari........ 0 0 35,833/19,167 131,665/115,210
William A. Sorensen..... 0 0 16,667/10,833 120,835/66,353
</TABLE>
- --------
(1) All of the unexercisable options have or will become exercisable in
connection with the transactions contemplated under the Merger Agreement.
COMPENSATION PURSUANT TO PLANS
Retirement Plans
The Company funds a qualified defined benefit retirement plan and related
trust (the "Retirement Plan") covering all employees of the Company who have
completed six months of employment and worked at least 1,000 hours. An
employee becomes fully vested after five years. Retirement Plan benefits are
based on the participant's highest average base monthly compensation for any
successive five-year period preceding retirement or termination of employment
and are not subject to reduction for Social Security benefits. Retirement
income payable to a participant is equal to the sum of 1.4% of that portion of
highest average monthly compensation that is not in excess of $600, plus 1.8%
of his or her highest average base monthly compensation in excess of $600,
multiplied by years of service.
A participant may select one of five alternative payment options under the
Retirement Plan, including the Ten Years Certain and Life Option, the Life
Option, the Joint Annuitant Option, the Joint and 66 2/3% Survivor Option or
the lump-sum distribution. Except for lump sum distribution, each of these
options allows for the payment of benefits to the participant's dependents
upon the participant's death. Each payment option has the same actuarial value
at commencement, but monthly payments vary according to the alternative
selected. The benefit formula notwithstanding, the annual retirement benefit
cannot exceed the maximum benefit allowed under Section 415(b) of the Internal
Revenue Code. For 1997, the maximum annual benefit is $125,000.
In fiscal year 1995, the Company adopted a Supplemental Retirement Plan (the
"Supplemental Plan") to supplement the retirement plan benefits limited under
federal law. The supplemental annual payment under this plan is equal to the
excess of the participant's benefits calculated under the Retirement Plan over
the maximum benefit permitted by law. The Compensation Committee approves all
employees covered under the Supplemental Plan. Mr. Huber is the only employee
currently covered by the Supplemental Plan.
Sch I-7
<PAGE>
The following table reflects annual retirement benefits that a participant
with the years of service and the salary levels indicated below can expect to
receive under the Retirement Plan and, in the case of Mr. Huber, the
Supplemental Plan upon retirement at age 65. The table assumes that benefits
are paid pursuant to the Ten Years Certain and Life Option. Covered
compensation for each of the named officers equals the amount of salary
reported in the Summary Compensation Table. As of June 30, 1997, Messrs.
Huber, DeLeo, Lapari and Sorensen had 5, 9, 14 and 3 years of credited
service, respectively.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------
REMUNERATION 5 10 15 20 25 30
- ------------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000......................... $8,856 $17,712 $26,568 $35,424 $44,280 $53,136
125,000......................... 11,106 22,212 33,318 44,424 55,530 66,636
150,000......................... 13,356 26,712 40,068 53,424 66,780 80,136
175,000......................... 15,606 31,212 46,818 62,424 78,030 93,636
200,000......................... 17,856 35,712 53,568 71,424 89,280 107,136
225,000......................... 20,106 40,212 60,318 80,424 100,530 120,636
250,000......................... 22,356 44,712 67,068 89,424 111,780 134,136
</TABLE>
Change of Control Severance Agreements
The Company has entered into agreements with Messrs. Huber, DeLeo, Lapari,
and Sorensen providing for severance benefits if the officer's employment is
terminated for the reasons described below during a two-year period following
a change in control of the Company. The severance benefit is equal to the sum
of (i) two times the sum of the officer's annual salary and bonus; (ii) any
accrued and unpaid or deferred benefits, including accrued salary, vacation
pay and accrued bonus, and (iii) the actuarial difference between the amount
the officer would receive under the Retirement Plan if he were employed for
the two-year period following termination and the amount paid or payable
thereunder. The agreement also provides for the continued provision of
benefits under the Company's welfare benefit plans, practices, policies and
programs.
Severance benefits under these agreements are payable to Messrs. Huber and
DeLeo upon termination of employment by the Company other than for disability
or cause, as defined therein, or by the officer for any reason. Such severance
benefits are payable to Messrs. Lapari and Sorensen upon termination of
employment by the Company other than for disability or cause, as defined
therein, or by the officer for good reason, as defined therein. In no event,
however, may severance benefits payable under such agreements exceed the
amount allowable to the Company as a deduction for federal tax purposes under
applicable law.
CERTAIN TRANSACTIONS
Furnished below is information regarding certain transactions in which
executive officers, directors and principal stockholders of the Company had an
interest during the fiscal year ended June 30, 1997.
Prior to its initial public offering in 1987, the Company was operated as a
joint venture between First Mississippi Corporation ("First Mississippi") and
Ashland. As participants in a joint venture, Ashland and First Mississippi
negotiated the terms of many significant contracts to which the Company is a
party. Certain of those contracts were with Ashland and First Mississippi,
and, although the Company did not negotiate such contracts at arm's-length,
the Company believes that its current commercial relationships with Ashland
and First Mississippi are on terms no less favorable than could be obtained
from unaffiliated third parties.
Feedstock Supply Agreement. From fiscal year 1987 to December 23, 1996, the
Company obtained all of its raw materials (urea and anhydrous ammonia) from
First Mississippi and Mississippi Chemical Corporation ("Mississippi
Chemical"), an unrelated party, out of the production of Triad Chemical, a
joint venture between First Mississippi and Mississippi Chemical. Until mid-
1988, First Mississippi provided all of the Company's urea and anhydrous
ammonia out of its share of Triad's production under a feedstock supply
agreement. In July 1988, the Company agreed to an assignment in which one-half
of First Mississippi's obligation under the feedstock
Sch I-8
<PAGE>
supply agreement was assigned to Mississippi Chemical, and First Mississippi
executed a stand-by agreement pursuant to which it agreed to supply urea and
anhydrous ammonia to the Company to the extent of the assignment if
Mississippi Chemical wrongfully ceased to make deliveries. The prices paid by
the Company for urea and anhydrous ammonia relate to their market prices. From
July 1, 1996 through December 23, 1996, the Company paid First Mississippi
approximately $5.4 million for urea and anhydrous ammonia. On December 23,
1996, First Mississippi spun-off certain of its assets, including its
investment in the Company, to ChemFirst and thereafter merged with Mississippi
Chemical, so that the Company's feedstock agreement was solely with Triad
Nitrogen, Inc. and guaranteed by Mississippi Chemical, both unrelated parties.
On October 9, 1997, the Company entered into a new feedstock agreement with
Triad Nitrogen, Inc. and also guaranteed by Mississippi Chemical.
Payments to Triad for Certain Goods and Services. The Company obtains
certain utilities and services from Triad, including clarified water,
demineralized water and certain of its steam and air. In addition, the Company
has agreed to share the expenses of certain basic services required for the
operation of the Company's and Triad's facilities including, among others, a
guard force, telephone equipment, road maintenance and shared legal costs. The
Company's payment for services provided under the agreement is based on the
actual cost of such services plus an overhead fee of 25%. The agreement may be
terminated by either party without cause upon one year's notice or the
shutdown of either Triad's or the Company's facilities. Prior to the December
23, 1996 spin-off referred to in the proceeding paragraph, Triad was 50% owned
by First Mississippi. Payments for such services to Triad from July 1, 1996
through December 23, 1996 were approximately $208,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Prater, Reneau and Summerford serve on the Compensation Committee
and Messrs. Prater and Reneau also serve on the Long-Term Incentive Plan
Committee. Mr. Crook, Chairman of the Board of the Company, is a member of the
Board of Directors of ChemFirst and Mr. Summerford is an executive officer of
ChemFirst. As indicated above, ChemFirst holds approximately 22.7% of the
outstanding Common Stock.
COMPENSATION COMMITTEE AND LONG-TERM INCENTIVE PLAN COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
Policies and Programs
The Company seeks to attract and retain executive officers who, in the
judgment of the Board, possess the skill, experience and motivation to
contribute significantly to the long-term success of the Company and enhance
value for the Company's stockholders. The Compensation Committee and Long-Term
Incentive Plan Committee follow a compensation policy designed to compensate
the Company's executive officers with both cash and equity-based compensation
in a program that takes into account both individual performance and
contribution to corporate results.
The compensation policies followed by these committees involve three
components--base salary, annual incentive and long-term incentive
compensation. Base salary compensation is determined by the impact the
executive has on the Company, the skills and experience the executive brings
to the job, competition in the marketplace for those skills and the potential
of the executive in the job. The Compensation Committee reviews and approves
base salary annually based on the executive's performance in comparison to the
Board's and the Chief Executive Officer's expectations. In addition, the
Compensation Committee in 1997 retained a consultant to assist in the
determination of base salary.
Annual incentive compensation payments for fiscal year 1997 under the
Company's Annual Incentive Award Plan were based on a computation of the
Company's rate of return on equity for the fiscal year compared to the prime
rate during that period. Individual awards were also influenced by the
Compensation Committee's evaluation of each individual's overall performance
during the fiscal year. If in any fiscal year the Company does not have net
earnings, the Company's executives will not be eligible for any payments under
the Annual Incentive Award Plan. The Plan is reviewed annually to determine if
changes and modifications are needed.
Sch I-9
<PAGE>
Long-term incentive compensation generally consists of stock options awarded
by the Long-Term Incentive Plan Committee. The size of a stock option award is
based primarily on the executive's potential to contribute to the long-term
growth of the Company. The value of the option once it vests (generally over a
three-year period) depends upon the Company's performance as evidenced by the
price appreciation of its Common Stock at the time the option is exercised.
The Company's long-term incentive compensation is designed to provide
significant financial rewards to the executives when shareholder value is
added. The Company's long-term incentive compensation also attempts to align
more closely the executive's interests with those of the Company's
shareholders.
Chief Executive Officer Compensation in 1997
At its February 5, 1997 meeting, the Compensation Committee reviewed Mr.
Huber's performance as Chief Executive Officer of the Company during the prior
year. The report of an outside consultant was also reviewed to determine how
Mr. Huber's salary compared to others in similar positions. Based upon its
review of his performance and the result of the consultant's report, the
Compensation Committee increased Mr. Huber's salary effective January 1, 1997
from $203,000 to $215,500. A subsequent salary increase in August 1997 to
$238,250 brought Mr. Huber's salary up to the median salary level for
comparable executives of similarly-situated companies.
On August 14, 1996, the Long-Term Incentive Plan Committee granted Mr. Huber
an option to purchase 10,000 shares of Common Stock at $7.125 per share (the
market price at the date of grant) to compensate Mr. Huber for the role he was
expected to play in the improvement of the Company's performance and in
creating shareholder value in the future. Based on the Company's return on
equity for fiscal year 1997 and the Compensation Committee's evaluation of Mr.
Huber's performance during fiscal year 1997, the Compensation Committee, at
its August 6, 1997 meeting, awarded him incentive compensation totaling
$198,361.
Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
Company's tax deduction to $1 million for compensation paid to the most highly
paid executive officers in a single year. An exception to the $1 million limit
is provided for "performance-based compensation" that meets certain
requirements, including stockholder approval. The 1996 Incentive Plan has been
structured to ensure that grants of options under the Plan will qualify as
"performance based compensation" and be excluded in calculating the $1 million
limit under Section 162(m).
PERSONNEL AND COMPENSATION COMMITTEE LONG-TERM INCENTIVE PLAN COMMITTEE
Nick H. Prater Daniel D. Reneau Nick H. Prater Daniel D. Reneau
R. Michael Summerford
Sch I-10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock for the last five fiscal years with the CRSP Total
Return Index for the NASDAQ Stock Market (US Companies) and an index composed
of a group of peer issuers. The members of the peer group were selected by the
Company based upon size and type of business. The peer group includes the
following companies: Kinark Corporation, High Plains Corporation and Detrex
Corporation.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
TOTAL RETURN FOR THE FISCAL YEAR
---------------------------------------
1992 1993 1994 1995 1996 1997
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Melamine Chemicals...................... 100 110.53 129.6 189.47 192.1 289.47
Nasdaq US............................... 100 125.76 126.97 169.48 217.57 264.59
Peer Group.............................. 100 97.72 115.12 111.56 81.95 88.31
</TABLE>
Sch I-11
<PAGE>
[LOGO]
MELAMINE CHEMICALS, INC.
- -------------------------------------------------------------------------------
RIVER ROAD, HWY. 18 POST OFFICE BOX 748 DONALDSONVILLE, LA. 70346 TELEPHONE:
504-473-3121 FAX: 504-473-0550 TELEX: 810-952-6516
October 15, 1997
Dear Stockholder:
I am pleased to report that on October 9, 1997, your Company entered into an
agreement and plan of merger (the "Merger Agreement") with Borden Chemical,
Inc. and its wholly-owned subsidiary, MC Merger Corp. ("Offeror"), pursuant to
which Offeror has agreed to acquire the Company.
In accordance with the Merger Agreement, Offeror has today commenced a
tender offer (the "Offer") to purchase all outstanding shares of the Common
Stock of the Company for $20.50 cash per share. If the Offer is successfully
completed, Offeror will, by means of a merger of Offeror into the Company (the
"Merger"), acquire for the same cash price all shares of Common Stock held by
stockholders who do not tender their shares in the Offer and do not exercise
their right to dissent from the Merger under Delaware law. The Offer is
conditioned on at least 51% of the outstanding shares of Common Stock being
validly tendered, the expiration or termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and certain other
conditions.
The Board of Directors of the Company has approved, by unanimous vote of the
directors present, the Offer, the Merger and the Merger Agreement, and has
determined that the Offer and the Merger are fair to and in the best interests
of the Company and its stockholders. The Board recommends that all
stockholders accept the Offer and tender their shares pursuant thereto.
Enclosed for your consideration are copies of Offeror's tender offer
materials and the Company's Schedule 14D-9, all of which are being filed today
with the Securities and Exchange Commission. These documents, which include a
fairness opinion from the Company's financial adviser, should be read
carefully. In particular, I call your attention to Item 4 of the Schedule 14D-
9, which describes the reasons for the Board's recommendation.
Sincerely,
/s/ FREDERIC R. HUBER
Frederic R. Huber
President and Chief Executive
Officer
<PAGE>
EXHIBIT (A)(6)
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
PERSONAL AND CONFIDENTIAL
October 9, 1997
Board of Directors
Melamine Chemicals, Inc.
39041 Highway 18 West
Donaldsonville, LA 70346
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $.01
per share (the "Shares"), of Melamine Chemicals, Inc. (the "Company") of the
$20.50 per Share in cash proposed to be paid by MC Merger Corp. ("Merger
Sub"), a wholly-owned subsidiary of Borden Chemical, Inc. ("Buyer"), in the
Tender Offer and Merger (as defined below) pursuant to the Agreement and Plan
of Merger dated as of October 9, 1997 among Buyer, Merger Sub and the Company
(the "Agreement"). The Agreement provides for a tender offer for all of the
Shares (the "Tender Offer") pursuant to which Merger Sub will pay $20.50 per
Share in cash for each Share accepted. The Agreement further provides that
following completion of the Tender Offer, Merger Sub will be merged into the
Company (the "Merger") and each outstanding Share (other than Treasury Shares,
Parent Shares and Dissenting Shares (each as defined in the Agreement)) will
be converted into the right to receive $20.50 in cash.
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 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 Borden Inc., parent of Buyer, from time to
time, including having acted as the sole underwriter in sales of common stock
of RJR Nabisco Holdings Corporation sold by Borden Inc. in February and March
of 1995, and may provide investment banking services to Buyer or Borden Inc.
in the future. In addition, we have provided in the past, and may provide in
the future, various investment banking services to Kohlberg Kravis Roberts &
Co., an affiliate of the principal shareholder of Borden Inc.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Tender Agreement dated as of October 9, 1997 among Buyer,
Merger Sub and ChemFirst, Inc.; Annual Reports to Stockholders and Annual
Reports on From 10-K of the Company for the five fiscal years ended June 30,
1997; certain interim reports to stockholders and Quarterly Reports on Form
10-Q of the Company; certain other communications from the Company to its
stockholders; and certain internal financial analyses, replacement cost
estimates and forecasts for the Company prepared by its management. We also
have held discussions with members of the senior management of the Company
regarding its past and current business operations, financial condition and
future prospects. In addition, we have reviewed the reported price and trading
activity for the Shares, compared certain financial and stock market
information for the Company 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 commodity chemicals
industry specifically and performed such other studies and analyses as we
considered appropriate.
<PAGE>
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 any of its subsidiaries and we have not been furnished with any
such evaluation or appraisal. 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
transaction contemplated by the Agreement and such opinion does not constitute
a recommendation as to whether or not any holder of Shares should tender such
Shares in connection with such transaction.
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 $20.50
per Share in cash to be received by the holders of Shares in the Tender Offer
and the Merger is fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- -----------------------
(GOLDMAN, SACHS & CO.)
<PAGE>
PERSONAL AND
- ------------
CONFIDENTIAL
- ------------
July 24, 1997
Borden Chemical, Inc.
180 East Broad Street, 24th Floor
Columbus, OH 43215-3799
Attn: Joseph M. Saggese
Chairman
Dear Mr. Saggese:
Melamine Chemicals, Inc. ("MCI") and Borden Chemical, Inc. (the "Company") are
prepared to engage in discussions with respect to a possible negotiated business
combination involving the Company and MCI (the "Transaction"), and during the
course of such discussions MCI may disclose and make available to the Company
certain information concerning MCI's business, prospects, financial condition,
operations, technology, assets and liabilities. All such information furnished
to the Company or its Representatives (as defined below) by or on behalf of MCI
(irrespective of the form of communication and whether such information is
furnished prior to, on or after the date hereof), and all analyses,
compilations, data, studies, notes, interpretations, memoranda or other
documents prepared by the Company or its Representatives containing or based in
whole or in part on any such furnished information are collectively referred to
herein as the "Confidential Information." As a condition to being furnished the
Confidential Information, the Company agrees as follows:
1. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. (a) the Company shall (i) use
the Confidential Information solely for the purpose of evaluating a
possible Transaction and for no other competitive or other purpose; (ii)
not disclose the Confidential Information to any third party, except for
disclosures to its directors, officers, employees and representatives of
its advisors (such as independent accountants, investment bankers and
attorneys) acting on
<PAGE>
its behalf (such directors, officers, employees and representatives being
referred to hereinafter collectively as its "Representatives") who in each
case, in the Company's reasonable judgment, need to know such information
for the purpose of evaluating a possible Transaction; provided, however,
that prospective financing sources shall not be considered
"Representatives" to whom Confidential Information may be disclosed in
accordance with this paragraph 1 unless specifically requested by the
Company and consented to by MCI in writing; (iii) inform its
Representatives of the confidential nature of the Confidential Information
and direct its Representatives to treat the Confidential Information
confidentially; (iv) take all additional reasonable precautions necessary
to prevent the disclosure of the Confidential Information by its
Representatives to any third party; and (v) be responsible for any breach
of this Agreement (the "Agreement") by its Representatives.
(b) If the Company or its Representatives is requested (by interrogatories,
requests for information or documents, subpoena, civil investigative demand
or similar process) to disclose any Confidential Information, it is agreed
that the Company will provide MCI with prompt notice of such request so
that MCI may seek an appropriate protective order and/or waive the
Company's compliance with the provisions of this Agreement. The Company
and its Representatives may disclose without liability hereunder only that
portion of the Confidential Information that the Company is advised by
written opinion of counsel is legally required to be disclosed; provided
that the Company gives MCI written notice of the information to be
disclosed as far in advance of its disclosure as is practicable and, upon
MCI's request, uses reasonable efforts to obtain assurances that
confidential treatment will be accorded to such information.
2. NON-DISCLOSURE OF NEGOTIATIONS OR AGREEMENTS. Except as required by law,
neither the Company nor its Representatives shall disclose to any person
the existence, status or terms of any discussions, negotiations or
agreements concerning a possible Transaction, including without limitation
any offer, letter of intent, proposal, price, value or valuation, or any
similar terms, agreements or understandings between the Company and MCI
with respect thereto, or that the Company has received from MCI
Confidential Information, without obtaining the prior written consent of
the other, which consent will not be withheld unreasonably.
3. RETURN OF CONFIDENTIAL INFORMATION. All written Confidential Information
delivered by or on behalf of MCI to the Company pursuant to this Agreement
shall be and remain the property of MCI and upon the written request of
MCI, the Company shall (i) promptly return such Confidential Information
and shall not retain any copies or other reproductions or extracts thereof,
(ii) destroy or have destroyed all memoranda, notes, reports, analyses,
compilations, studies, interpretations, or other documents derived from or
containing Confidential Information, and all copies and other reproductions
and extracts thereof, and (iii) upon written request by MCI provide a
certificate to MCI certifying that the foregoing
<PAGE>
materials have, in fact, been destroyed or returned, signed by an
authorized officer supervising such destruction or return. Notwithstanding
the return or destruction of the Confidential Information, the Company and
its Representatives will continue to be bound by the confidentiality and
other obligations hereunder, until the expiration of three years from the
date of this Agreement, unless a lesser duration is specified herein.
4. INFORMATION NOT DEEMED CONFIDENTIAL INFORMATION. The term "Confidential
Information" does not include information that (i) is or becomes generally
available to the public other than as a result of a disclosure by the
Company or its Representatives in violation of this Agreement; or (ii) was
or becomes available to the Company from a source other than MCI or its
Representatives, provided that such source is not known by the Company to
be bound by an obligation of confidentiality to MCI or its Representatives
or (iii) was already known to the Company at the time of its disclosure by
MCI.
5. NO REPRESENTATIONS OR WARRANTIES. Neither MCI nor any of its respective
officers, directors, employees, representatives or agents makes any
representation or warranty, express or implied, as to the accuracy and
completeness of any Confidential Information provided by it, and no
liability shall result to MCI from its use, except as set forth in a
definitive agreement for a Transaction. Only the representations and
warranties that are made in a definitive agreement for a Transaction, when,
as, and if it is executed, and subject to such limitations and restrictions
as may be specified therein, shall have any legal effect.
6. NO AGREEMENT. MCI has the absolute right to determine what information,
properties and personnel it wishes to make available to the Company.
Unless a definitive agreement regarding a Transaction between the Company
and MCI has been executed and delivered, neither MCI, the Company nor any
of their stockholders or affiliates will be under any legal obligation of
any kind whatsoever with respect to such a Transaction by virtue of this
Agreement or any other written or oral expression with respect to such
Transaction except, in the case of this Agreement, matters specifically
agreed to herein. Each party further acknowledges and agrees that each
party reserves the right, in its sole discretion, to reject any and all
proposals made by the other party or any of its Representatives with regard
to a Transaction, and to terminate discussions and negotiations with the
other party at any time.
7. CONTACT PERSONS; NO SOLICITATION. All requests by the Company for
Confidential Information, meetings with personnel or inspection of
properties and all other
<PAGE>
communications regarding a possible Transaction shall be made only to the
contacts designated by MCI (the "Contact Persons"). The Company agrees
that, for a period of two years from the date of this Agreement, it will
not initiate or maintain contact (except in the ordinary course of
business) with any director, officer, employee, distributor or customer of
MCI regarding MCI's business operations, prospects or finances, except as
may be permitted by the Contact Persons for due diligence purposes. It is
expressly understood that this Agreement is not intended to limit the right
of the parties to compete with one another in the ordinary course. The
Company further agrees that, for a period of two years from the date
hereof, it will not directly or indirectly offer employment to (other than
by means of a general advertisement) or hire any of MCI's employees with
whom it has had contact during the process contemplated by this Agreement.
8. NON-PUBLIC INFORMATION. MCI has outstanding publicly-held securities and
the Confidential Information contains material non-public information. The
Company acknowledges that it is (i) aware, and has advised or will advise
its Representatives, that the United States securities laws prohibit any
person in possession of material non-public information about a company
from purchasing or selling securities of such company, and from
communicating such information to any other person under circumstances in
which it is reasonably foreseeable that such person may purchase or sell
such securities and (ii) familiar with the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations thereunder,
and the Company agrees that it will neither use nor permit any of its
Representatives to use any Confidential Information in violation of such
Act or rules or regulations, including without limitation Rule 10b-5.
9. STANDSTILL. The Company agrees that, until the expiration of two years
from the date of this Agreement, without the prior written invitation (on
an unsolicited basis) of MCI's Board of Directors, it and its affiliates
will not (i) in any manner acquire, agree to acquire or make any proposal
or offer or otherwise seek to acquire, directly or indirectly, any
securities (or rights in respect thereof), assets or property of MCI or
any of its subsidiaries or of any successor thereto or person in control
thereof, whether such agreements or proposals or offers are made with or to
MCI or any of its subsidiaries (or a successor thereto or person in control
thereof) or a third party; (ii) enter into or agree, offer, seek or propose
to enter into or otherwise be involved in or part of, directly or
indirectly, any merger, acquisition transaction or other business
combination relating to MCI or any of its subsidiaries or any of their
respective assets; (iii) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are used in the
proxy rules under the Exchange Act) to vote, or seek to advise or influence
any person with respect to the voting of, any voting securities of MCI or
any of its subsidiaries or of any successor thereto or person in control
thereof; (iv) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of MCI or any of its subsidiaries or of any successor thereto or
person in control thereof; (v) seek or propose, alone or in concert
<PAGE>
with others, to control or influence the management, Board of Directors or
policies of MCI; (vi) directly or indirectly enter into any discussions,
negotiations, arrangements or understandings with any other person (except
internal discussions and planning activities involving its Representatives)
with respect to any of the foregoing activities or propose any of such
activities to any other person (other than its Representatives); (vii)
directly or indirectly advise, encourage, assist, act as a financing source
for or otherwise invest in any other person in connection with any of the
foregoing; or (viii) publicly disclose any intention, plan or arrangement
inconsistent with the foregoing. The Company also agrees that, during such
two-year period, neither it nor any of its affiliates will: (i) request MCI
or its advisors, directly or indirectly, to (1) amend or waive any
provision of this paragraph (including this sentence) or (2) otherwise
consent to any action inconsistent with any provision of this paragraph
(including this sentence); or (ii) take any initiative with respect to MCI
or any of it's subsidiaries that could reasonably be expected to require
MCI to make a public announcement regarding (1) such initiative, (2) any of
the activities referred to in this paragraph, (3) the possibility of a
Transaction or any similar transaction or (4) the possibility of the
Company's or any other person's acquiring control of MCI, whether by means
of a business combination or otherwise. Notwithstanding the foregoing
provisions of this paragraph 9, the Company's chief executive officer may
contact MCI's chief executive officer for the purpose of expressing
continuing or renewed interest in a Transaction, provided that, unless
invited to do so by MCI's chief executive officer, no offer or proposal
shall be made that would require public disclosure or formal consideration
by MCI or its Board of Directors.
10. PERSON. The term "person" as used in this Agreement will be interpreted
broadly to include the media and any corporation, company, group,
partnership, governmental body or other entity or individual.
11. NO WAIVER. No failure or delay by MCI in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof,
or the exercise of any right, power or privilege hereunder.
12. REMEDIES. It is understood and agreed that money damages would not be a
sufficient remedy for any breach of this Agreement by the Company and that
MCI shall be entitled to equitable relief, including specific performance
and injunction, as a remedy for any such
<PAGE>
breach or threatened breach. Such remedies shall not be deemed to be the
exclusive remedies for a breach of this Agreement by the Company but shall
be in addition to all other remedies available at law or in equity to MCI,
including remedies pursuant to applicable laws relating to trade secrets.
13. BENEFITS; GOVERNING LAW. This Agreement is for the benefit of MCI and its
respective directors, officers, employees, representatives and agents and
its respective successors and assigns and shall be governed by and
construed in accordance with the internal substantive laws and not the
choice of law rules of the State of Louisiana.
14. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all such counterparts
together shall constitute but one and the same Agreement.
15. SEVERABILITY. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid or unenforceable, such invalidity or
unenforceability shall not be deemed to affect any other provision hereof
or the validity of the remainder of this Agreement, and such invalid or
unenforceable provision shall be deemed deleted herefrom to the minimum
extent necessary to cure such invalidity or unenforceability.
16. MODIFICATIONS. No provision of this Agreement may be waived, amended or
modified except by the written agreement of the Company and MCI.
Please confirm your agreement with the foregoing by signing and returning one
copy of this letter to the undersigned, whereupon this letter shall become a
binding agreement between us.
MELAMINE CHEMICALS, INC.
By: /s/ Goldman, Sachs & Co.
---------------------------------------
Goldman, Sachs & Co.
on behalf of Melamine Chemicals, Inc.
Accepted and agreed to as of the 31st
day of July, 1997.
BORDEN CHEMICAL, INC.
By: /s/________________________
