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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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MCWHORTER TECHNOLOGIES, INC.
(Name of Subject Company)
MCWHORTER TECHNOLOGIES, INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(And Associated Preferred Share Purchase Rights)
(Title of Class of Securities)
582803 10 2
(CUSIP Number of Class of Securities)
JEFFREY M. NODLAND
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MCWHORTER TECHNOLOGIES, INC.
400 EAST COTTAGE PLACE
CARPENTERSVILLE, ILLINOIS 60110
(847) 428-2657
(Name, Address, and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person Filing Statement)
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With Copies To:
<TABLE>
<S> <C>
Warren B. Grayson R. Scott Falk, Esq.
Vice President, General Counsel & Kirkland & Ellis
Secretary 200 East Randolph Drive
McWhorter Technologies, Inc. Chicago, Illinois 60601
400 East Cottage Place (312) 861-2000
Carpentersville, Illinois 60110
(847) 428-2657
</TABLE>
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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ITEM 1. SECURITY AND SUBJECT COMPANY INFORMATION.
(a), (b) Name and Address; Securities. The name of the subject company is
McWhorter Technologies, Inc. (the "Company"). The address of the principal
executive offices of the Company is 400 East Cottage Place, Carpentersville,
Illinois 60110. The telephone number of the principal executive offices of the
company is (847) 428-2657. The title of the class of equity securities to which
this statement relates is the common stock, par value $.01 per share, of the
Company (the "Common Stock"), including the associated rights (the "Rights") to
purchase Series A Junior Participating Preferred Stock, issued pursuant to the
Rights Agreement dated as of February 1, 1994, as amended (the "Rights
Agreement"), between the Company and EquiServe Trust Company, N.A., as successor
to Wachovia Bank of North Carolina, N.A. (the "Rights Agent"). As of April 30,
2000, there were 9,950,685 shares of Common Stock outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) Name and Address. The name, business address and business telephone
number of the Company are set forth in Item 1 above.
(b) Tender Offer. This Statement relates to the tender offer by Tartan,
Inc., a corporation formed under the laws of the State of Delaware (the
"Purchaser") and a wholly owned subsidiary of Eastman Chemical Company, a
corporation formed under the laws of the State of Delaware ("Eastman"),
disclosed in a Tender Offer Statement on Schedule TO filed by the Purchaser and
Eastman (the "Schedule TO"), dated May 12, 2000, to purchase all outstanding
shares of the Common Stock (including the associated Rights) at a purchase price
of $19.70 per share, net to the seller in cash, without interest (the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated May 12, 2000 and filed as Exhibit (a)(1) to the Schedule TO (the
"Offer to Purchase"), and the related Letter of Transmittal (which, as may be
amended or supplemented from time to time, together constitute the "Offer").
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of May 3, 2000, by and among Eastman, the Purchaser and the Company (as such
agreement may be amended or supplemented from time to time, the "Merger
Agreement"). The Merger Agreement provides, among other things, that as soon as
practicable after the satisfaction or waiver of the conditions set forth in the
Merger Agreement, in accordance with the relevant provisions of the Delaware
General Corporation Law (the "DGCL"), the Purchaser will be merged with and into
the Company (the "Merger"). Following the effective time (the "Effective Time")
of the Merger, the Company will continue as the surviving corporation (the
"Surviving Corporation") and a wholly owned subsidiary of Eastman.
A copy of the Merger Agreement is filed herewith as Exhibit 3, and is
incorporated herein by reference.
As set forth in the Schedule TO, the principal executive offices of Eastman
and the Purchaser are located at 100 North Eastman Road, Kingsport, Tennessee
37660.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
CONFLICTS OF INTEREST
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Section 14(f) of the Securities Exchange Act of 1934, as amended, and Rule 14f-1
thereunder (the "Information Statement") that is attached as Annex B to this
Statement and is incorporated herein by reference. Except as set forth in the
response to this Item 3, Item 4 below or in Annex B attached hereto or as
incorporated by reference herein, to the knowledge of the Company, there are no
material agreements, arrangements or understandings and no actual or potential
conflicts of interest between the Company or its affiliates and (i) the
Company's executive officers, directors or affiliates or (ii) Eastman or the
Purchaser or their respective executive officers, directors or affiliates.
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TRANSACTION DOCUMENTS
The summaries of the Merger Agreement and the description of the conditions
of the Offer contained in Sections 11 and 14 of the Offer to Purchase, which is
being mailed to stockholders together with this Statement, are incorporated
herein by reference. Such summaries and description are qualified in their
entirety by reference to such documents, which are incorporated herein by
reference.
STOCK OPTIONS
The Merger Agreement provides that Eastman and the Company shall take all
actions necessary to provide that, as of the Effective Time, each outstanding
employee stock option, stock equivalent right or right to acquire Common Stock
granted under the Company's 1994 Stock Incentive Plan or the Company's 1996
Incentive Stock Plan, and each outstanding non-employee director option to
purchase Common Stock granted under the 1996 Non-Employee Director Stock Option
and Award Plan, whether or not then exercisable or vested (collectively,
"Options"), shall be canceled. In consideration of the cancellation of such
Options, Eastman shall, or shall cause the Surviving Corporation to, pay to
holders of such Options, whether or not then exercisable or vested, an amount in
respect thereof equal to (A) the excess, if any, of the Offer Price over the
exercise price of each Option (which, in the case of any stock equivalent right,
shall be zero) multiplied by (B) the number of shares of Common Stock subject to
such Options. As of the Effective Time, the Company's option plans will
terminate and the Company will take all action necessary to ensure that, after
the Effective Time, no person will have any right under such option plans.
BENEFIT PLANS
The Merger Agreement provides that, subject to any applicable collective
bargaining agreement, for one year following the Effective Time, the Surviving
Corporation will not reduce the compensation paid to employees of the Surviving
Corporation who were employees of the Company immediately before the Effective
Time ("Affected Employees") and will provide benefits that in the aggregate are
substantially comparable to benefits provided before the Effective Time;
provided, that the Surviving Corporation will not be required to establish or
maintain any particular compensation or benefit plan, program or arrangement of
the Company that is in place before the Effective Time. For purposes of
determining Affected Employees' eligibility to participate, vesting and accrual
or entitlement to benefits under any employee benefit plan, program, or
arrangement of the Surviving Corporation, Eastman shall cause each Affected
Employee to be credited, as of the Effective Time, with the service credited to
each Affected Employee for such respective purposes immediately before the
Effective Time under the Company's employee benefit plans, programs or
arrangements (subject, in the case of defined benefit arrangements, to there
being no duplication of benefits). For the year in which the Effective Time
occurs, Eastman shall cause each Affected Employee to be credited under the
employee welfare benefit plans maintained by the Surviving Corporation with all
deductible payments and copayments and payments toward out-of-pocket maximums
credited to the Affected Employee under the employee welfare benefit plans of
the Company immediately before the Effective Time.
EMPLOYMENT/SEVERANCE AGREEMENTS
The purchase of shares of Common Stock pursuant to the Offer will
constitute a "change of control" for purposes of the employment and severance
agreements the Company has entered into with John R. Stevenson, the Company's
Chairman, and certain key employees and other officers of the Company. According
to Mr. Stevenson's employment agreement with the Company, as amended, if
termination occurs after a change of control, Mr. Stevenson shall receive, in
addition to any other benefits to which he may be entitled, the sum of $250,000,
to be paid within 60 days of such change of control. The agreement also provides
that upon termination following a change of control (other than a termination
for "cause") Mr. Stevenson will receive his full salary through February 29,
2004. Under the agreements with key employees and other officers of the Company,
if the employee or officer is terminated within two years of a change of control
(other than for "cause" or by employee without "good reason"), then the Company
shall pay severance benefits to the employee or officer (which shall be in lieu
of any severance pay under any benefit plan of the Company) equal to: (i) the
employee's full base salary through the date of termination and 100%
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of the target bonus for such year and (ii) an amount equal to a multiple of such
employee's or officer's annual base salary and target annual bonus. In addition,
upon such termination, the employee's or officer's options and restricted stock
will immediately vest and the Company will pay certain outplacement costs and
provide certain extended benefits. Gross-up payments will be made under such
agreements to the extent any payments are subject to any excise tax under the
Internal Revenue Code.
The purchase of shares of Common Stock pursuant to the Offer will also
constitute a change of control for purposes of the Company's Long Term Incentive
Plan. Under the terms of such plan, all awards that are or will become payable
shall vest upon a change of control and, for 24 months following the date of the
change of control, any grantee who is terminated without "cause" or who
terminates without "good reason" shall receive a cash payment representing the
maximum payout for the three-year plan cycle in which such termination occurs,
pro rated from the first day of the cycle in which such termination occurs up to
the date of termination.
INDEMNIFICATION AND INSURANCE
Pursuant to the Merger Agreement, Eastman and the Purchaser have agreed
that the certificate of incorporation and bylaws of the Surviving Corporation
shall contain certain indemnification provisions, with respect to directors and
officers of the Company prior to Effective Time, that are substantially similar
to such provisions currently contained in the Company's certificate of
incorporation and by-laws. The indemnification provisions specified in the
Merger Agreement may 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 of individuals who at any time prior to the Effective Time were
directors or officers of the Company with respect to actions or omissions
occurring at or prior to the Effective Time, unless such modification is
required by law or the Surviving Corporation is merged into Eastman.
For six years after the Effective Time, the Surviving Corporation will
indemnify, defend and hold harmless, to the fullest extent permitted under the
DGCL, the present and former officers and directors of the Company against all
losses, claims, damages, liabilities, fees and expenses in connection with any
claim, suit, action, proceeding or investigation that is based on or arising out
of the fact that such person is or was a director or officer of the Company and
relates to actions or omissions occurring at or prior to the Effective Time. The
Surviving Corporation is obligated to pay expenses to any such indemnified
person in advance of the final disposition of any indemnified action or
proceeding to the fullest extent permitted under the DGCL, subject to the
agreement of the indemnified person to repay such advances as contemplated by
the DGCL.
For a period of six years after the Effective Time, Eastman shall, or shall
cause the Surviving Corporation to, maintain in effect, if available, directors'
and officers' liability insurance covering those persons who are currently
covered by the Company's directors' and officers' liability insurance policy for
events occurring on or prior to the Effective Time. Such coverage shall be on
terms that are no less favorable to such persons than the terms now applicable
under the Company's current policies.
THE SURVIVING CORPORATION'S BOARD OF DIRECTORS
Promptly upon the Purchaser's purchase of at least a majority of the
outstanding shares of Common Stock (on a fully diluted basis), Eastman shall be
entitled to designate such number of directors of the Company, rounded up to the
next whole number, as is equal to the product of (A) the total number of
directors on the Company's Board of Directors (the "Board") (giving effect to
the directors designated by Eastman pursuant to this sentence) multiplied by (B)
the percentage that the aggregate number of shares of Common Stock beneficially
owned by the Purchaser, Eastman and any of their affiliates bears to the total
number of shares of Common Stock then outstanding. The Company shall, upon
request of Eastman, use its reasonable best efforts promptly either to increase
the size of its Board, or secure the resignations of such number of its
incumbent directors, or both, as is necessary to enable Eastman's designees to
be so elected or appointed to the Board, and shall use its reasonable best
efforts to cause Eastman's designees to be so elected or appointed. The Company
shall, upon the request of Eastman, also cause persons designated by Eastman to
constitute the same percentage (rounded up to the next whole number) as is on
the Board of (i) each committee of the Board, (ii) each board (or similar body)
of each subsidiary of the Company and (iii) each
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committee (or similar body) of each such board, in each case only to the extent
permitted by applicable law or the rules of any stock exchange on which the
Common Stock is listed.
In the event that Eastman's designees are elected to the Board, until the
Effective Time, the Company shall cause its Board to have at least three
directors who are directors on the date of the Merger Agreement (the
"Independent Directors"). In the event of any vacancy caused by the death or
disability of an Independent Director, the remaining Independent Directors shall
fill such vacancy; provided, that if no Independent Director then remains, the
other directors shall appoint new directors to fill such vacancies and each such
appointee shall be deemed to be an Independent Director. If prior to the
Effective Time Eastman's designees constitute a majority of the Board, then the
affirmative vote of a majority of the Independent Directors shall be required to
(i) amend or terminate the Merger Agreement by the Company, (ii) exercise or
waive any of the Company's rights, benefits or remedies under the Merger
Agreement, (iii) amend the certificate of incorporation or by-laws of the
Company or (iv) take any other action of the Board under or in connection with
the Merger Agreement.
As of the date of this Statement, no determination has been made as to
which directors of the Company will continue to serve on the Surviving
Corporation's board of directors. It is expected that the board of directors of
the Surviving Corporation will continue to compensate directors at levels
consistent with the compensation paid to the Board.
THIRD-PARTY BENEFICIARIES
The provisions of the Merger Agreement are not intended to confer upon any
person other than the parties to the Merger Agreement any rights or remedies,
except that certain provisions discussed under the headings "Benefit Plans",
"Employment/Severance Agreements" and "Indemnification" are enforceable by the
beneficiaries thereof.
STOCK OPTION AGREEMENT
The Merger Agreement provides that, if following a subsequent offering
period, the Purchaser has acquired less than 90% of the Common Stock but not
less than 75% of the Common Stock, then the Purchaser and the Company will enter
into a stock option agreement, on customary terms, pursuant to which the Company
will grant to the Purchaser an option to purchase that number of shares of
Common Stock equal to the number of shares of Common Stock that, when added to
the number of such shares owned by the Purchaser and its affiliates immediately
following expiration of a subsequent offering period following the Offer,
results in Purchasers beneficially owning 90% of the shares of Common Stock then
outstanding on a fully diluted basis.
CONFIDENTIALITY AGREEMENT
On November 12, 1999, Eastman and the Company entered into a
Confidentiality Agreement (the "Confidentiality Agreement"). The Confidentiality
Agreement provides that for two years following the date of the Confidentiality
Agreement, Eastman will keep confidential all information concerning the
Company, subject to certain exceptions, and will use the confidential
information for no purpose other than evaluating a possible transaction with the
Company. Pursuant to the Confidentiality Agreement, Eastman also agreed to
certain standstill provisions that were effective for a period of 180 days from
the date of the Confidentiality Agreement. Eastman further agreed not to hire
management or employees of the Company for a period of one year except in
certain specified circumstances.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board. At a meeting held on May 3, 2000, the
Board unanimously (i) determined that the Offer, the Merger and the Merger
Agreement are advisable, fair to, and in the best interests of, the Company
stockholders, (ii) approved the Merger Agreement and the transactions
contemplated thereby, including the Merger and the Offer and (iii) resolved to
recommend that the Company
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stockholders accept the Offer and tender their Common Stock pursuant thereto
and, if necessary under the DGCL, approve and adopt the Merger Agreement.
(b) Background; Reasons for the Recommendations of the Board
BACKGROUND
Over the past year the Company has either approached, or been approached
by, numerous companies that might have an interest in a strategic business
arrangement with the Company. In some cases, interest in a possible acquisition
of or investment in the Company was indicated but, except as noted below, none
of those discussions proceeded beyond the preliminary stage.
Prior to May 1999, the Board had numerous discussions regarding the
competitive environment in which the Company operates and the difficulties
facing industry participants of the Company's size. As a result, the Board
determined that it would be desirable to retain a financial advisor to assist
the Company in assessing possible strategic alternatives for the Company. At its
meeting held on May 18 and 19, 1999, the Board interviewed Merrill Lynch & Co.
("Merrill Lynch") and another financial advisor candidate, each of which was
selected from a number of firms interviewed by management. The Board selected
Merrill Lynch as its financial advisor and the Company and Merrill Lynch
executed an engagement letter for general strategic advisory services on June
16, 1999.
At a meeting of the Board on August 24 and 25, 1999, which was also
attended by the Company's senior officers and financial advisors, Merrill Lynch
presented to the Board various potential transactions that were then under
review by management of the Company, including the use of leveraged financial
markets in connection with such transactions. At this meeting, the Company's
general counsel reviewed with the Board its general fiduciary duties under the
DGCL and special duties applicable to strategic transactions. The Board then
discussed the next steps in approaching a potential strategic transaction. After
discussion, the Board concluded that it would be desirable to authorize the
Company's financial advisors to contact companies that could reasonably be
expected to have a possible interest in pursuing a strategic transaction with
the Company. Accordingly, the Board directed Merrill Lynch to have discussions
with such companies and respond to unsolicited inquiries, in each case solely
for the purpose of assessing interest in a transaction with the Company.
Following the August Board meeting, Merrill Lynch made numerous inquires
among logical candidates for acquisition by the Company or other strategic
transactions. However, the companies Merrill Lynch approached displayed little
interest in being acquired, but a few indicated their interest in acquiring
certain assets or businesses of the Company.
At a special meeting of the Board on October 25, 1999, which was also
attended by senior officers of the Company and its financial and legal advisors,
Merrill Lynch reviewed with the Board the history and content of its discussions
with such companies and the interest shown by such companies. The Board then
discussed the appropriate steps to follow in its information gathering process,
and Kirkland & Ellis, the Company's special legal counsel, advised the Board as
to its duties and responsibilities in that regard. The Board next discussed the
proper method to initiate a due diligence process with third parties and, taking
into account the results of the discussions conducted by Merrill Lynch, the
Board identified six entities that were potential candidates for a strategic
transaction with the Company, including Eastman. Following these discussions,
the Board authorized the continued gathering of information regarding potential
strategic transactions and the distribution of information packages containing
information about the Company to each of the six entities, subject to each such
entity's execution of a confidentiality and standstill agreement.
On October 26, 1999, the representatives of Merrill Lynch who had advised
the Company resigned their positions with Merrill Lynch to assume positions with
Lehman Brothers Inc. ("Lehman Brothers"). The Company subsequently agreed with
Merrill Lynch to terminate its engagement and on November 3, 1999, executed an
engagement letter with Lehman Brothers to act as the Company's exclusive
financial advisor.
On November 16 and 17, 1999, the Board held a meeting attended by senior
officers and the Company's financial and legal advisors. At this meeting Lehman
Brothers summarized the responses it received from the
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six companies identified by the Board at its special meeting held on October 25,
1999. The Board was informed that only Eastman and a second company ("Company
B") expressed an interest in exploring a strategic transaction with the Company.
However, the Board identified an additional company in Europe ("Company C") that
may have been interested in a potential transaction. Lehman Brothers then
reviewed with the Board its most recent valuation of the Company. The Board
discussed various alternatives available to the Company, including continuing on
the Company's present course as an independent company, potential strategic
acquisitions and the possible sale of the Company. The Board discussed the
challenges and opportunities that these various alternatives might present.
Following discussion, the Board directed Lehman Brothers to broaden the scope of
its inquiries to include financial institutions that may be interested in
alternative transactions with the Company. Kirkland & Ellis again reviewed with
the Board their duties under the DGCL and reminded the Board that it was under
no specific duty to seek the highest transaction price for the Company as the
Board had not abandoned its long-term strategy or decided to undertake any
strategic transaction. The Board determined that it should continue its process
of gathering information regarding strategic alternatives, including continuing
or commencing discussions with Eastman, Company B and Company C.
In early November 1999, Lehman Brothers contacted Company C and was told
that Company C was not in a position to consider a strategic transaction at that
time.
On November 12, 1999, the Company and Eastman executed a confidentiality
and standstill agreement.
The Company's Chairman and other executive officers of the Company met with
representatives from Company B to discuss their respective businesses on
December 10, 1999. The Company's Chairman and other executive officers of the
Company met with representatives from Eastman to discuss their respective
businesses on December 13, 1999. Following this meeting, members of Eastman's
senior management engaged in a series of conversations with the Company's
financial advisors regarding potential valuations of the Company and other due
diligence matters.
In late 1999, the Company received a telephone call from an officer of a
fourth company ("Company D"), indicating Company D's interest in discussing a
potential strategic transaction with the Company. The Company expressed concern
that it was prohibited from discussing any transaction with Company D under the
terms of a consent order issued by the Federal Trade Commission (the "FTC") that
prohibited the Company from sharing certain information with Company D. The
Company requested that Company D seek written advice from the FTC that the
consent order would not prohibit the Company from making available to Company D
due diligence materials that included non-public information.
A special meeting of the Board was held on December 28, 1999, also attended
by its senior officers and financial advisors, to receive updates regarding
potential transactions. Lehman Brothers reported that none of the financial
institutions it spoke with was in a position to discuss a transaction with the
Company at that time. Company B indicated that they were no longer interested in
pursuing discussions. However, another company ("Company E") expressed to Lehman
Brothers their interest in pursuing discussions with the Company. On January 5,
2000, the Company and Company E executed a confidentiality and standstill
agreement. The Board authorized the continued process of identifying interested
parties, the preparation of management presentations and preparation of a data
room for Eastman and Company E.
During the first two weeks of February 2000, representatives of Eastman and
Company E attended a data room and management presentations in Chicago.
On February 17, 2000, an officer of Eastman submitted a letter to the
Company through Lehman Brothers, indicating Eastman's continued interest in the
Company at a valuation of $20 per share, subject to further due diligence
review. Eastman requested a period of exclusive negotiation with the Company
during which Eastman could confirm its valuation based upon an analysis of
potential synergies between Eastman and the Company.
On February 21 and 22, 2000, the Board held a meeting that was attended by
senior officers of the Company and its financial and legal advisors. Lehman
Brothers informed the Board that it had received an additional expression of
interest from a merchant banking firm, but discussions were discontinued after
the
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firm concluded that it could not reach a valuation of the Company acceptable to
the Board. Similarly, after its review of the data room and attendance at
management presentations, Company E discontinued discussions, concluding that it
could not reach the valuation indicated in its preliminary indication of
interest. The Board discussed the FTC restrictions that potentially prohibited
discussions with Company D and Eastman's request for exclusivity. The Board also
considered other available alternatives, including the possibility of publicly
announcing an intention to seek strategic alternatives. The Board discussed
revisiting prior discussions with Company C. After discussion, the Board
directed management to contact representatives of Company C and, if Company C
expressed no interest in a transaction, to grant Eastman its request for a brief
exclusivity period. The Board also concurred with management's request that
Company D obtain FTC advice before conducting discussions that may be deemed to
violate the FTC consent order. Kirkland & Ellis again reminded the Board of its
duties under the DGCL and confirmed that the Board had not abandoned its
long-term business strategy to pursue a strategic transaction.
In accordance with the Board's instructions, Lehman Brothers contacted
Company C and were again told that Company C would not consider a transaction.
On February 25, 2000, John R. Stevenson, the Company's Chairman spoke with
Eastman's Chief Financial Officer regarding Eastman's proposed offer price and
request for a period of exclusivity.
On March 1, the Company's Chairman spoke with Eastman's Chief Financial
Officer via telephone and orally agreed to suspend discussions with other
interested parties for a period of 30 days. On March 6, Mr. Stevenson spoke with
Eastman's Chief Financial Officer to discuss the additional due diligence
required by Eastman.
Throughout the weeks of March 13 and March 20, 2000, representatives from
Eastman toured the Company's worldwide facilities and conducted additional due
diligence at the Company's headquarters building. On March 20, 2000, the
Company's general counsel spoke with a senior manager at Eastman to discuss the
results of the prior week's due diligence.
On March 21, 2000, an officer of Company C contacted Lehman Brothers to
inquire as to the Company's continued interest in a transaction. Lehman Brothers
responded that it could not talk to Company C about any transaction because the
Company was then engaged in a period of exclusive discussions with another
party. On April 3, 2000, following the expiration of Eastman's exclusivity
period. Lehman Brothers contacted Company C to follow up on Company C's last
phone call. Lehman Brothers informed Company C that the Board would consider a
firm proposal from Company C. An information package was delivered to Company C,
and on April 4 and 5, 2000, Company C conducted due diligence at the Company's
headquarters.
On April 7, 2000, the Board held a special meeting, attended by senior
management of the Company and representatives of its financial and legal
advisors. The meeting began with a review of the Board's duties under the DGCL
and confirmation that the directors had not yet committed to a strategy that
would trigger special duties. Lehman Brothers reported that Eastman had
submitted, on April 6, 2000, a letter containing a non-binding proposal to
acquire the Company at a price of $18 per share. Lehman Brothers summarized the
discussions it had with an additional company that expressed an interest in a
transaction involving only certain assets of the Company. It also informed the
directors that Company C had expressed an interest in a potential acquisition of
the Company and stated that its preliminary valuation was $20 per share, subject
to an additional 30 to 45 days of due diligence and approval by its parent
company's board in June 2000. The Board considered these developments and
reviewed with Lehman Brothers the most recent valuation analysis of the Company.
The Board determined that it was advisable to continue discussions with Eastman,
Company C and Company D and directed management to inform Eastman that its $18
proposal did not represent an acceptable value for the Company's stockholders.
The Company authorized management to make public disclosure of its process to
identify potential strategic transactions unless Eastman responded with an
improved final proposal.
Between April 7 and April 10, 2000, the Company's Chairman conveyed the
Board's determination to Eastman and Lehman Brothers engaged in a series of
conversations with Eastman's financial advisor relating to Eastman's valuation
of the Company.
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On April 11, 2000, the Board held a special meeting that was attended by
the Company's senior officers and its financial and legal counsel. The purpose
of the meeting was to update the Board on a revised offer received from Eastman
on April 10, 2000. Eastman had responded with two alternative proposals to
acquire all shares of the Common Stock. The first proposal was for a per share
price of $20, subject to five conditions that the Board determined following
discussion would render the proposal relatively unfavorable. Eastman's second
proposal included a bid price of $19.70 per share without the most
disadvantageous of the conditions, which would have required material amendments
to key employment agreements that the Company determined it would not be able to
obtain. Accordingly, the Board authorized further negotiations with Eastman
relating to a transaction at a bid price of $19.70 per share. The Board directed
the Company's management and advisors to begin negotiation of a definitive
merger agreement with Eastman containing a reasonable breakup fee and to keep
discussions open with Company C and with Company D in the event of receipt of
written advice of the FTC.
On April 12, 2000, Lehman Brothers informed Eastman of the Board's
determination at its April 11 meeting.
From April 13, 2000 through May 3, 2000, representatives of the Company and
Eastman negotiated the terms of the Merger Agreement.
On April 14, 2000, an officer of Company D informed the Company that the
FTC had issued its written advice that Company D could discuss a transaction
with the Company so long as certain operational employees of Company D were not
involved. On April 18, 2000, representatives of Company D conducted due
diligence at the Company's headquarters. Two days later, an officer of Company D
informed Lehman Brothers that Company D could not reach the valuation that it
had indicated in its earlier expression of interest and would require extensive
additional due diligence to confirm its present numbers.
On May 2 and 3, 2000, the Company's Chief Executive Officer had discussions
with a senior manager of Eastman regarding integration issues that would arise
upon consummation of a transaction between the Company and Eastman.
On May 3, 2000, negotiations relating to the Merger Agreement were
completed and all outstanding issues were addressed in a manner acceptable to
the Company. In the evening of May 3, 2000, the Board held a special meeting to
receive an update on the status of the discussions and negotiations. Kirkland &
Ellis presented to the Board in detail the final terms of the merger agreement
and an analysis of the Board's actions and deliberations fulfilling the
fiduciary duties owed to Company stockholders. Lehman Brothers indicated that
there had been no material change in its overall conclusions with respect to its
financial analysis as reviewed by the Board at its April 7, 2000 meeting and
rendered to the Board an oral opinion (which opinion was confirmed by delivery
of a written opinion later that evening) as to the fairness, from a financial
point of view, to the holders of shares of Common Stock (other than Eastman and
its affiliates) of the $19.70 per share cash consideration to be received in the
Offer and the Merger. After discussion, the Board unanimously voted to approve
the Merger Agreement and any related documents and transactions and to recommend
that stockholders of the Company tender their shares of Common Stock in the
Offer, for the reasons described below.
On the evening of May 3, 2000, the Merger Agreement was signed and
delivered, and the parties issued a press release announcing the Merger
Agreement on the morning of May 4, 2000.
REASONS FOR THE RECOMMENDATIONS OF THE COMPANY'S BOARD
A copy of the letter to the Company's stockholders communicating the
recommendation of the Board and the press release relating thereto are filed as
Exhibits 5 and 7 hereto and are incorporated by reference herein.
In approving the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, and recommending that all holders
of Common Stock accept the Offer and tender their shares of
8
<PAGE> 10
Common Stock pursuant to the Offer, and, if necessary under the DGCL, approve
and adopt the Merger Agreement, the Board considered a number of factors
including:
1. The Board's familiarity with, and management's view of, the Company's
business, financial condition, results of operations, current business
strategy and future prospects, the nature of the markets in which the
Company operates, including their growth prospects, the Company's
position in such markets and the historical and current market prices
for the Common Stock.
2. Developments in the Company's industries, including fluctuations in raw
material costs, increasing competition and the difficulties of industry
participants, of a size similar to the Company, to effectively compete.
3. Presentations by the Company's management relating to the Company's
financial performance and future prospects.
4. Presentations by representatives of Lehman Brothers concerning the
Company and the financial aspects of the Offer.
5. The extensive information gathering process undertaken before the
signing of the Merger Agreement, as described under "Background".
6. The fact that management of the Company has held discussions with other
parties, including all of the companies it reasonably considered to be
potential interested parties, concerning possible business
combinations, and such discussions had resulted in only one other party
making a serious proposal, which involved a proposed business
combination on terms that were less favorable than the Offer.
7. The oral and written opinions of Lehman Brothers that, as of the date
of such opinions, the Offer Price is fair, from a financial point of
view, to the Company's stockholders. A copy of such written opinion
setting forth assumptions made and matters considered and limitations
set forth by Lehman Brothers is included as Annex A hereto and should
be read in its entirety.
8. The historical market prices, price to earnings ratios, EBITDA and
other multiples, recent trading activity and trading range of the
Common Stock, including the fact that the Offer Price represents (i) a
premium of approximately 42% over the $13 7/8 closing price of the
Common Stock on the New York Stock Exchange (the "NYSE") on May 3,
2000, the last full trading day prior to the announcement of the Offer,
(ii) a premium of approximately 52% over the average closing price of
the Common Stock on the NYSE for the 30 days prior to the announcement
of the Offer, (iii) a premium of approximately 37% over the average
closing price of the Common Stock on the NYSE for the 12 months prior
to announcement of the Offer, (iv) a premium of approximately 7% over
the highest closing price of the Common Stock on the NYSE during the 12
months prior to the announcement of the Offer and (v) a premium of
approximately 81% over the lowest closing price of the Common Stock on
the NYSE for the 12 months prior to announcement of the Offer.
9. The fact that the Offer and the Merger provide for a prompt cash tender
offer for all shares of Common Stock to be followed by the Merger for
the same consideration, thereby enabling the Company's stockholders, at
the earliest possible time, to obtain the benefits of the transaction
in exchange for their shares of Common Stock.
10. The fact that the Company may terminate the Merger Agreement in order
to approve an unsolicited tender offer or exchange offer for all of the
shares of Common Stock or other proposed business combination by a
third party that the Board determines in good faith to be fully
financed or reasonably capable of being financed and financially
superior to the Offer, upon the payment to Eastman of an $8 million
termination fee.
11. The fact that Eastman's and the Purchaser's obligations under the Offer
are not subject to any financing condition.
12. The limited ability of Eastman or the Purchaser to terminate the Offer
or the Merger Agreement.
9
<PAGE> 11
13. The impact of the Offer and the Merger on existing stock options and
other benefits of Company personnel.
The foregoing discussion of the information and factors considered and
given weight by the Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Offer,
the Board did not find it practicable to, and did not, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Board may have given
different weights to different factors.
(c) Intent to Tender. To the Company's knowledge after reasonable inquiry,
all of the Company's executive officers, directors and affiliates currently
intend to tender all shares of Common Stock held of record or beneficially by
them pursuant to the Offer. The foregoing does not include any shares over
which, or with respect to which, any such executive officer, director or
affiliate acts in a fiduciary or representative capacity or is subject to the
instructions of a third party with respect to such tender or vote.
ITEM 5. PERSON/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
Pursuant to a letter agreement dated November 3, 1999, the Company formally
retained Lehman Brothers to provide general financial advisory services to, and
to advise the Company concerning, one or more strategic transactions, including
a possible acquisition, sale, merger, joint venture or business combination,
and, if requested, to render an opinion to the Board regarding the fairness,
from a financial point of view, to the holders of the Common Stock of the
consideration to be received in any such strategic transaction. The Board
retained Lehman Brothers based upon Lehman Brothers' qualifications, experience
and expertise, particularly with respect to the Company's industries.
Pursuant to the Lehman Brothers engagement letter, the Company agreed to
pay to Lehman Brothers (i) a quarterly cash retainer, (ii) a fee for delivery of
an opinion and (iii) a sliding-scale fee, payable upon consummation of a
strategic transaction, which is based upon the aggregate value of the strategic
transaction. The cash retainer and opinion fees are creditable against the fee
payable upon consummation of a strategic transaction. Prior to delivery of its
fairness opinion relating to the Offer, Lehman Brothers received retainer fees
aggregating $50,000. Lehman Brothers will receive a cash opinion fee of $500,000
and, if the Company consummates the transaction described in this Statement,
Lehman Brothers will receive a net additional cash fee of $2,450,000. The
Company has also agreed to reimburse Lehman Brothers for certain costs and
expenses. In addition, the Company has also agreed to indemnify Lehman Brothers
against certain liabilities and expenses, including certain liabilities under
the federal securities laws, arising out of Lehman Brothers engagement or, if
such indemnification is unavailable to Lehman Brothers or insufficient to hold
it harmless, then the Company has agreed to contribute to the amount paid or
payable by Lehman Brothers as a result of such occurrence.
Except as described above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to stockholders on its behalf concerning
the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES.
Except as set forth below, no transactions in shares of Common Stock have
been effected during the past 60 days by the Company or any subsidiary of the
Company or, to the best of the Company's knowledge, by any executive officer,
director or affiliate of the Company.
10
<PAGE> 12
The Company, on behalf of participants in its Employee Stock Ownership
Plan, 401(k) Plan and Employee Stock Participation Plan, purchased shares of
Common Stock in the following open market transactions.
<TABLE>
<CAPTION>
DATE AMOUNT (SHARES) PRICE PER SHARE
---- --------------- ---------------
<S> <C> <C>
3/16/00...................................... 96 $12.5625
3/20/00...................................... 791 13.0625
3/23/00...................................... 1,536 11.9253
3/24/00...................................... 1,154 11.7500
3/29/00...................................... 1,740 11.6875
3/30/00...................................... 89 11.8125
3/30/00...................................... 656 11.8750
3/30/00...................................... 3,062 11.9146
3/31/00...................................... 3,834 12.2625
4/3/00....................................... 886 11.8750
4/6/00....................................... 4,113 12.0000
4/12/00...................................... 113 11.6250
4/12/00...................................... 898 12.5625
4/13/00...................................... 283 12.5000
4/13/00...................................... 1,080 12.5625
4/14/00...................................... 52 12.5625
4/20/00...................................... 744 12.1250
4/27/00...................................... 82 13.8750
4/28/00...................................... 645 13.8750
5/3/00....................................... 6,103 13.9375
5/3/00....................................... 85 14.0000
5/8/00....................................... 58 19.5625
5/9/00....................................... 271 19.6875
</TABLE>
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as set forth in this Statement, the Company is not currently
undertaking or engaged in any negotiations in response to the Offer that relate
to (i) a tender offer for or other acquisition of the Company's securities by
the Company, any subsidiary of the Company or any other person; (ii) an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the Company; (iii) a purchase, sale,
or transfer of a material amount of assets of the Company or any subsidiary of
the Company; or (iv) any material change in the current dividend rate or policy
or in the indebtedness or capitalization of the Company.
Except as set forth in this Statement, there are no transactions,
resolutions of the Board, agreements in principle, or signed contracts in
response to the Offer that relate to one or more of the events referred to in
this Item 7.
ITEM 8. ADDITIONAL INFORMATION.
THE RIGHTS AGREEMENT
Each Right issued pursuant to the Rights Agreement entitles the registered
holder thereof to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock ("Series A Preferred"), at an exercise price of
$70 (the "Purchase Price") per share, subject to adjustment. On the earlier of
(A) the 10th business day following a public announcement that, without the
prior consent of the Board, a person or group of affiliated or associated
persons (an "Acquiring Person") has acquired or obtained the right to acquire
beneficial ownership of 15% or more of the voting power of the Company or (B)
the 10th business day following the commencement of, or public announcement of
intention to make, a tender offer or exchange offer the consummation of which
would result in that person becoming an Acquiring Person (the earlier of
11
<PAGE> 13
such dates being the "Distribution Date"), the Rights become exercisable and
trade separately from the Common Stock. After the Distribution Date, each holder
of each of the Rights (other than the Acquiring Person) will thereafter have the
right to purchase from the Company one one-hundredth of a share of Series A
Preferred for each Right held. In the event that any person becomes an Acquiring
Person (a "Flip-In-Event"), each holder of a Right will thereafter have the
right to receive, upon exercise thereof, at the then current Purchase Price of
the Right such number of shares of Common Stock as shall have a value of two
times the Purchase Price of the Right. The Rights may be redeemed at a price of
$.01 per Right at any time prior to a person becoming an Acquiring Person.
The Company and the Rights Agent amended the Rights Agreement as of May 9,
2000 to provide, among other things, that none of a "Distribution Date," "Stock
Acquisition Date" or "Flip-In Event" shall occur or be deemed to occur, and
neither Eastman nor the Purchaser shall become an "Acquiring Person," as a
result of the execution, delivery or performance of the Merger Agreement or by
the announcement, making or consummation of the Offer, the Merger of any other
transactions contemplated by the Merger Agreement. In addition, the amendment
provides for the expiration of the Rights immediately prior to the consummation
of the Offer.
SECTION 14(F) INFORMATION STATEMENT
The Information Statement attached as Annex B hereto is being furnished in
connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board other than at a
meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
<TABLE>
<S> <C>
Exhibit 1 Offer to Purchase (incorporated by reference to Exhibit
(a)(1) to the Schedule TO).*
Exhibit 2 Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to the Schedule TO).*
Exhibit 3 Agreement and Plan of Merger dated May 3, 2000, by and among
Eastman, Purchaser and the Company (incorporated by
reference to Exhibit (d)(1) to the Schedule TO).
Exhibit 4 Confidentiality Agreement, dated as of November 12, 1999,
between Eastman and the Company (incorporated by reference
to Exhibit (d)(2) to the Schedule TO).
Exhibit 5 Letter to Stockholders of the Company, dated May 12, 2000.*
Exhibit 6 Opinion of Lehman Brothers, dated May 3, 2000 (included as,
and incorporated by reference to, Annex A attached hereto).
Exhibit 7 Joint Press Release of Eastman and the Company, dated May 4,
2000 (incorporated by reference to the Company's filing of
the Joint Press Release with the Securities and Exchange
Commission under cover of Schedule 14D-9 on May 5, 2000).
Exhibit 8 Certificate of Incorporation of the Company, as amended
(incorporated by reference to the Company's annual report on
Form 10-K for the year ended October 31, 1994).
Exhibit 9 Bylaws of the Company, as amended (incorporated by reference
to the Company's annual report on Form 10-K for the year
ended October 31, 1996).
Exhibit 10 The Information Statement of the Company, dated May 12, 2000
(included as, and incorporated by reference to, Annex B
attached hereto).
Exhibit 11 Third Amendment to Rights Agreement, dated as of May 9, 2000
between the Company and EquiServe Trust Company, N.A.
Exhibit 12 Employment Agreement dated as of November 12, 1998, by and
between the Company and John R. Stevenson.
Exhibit 13 Amendment to Employment Agreement dated as of April 12,
2000, by and between the Company and John R. Stevenson.
</TABLE>
- -------------------------
* Included in copies mailed to stockholders.
12
<PAGE> 14
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
McWHORTER TECHNOLOGIES, INC.
/s/ Warren B. Grayson
--------------------------------------
By: Warren B. Grayson
Vice President
Dated: May 12, 2000
13
<PAGE> 15
ANNEX A
OPINION OF FINANCIAL ADVISOR
LEHMAN BROTHERS
May 3, 2000
Board of Directors
McWhorter Technologies, Inc.
400 East Cottage Place
Carpentersville, IL 60110
Members of the Board:
We understand that McWhorter Technologies, Inc., a Delaware corporation
("McWhorter" or the "Company"), and Eastman Chemical Company, a Delaware
corporation, ("Eastman") are proposing to enter into an Agreement and Plan of
Merger to be dated May 3, 2000 (the "Agreement") pursuant to which a subsidiary
of Eastman (the "Acquisition Sub") will commence a tender offer (the "Tender
Offer") to acquire 100% of the outstanding shares of common stock of McWhorter
("McWhorter Common Stock") for $19.70 per share in cash. Following consummation
of the Tender Offer, the Acquisition Sub will be merged with and into McWhorter
(the "Merger", and together with the Tender Offer, the "Proposed Transaction")
and each share of common stock will be exchangeable for $19.70 in cash. The
terms and conditions of the Proposed Transaction are set forth in more detail in
the Agreement.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's stockholders of the consideration to be offered to such stockholders
in the Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) the publicly available
information concerning the Company that we believe to be relevant to our
analysis, including an Annual Report on Form 10-K for the fiscal year ended
October 31, 1999 and a Quarterly Report on Form 10-Q for the quarter ended
January 31, 2000, (3) financial and operating information with respect to the
business, operations and prospects of the Company furnished to us by the
Company, (4) a trading history of the Company's common stock from 1997 to the
present and a comparison of that trading history with those of other companies
that we deemed relevant, (5) a comparison of the historical financial results
and present financial condition of the Company with those of other companies
that we deemed relevant, (6) a comparison of the financial terms of the Proposed
Transaction with the financial terms of certain other recent transactions that
we deemed relevant, (7) estimates of third party research analysts with respect
to the future financial performance of the Company, and (8) the results of
efforts to solicit indications of interest from third parties with respect to a
purchase of the Company. In addition, we have had discussions with the
management of the Company concerning its business, operations, assets, financial
condition and prospects and have undertaken such other studies, analyses and
investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts or circumstances that would make such information
inaccurate or misleading. With respect to the financial projections of the
Company, upon advice of the Company we have assumed that such projections have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
financial performance of the Company.
A-1
<PAGE> 16
However, for purposes of our analysis, based upon the historical financial
performance of the Company and the possibility that management's projections may
not be met in the future, we also have considered more conservative assumptions
and estimates which resulted in certain adjustments to the projections of the
Company. We have discussed these adjusted projections with the management of the
Company and they have agreed with the appropriateness of the use of such
adjusted projections in performing our analysis. In arriving at our opinion, we
have not conducted a physical inspection of the properties and facilities of the
Company and have not made or obtained any evaluations or appraisals of the
assets or liabilities of the Company. Our opinion necessarily is based upon
market, economic and other conditions as they exist on, and can be evaluated as
of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the stockholders of the Company in the Proposed Transaction is fair
to such stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. In the ordinary course of our business, we may
actively trade in the debt and equity securities of the Company and Eastman for
our own account and for the accounts of our customers and, accordingly, may at
any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
whether to accept the consideration to be offered to the stockholders in
connection with the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
A-2
<PAGE> 17
ANNEX B
MCWHORTER TECHNOLOGIES, INC.
400 EAST COTTAGE PLACE
CARPENTERSVILLE, ILLINOIS 60110
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about May 12, 2000 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Statement") of McWhorter Technologies, Inc. (the "Company"). You are receiving
this Information Statement in connection with the possible election of persons
designated by Eastman Chemical Company ("Eastman"), a corporation formed under
the laws of the State of Delaware, to a majority of seats on the Board of
Directors (the "Board of Directors") of the Company. On May 3, 2000, the Company
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
Eastman and Tartan, Inc. (the "Purchaser"), a corporation formed under the laws
of the State of Delaware and a wholly owned subsidiary of Eastman, pursuant to
which the Purchaser is required to commence a tender offer to purchase all
outstanding shares of Common Stock, par value $.01 per share, of the Company
(the "Common Stock"), including the associated purchase rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of February 1, 1994 (as
amended, the "Rights Agreement"), at a price per share of $19.70 net to the
seller in cash (the "Offer Price"), upon the terms and conditions set forth in
the Purchaser's Offer to Purchase, dated May 12, 2000, and in the related Letter
of Transmittal (which, together with any amendments and supplements thereto,
collectively constitute the "Offer"). Copies of the Offer to Purchase and the
Letter of Transmittal have been mailed to stockholders of the Company and are
filed as Exhibits (a)(1) and (a)(2) respectively, to the Tender Offer Statement
on Schedule TO (as amended from time to time, the "Schedule TO") filed by the
Purchaser and Eastman with the Securities and Exchange Commission (the
"Commission") on May 12, 2000. The Merger Agreement provides that, subject to
the satisfaction or waiver of certain conditions, following completion of the
Offer, and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), the Purchaser will be merged with and into the Company
(the "Merger"). Following consummation of the Merger, the Company will continue
as the surviving corporation (the "Surviving Corporation") and will be a wholly
owned subsidiary of Eastman. At the effective time of the merger (the "Effective
Time"), each issued and outstanding share of Common Stock (other than shares
that are owned by Eastman, the Purchaser, any of their respective subsidiaries,
the Company or any of its subsidiaries, and Shares held by stockholders of the
Company who did not vote in favor of the Merger Agreement and who comply with
all of the relevant provisions of Section 262 of the DGCL) will be converted
into the right to receive $19.70 in cash or any greater amount per share paid
pursuant to the Offer.
The Offer, the Merger, and the Merger Agreement are more fully described in
the Schedule 14D-9 to which this Information Statement is attached as Annex B,
which was filed by the Company with the Commission on May 12, 2000 and which is
being mailed to stockholders of the Company along with this Information
Statement.
This Information Statement is being mailed to you in accordance with
Section 14(f) of the Securities Exchange Act of 1934, as amended, and Rule 14f-l
promulgated thereunder. The information set forth herein supplements certain
information set forth in the Statement on Schedule 14D-9. Information set forth
herein related to Eastman, the Purchaser or the Eastman Designees (as defined
herein) has been provided by Eastman. You are urged to read this Information
Statement carefully. You are not, however, required to take any action in
connection with the matters set forth herein.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on May
12, 2000. The Offer is currently scheduled to expire at 12:00 midnight, New York
City time, on Friday, June 9, 2000, unless the Purchaser extends it.
B-1
<PAGE> 18
GENERAL
The Common Stock is the only class of equity securities of the Company
outstanding which are entitled to vote at a meeting of the stockholders of the
Company. As of April 30, 2000 there were 9,950,685 shares of Common Stock
outstanding, of which Eastman and the Purchaser own no shares as of the date
hereof.
RIGHTS TO DESIGNATE DIRECTORS AND EASTMAN DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of and
payment for shares of Common Stock by the Purchaser pursuant to the Offer,
Eastman will be entitled to designate at least a majority of the members (the
"Eastman Designees") of the Board of Directors.
The Merger Agreement provides that the Company will, upon request of the
Purchaser, promptly increase the size of the Board of Directors or exercise its
reasonable best efforts to secure the resignations of such number of directors,
or both, as is necessary to enable the Eastman Designees to be elected to the
Board and, subject to Section 14(f) of the Securities Exchange Act of 1934, as
amended, and Rule 14f-l promulgated thereunder, will cause the Eastman Designees
to be so elected. At such time, the Company will, if requested by Eastman, also
cause directors designated by Eastman to constitute at least the same percentage
(rounded up to the next whole number) of each committee of the Board of
Directors as such directors constitute on the Board of Directors.
Notwithstanding the foregoing, if shares of Common Stock are purchased
pursuant to the Offer, there will be until the Effective Time at least three
members of the Board of Directors who were directors on the date of the Merger
Agreement and who are not employees of the Company.
The Eastman Designees are listed below. Each of the following individuals
has consented to serve as a director of the Company if appointed or elected.
None of the Eastman Designees currently is a director of, or holds any position
with, the Company. Eastman has advised the Company that, to the best of
Eastman's knowledge, except as set forth below, none of the Eastman Designees or
any of their affiliates beneficially owns any equity securities or rights to
acquire any such securities of the Company nor has any such person been involved
in any transaction with the Company or any of its directors, executive officers
or affiliates that is required to be disclosed pursuant to the rules and
regulations of the Commission other than with respect to transactions between
Eastman and the Company that have been described in the Schedule TO or the
Statement.
The name, age, present principal occupation or employment and five-year
employment history of each of the individuals who may be selected as Eastman
Designees are set forth below. Unless otherwise indicated, each such individual
has held his or her present position as set forth below for the past five years.
Unless otherwise indicated, each such person is a citizen of the United States
and the business address of each person listed below is 100 North Eastman Road,
P.O. Box 511, Kingsport, Tennessee 37662.
NAME, AGE, PRINCIPAL OCCUPATION AND EMPLOYMENT HISTORY
ALLAN R. ROTHWELL, age 52, is President, Chemicals Group of Eastman
Chemical Company. Mr. Rothwell joined the Company in 1969, became Vice President
and General Manager, Container Plastics Business Organization in 1994, and was
appointed Vice President, Corporate Development and Strategy in 1997. He was
named Senior Vice President and Chief Financial Officer in 1998 and assumed his
current position in 1999.
BRUCE E. MOORE, age 60, is Eastman Chemical Company's Vice President and
General Manager of Coatings, Adhesives and Specialty Polymers. Mr. Moore joined
the Company in 1962, became Vice President of Asia Pacific and Latin America
Sales, Worldwide Sales Division in 1991, was appointed President and Managing
Director of Eastman Chemical, Asia Pacific Pte. Ltd. In 1994, and became Vice
President and General Manager, Coatings, Inks and Resins Business Organization
in 1998. He assumed his current position in 1999.
B-2
<PAGE> 19
PRENTICE O. MCKIBBEN, JR., age 49, is Director, Corporate and Business
Development of Eastman Chemical Company. Mr. McKibben joined the Company in 1974
and became Business Development Manager in 1991. He was appointed Business
Ventures Director in 1996 and became Business Development Executive in 1997. He
assumed his current position in 1998.
ERIC D. DELOACH, age 52, became Director, Coatings, Adhesives and Specialty
Polymers Business Organization of Eastman Chemical Company effective January 1,
2000. Mr. DeLoach joined the Company in 1969 and served as a Business Manager,
Coatings, Inks and Resins Business Organization from 1991 until his appointment
as Business Director, Coatings, Inks and Resins Business Organization in 1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following information presents the beneficial ownership of shares of
Common Stock as of December 1, 1999 (unless otherwise stated) by (i) each
stockholder known by the Company to be the owner of more than five percent of
the outstanding shares of Common Stock, (ii) each director, (iii) each executive
officer named in the Summary Compensation Table, and (iv) all directors and
executive officers as a group. Except as noted below, the shares of Common Stock
indicated in the following table are held with sole power over both investment
and voting.
This table also sets forth the number of stock equivalents credited to the
individual's deferred compensation account or equivalents granted through the
Key Employee Annual Bonus Plan. The deferred compensation account reflects the
election of the individual to defer restricted stock and stock option gains
and/or restoration contributions under the McWhorter Technologies, Inc. Employee
Stock Ownership Plan (the "ESOP"). The value of stock equivalents is determined
by the price of the Common Stock. Therefore, the value of an individual's
account is fully at risk and tied to Common Stock performance. These stock
equivalents do not carry any voting rights.
<TABLE>
<CAPTION>
TOTAL NUMBER
SHARES OF SHARES AND
BENEFICIALLY PERCENT OF MWT STOCK MWT STOCK
NAME OF BENEFICIAL OWNER OWNED CLASS EQUIVALENTS EQUIVALENTS
------------------------ ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Shapiro Capital Management Company, Inc........ 1,984,965(1) 19.9% 0 1,984,965
3060 Peachtree Road, N.W
Atlanta, GA 30305
Resource Trust Company......................... 1,243,863(2) 12.5% 0 1,243,863
900 Second Avenue South, Suite 300
Minneapolis, MN 55402
C. Angus Wurtele............................... 923,642(3) 9.3% 0 923,642
1700 Foshay Tower 827 Marquette Ave
Minneapolis, MN 55402
Dimensional Fund Advisors...................... 643,900(4) 6.5% 0 643,900
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
John R. Stevenson.............................. 169,978(5) 1.7% 27,807 197,785
Jeffrey M. Nodland............................. 93,367(6) * 15,007 108,374
D. George Harris............................... 39,453(7) * 8,422 47,875
Douglas J. Graff............................... 32,275(8) * 6,422 38,697
Douglas B. Rahrig.............................. 30,995(9) * 2,423 33,418
Heinn F. Tomfohrde, III........................ 19,000(10) * 5,381 24,381
David I. Barton................................ 17,000(10) * 0 17,000
John G. Johnson, Jr............................ 10,900(10) * 3,265 14,165
Edward M. Giles................................ 10,000(10) * 4,233 14,233
</TABLE>
B-3
<PAGE> 20
<TABLE>
<CAPTION>
TOTAL NUMBER
SHARES OF SHARES AND
BENEFICIALLY PERCENT OF MWT STOCK MWT STOCK
NAME OF BENEFICIAL OWNER OWNED CLASS EQUIVALENTS EQUIVALENTS
------------------------ ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Donald J. Crawford, Jr......................... 10,000 * 56 10,056
All directors and executive officers as a group
(13 persons)................................. 489,887 4.9%
</TABLE>
- -------------------------
* Less than 1.0%
(1) Based on Schedule 13G/A dated February 14, 2000.
(2) Based on Schedule 13G/A dated February 11, 2000.
(3) Based on Schedule 13G/A dated February 14, 2000, Mr. Wurtele reported sole
voting and investment power over 898,217 shares and shared voting and
investment power over 25,425 shares owned by Mr. Wurtele's spouse. Pursuant
to the Agreement Containing Consent Order by and among The Valspar
Corporation, the Company and the Federal Trade Commission dated September
30, 1993, all such shares are restricted from being voted.
(4) Based on Form 13G/A dated July 31, 1999.
(5) Includes options to purchase 87,596 shares. As of October 31, 1999, includes
3,151 shares held through the ESOP.
(6) Includes options to purchase 52,063 shares. As of October 31, 1999, includes
3,128 shares held though the ESOP.
(7) Includes options exercisable to purchase 35,000 shares.
(8) Includes options to purchase 20,440 shares. As of October 31, 1999, includes
2,088 shares held through the McWhorter Technologies, Inc. Employee 401(k)
Savings Plan (the "401(k) Plan" ) and 3,047 shares held through the ESOP.
(9) Includes options to purchase 26,776 shares. As of October 31, 1999, includes
357 shares held through the 401(k) plan and 2,313 shares held through the
ESOP.
(10) Includes options exercisable to purchase 10,000 shares.
BOARD OF DIRECTORS
TERMS OF DIRECTORS
The directors are elected to serve until the next annual meeting.
DIRECTORS AND EXECUTIVE OFFICERS
The current executive officers of the Company are as follows:
KEVIN W. BROLSMA, age 45, is Vice President responsible for special
projects. Prior to being named to his current position in October 1999, Mr.
Brolsma was Vice President, Global Operations beginning in February 1999 and
Vice President, Acquisitions Integration/Environment, Health, and Safety
beginning in August 1997. Mr. Brolsma was Vice President, Powder from May 1996
to August 1997 and Vice President, Operations from February 1994 to April 1996.
Previously he was the General Manager of the Southeast Region of the Resin
Products Division of Cargill beginning in January 1990. From January 1988 to
December 1989, Mr. Brolsma was the National Accounts Manager and General Sales
Manager of the Resin Products Division.
DONALD J. CRAWFORD, JR., age 47, is President, Global Coating Resins. Prior
to his current position, Mr. Crawford was Vice President, Global Coating Resins
from June 1999 to February 2000 and Vice President, Global Liquid Coatings from
January 1999 to June 1999. Prior to joining the Company in January 1999, Mr.
Crawford was Vice President and General Manager for North America for Betz
Dearborn, Inc.,
B-4
<PAGE> 21
beginning in 1996. Mr. Crawford held various positions with Betz Dearborn Inc.
for twenty years, most recently as Vice President and General Manager.
DOUGLAS J. GRAFF, age 48, is President, Composite Polymers of the Company.
Prior to his current position, Mr. Graff was Vice President, Composite Polymers
from February 1994 to February 1999 and Assistant Vice President and General
Manager of the West Region of the Resin Products Division of Cargill from
October 1981 to January 1994. Mr. Graff has held various positions with Cargill
since July 1973.
WARREN B. GRAYSON, age 49, is Vice President, General Counsel and
Secretary. Prior to joining the Company in May 1999, Mr. Grayson was Assistant
General Counsel of Monsanto Company beginning in November 1997. Prior to
November 1997, Mr. Grayson was Deputy General Counsel to The Nutrasweet Company,
a wholly owned subsidiary of Monsanto beginning May 1995.
JEFFREY M. NODLAND, age 44, is President and Chief Executive Officer of the
Company. He has held the position of Chief Executive Officer since February
1999, and the position of President since January 1997. Mr. Nodland was the
Executive Vice President from May 1995 to December 1996, the Senior Vice
President and Chief Financial Officer from February 1994 to May 1995 and Chief
Operating Officer from May 1995 to February 1999. Previously he held the
position of President of McWhorter, Inc. from June 1991, and Vice President,
Maintenance & Marine Coatings of The Valspar Corporation ("Valspar") from
October 1989. Mr. Nodland has been a director of the Company since November
1993.
DOUGLAS B. RAHRIG, age 48, is Vice President, Global Technical Marketing.
Prior to being named to his current position in May 1999, Mr. Rahrig was Vice
President, Technology beginning in February 1994. Mr. Rahrig was Department
Manager of the Technology Department of S.C. Johnson & Son, Inc. beginning in
February 1993. Mr. Rahrig has held various technical and management positions
with S.C. Johnson & Son, Inc. since 1985.
LOUISE M. TONOZZI-FREDERICK, age 43, is Vice President, Chief Financial
Officer and Treasurer of the Company. Prior to being named to her current
position, Ms. Tonozzi-Frederick was Treasurer and Controller from May 1995 to
September 1996. She was Controller from May 1994 to May 1995. Prior to May 1995,
Ms. Tonozzi-Frederick held various financial positions with Mallinkrodt Group,
Inc. for several years, most recently as Assistant Controller.
The current directors of the Company are as follows:
JOHN R. STEVENSON, age 57, is Chairman of the Board of Directors of the
Company. He has held the position of Chairman since January 1997 and held the
position of Chief Executive Officer from February 1994 until February 1999. Mr.
Stevenson was President of the Company from February 1994 to December 1996.
Prior to being named in February 1994 to this position, Mr. Stevenson was Vice
President, Special Products Group and Administration of Valspar beginning in
August 1992. Previously he held the position of Vice President, Administration
of Valspar beginning in February 1991 and Vice President, Corporate Services of
Valspar beginning in February 1985. Mr. Stevenson has been a director of the
Company since November 1993.
DAVID I. BARTON, age 61, is retired. Prior to his retirement, he was
director of Sybron Chemicals Inc. from July 1996 through January 1999. He served
as Chairman, President and Chief Executive Officer of OSI Specialties, Inc. from
March 1993 until October 1995. During the previous five years, Mr. Barton was
Senior Vice President and General Manager of the Specialty Derivatives business
at International Specialty Products, Inc. He currently serves as Chairman of the
Board of the University of Connecticut Foundation. Mr. Barton has been a
director of the Company since February 1999.
EDWARD GILES, age 64, is Chairman of The Vertical Group, Inc., the
successor to the venture capital activities of F. Eberstadt & Co., Inc. He has
held this position since 1988. Previously, he was President of F. Eberstadt &
Co., Inc. beginning in 1979 and Vice Chairman of Eberstadt Fleming beginning in
1985. He is director of Ventana Medical Systems and Synthetech Inc. and an
advisory director of Sit Kim International Investments. Mr. Giles has been a
director of the Company since May 1994.
B-5
<PAGE> 22
D. GEORGE HARRIS, age 67, is Chairman and Chief Executive Officer of D.
George Harris & Associates, PLC (DGH&A) New York, NY, a firm he founded in 1987,
which specializes in leveraged buyouts in the chemical and other process
industries. Until they were sold in 1999, he was chairman of Penrice Soda
Products, Harris Chemical Group, Inc., and Harris Specialty Chemicals. Mr.
Harris serves as chairman of both Better Minerals & Aggregates Company and
Vestolit GmbH. Previously he was President of SCM Chemicals, SCM Corporation,
and Rhone-Poulenc Inc., the U.S. subsidiary of France's largest chemical
company. He serves as a consultant to the Tax Free Fund for Utah and is a member
of the Presidents' Advisory Committee on Trade Policy Negotiation (ACTPN). Mr.
Harris has been a director of the Company since February 1994 and was Chairman
of the Board of Directors of the Company from February 1994 through December
1996.
JOHN G. JOHNSON, Jr., age 59, is President and Chief Executive Officer of
Foamex International. He has held this position since March 1999. Previously he
was the Principal of Johnson Eight, a management consulting firm. He held the
position of Chief Executive Officer of Safety-Kleen Corp. from January 1995 to
August 1997, and the position of President and Director from January 1993 to
August 1997. Prior to joining Safety-Kleen he was employed by ARCO beginning in
1958. From 1988 until December 1992 he served as President of ARCO Chemical
Americas, a division of ARCO Chemical, and served as director of ARCO Chemical.
He serves as a director of Foamex International and is also a member of the
Board of Trustees of Drexel University. Mr. Johnson has been a director of the
Company since May 1995.
JEFFREY M. NODLAND. See Mr. Nodland's biography above.
HEINN F. TOMFOHRDE, III, age 66, is retired. Prior to his retirement he
held the position of President, Chief Operating Officer, and Director of
International Specialty Products, Inc. and its predecessor company GAF Chemicals
Corp. from 1987 through 1991. Previously, he held the position of President and
Chief Operating Officer of Union Carbide's Consumer and Industrial Products and
Services Group beginning in 1985. Mr. Tomfohrde has been a director of the
Company since February 1994 and has been the Lead Director since February 1997.
DIRECTOR COMPENSATION
Employee directors do not receive additional compensation for serving on
the Board of Directors. Non-employee directors receive an annual retainer of
$17,000 payable, at the director's option, either entirely in deferred stock or
half in deferred stock and half in cash. In February 1997, the Board of
Directors approved the designation of a Lead Director (non-employee) of the
Company. The Lead Director receives annual compensation of $8,000 more than
other non- employee directors of the Company. A non-employee director is
entitled to receive shares of Common Stock represented by the deferred stock
awards when such director ceases to be a member of the Board of Directors. Each
non-employee director also receives a fee of $1,000 in cash for each Board of
Directors or committee meeting attended, provided that this fee is not paid for
committee meetings held on the same day as a Board of Directors meeting. Upon
his or her initial election to the Board of Directors, each non-employee
director (except for Mr. Harris in his previous role as Chairman of the Board of
Directors) received an initial non-qualified option to purchase 10,000 shares of
Common Stock at a price equal to the market value of such shares at the date of
grant. Mr. Harris, in his previous role as Chairman of the Board of Directors,
received an initial non-qualified option to purchase 35,000 shares of Common
Stock at an exercise price equal to the market value of such shares at the date
of grant. The exercise price for such options for Messrs. Giles, Harris, and
Tomfohrde is $16.2125 per share, for Mr. Johnson is $15.00 per share, and for
Mr. Barton is $16.50 per share.
CERTAIN INFORMATION CONCERNING MEETINGS AND COMMITTEES OF THE BOARD
The Board held six meetings during the fiscal year ended October 31, 1999
("fiscal 1999"). The four standing committees of the Board are the Audit
Committee, the Compensation Committee, the Environmental Committee and the
Nominating and Governance Committee. Mr. David Barton joined the Board in
February 1999 and Ms. Michelle Collins resigned effective June 30, 1999. Each
director attended all of the meetings of the Board and of the Committees on
which the director served except for Mr. Giles who was absent from one Board
meeting; Ms. Collins who was absent from one Board meeting and one Compensation
B-6
<PAGE> 23
Committee meeting; and D. George Harris who was absent from one Audit Committee
Meeting and one Environmental Committee meeting.
Audit Committee. The members of the Audit Committee are Messrs. Barton
(beginning in August 1999), Giles (Chairman), Harris, Johnson, Tomfohrde, and
Ms. Collins (through June 1999). The Audit Committee held three meetings during
fiscal 1999. This committee reviews the accounting and auditing principles and
procedures of the Company with a view to the safeguarding of the Company's
assets and the reliability of its financial records; recommends to the Board,
the engagement of the Company's independent auditors; reviews with the
independent auditors the plans and results of the auditing engagement; and
considers the independence of the Company's auditors.
The Board has not adopted a written charter for the Audit Committee. The
members of the Audit Committee are "independent", as defined in Sections
303.01(B)(2)(a) and (3) of the New York Stock Exchange listing standards.
Compensation Committee. The members of the Compensation Committee are
Messrs. Barton (beginning in August 1999), Giles, Harris, Johnson, and Tomfohrde
(Chairman), and Ms. Collins (through June 1999). The Compensation Committee held
four meetings during fiscal 1999. This committee establishes salaries,
incentives, and other forms of compensation for executive officers and other key
employees of the Company; administers the various incentive compensation and
benefit plans of the Company; and recommends policies related to such incentive
compensation and benefit plans.
Environmental Committee. The members of the Environmental Committee are
Messrs. Barton (beginning in August 1999), Giles, Harris, Johnson (Chairman),
and Tomfohrde, and Ms. Collins (through June 1999). The Environmental Committee
held two meetings during fiscal 1999. This committee reviews the environmental
principles and procedures of the Company with a view to achieving and
maintaining compliance with all applicable environmental laws and regulations;
implementing programs and procedures that address issues related to the
environment; and integrating environmental planning with the Company's business
operations.
Nominating and Governance Committee. The members of the Nominating and
Governance Committee are Messrs. Barton (Chairman, beginning August 1999),
Giles, Harris, Johnson, and Tomfohrde and Ms. Collins (member and chairwoman
through June 1999). The Nominating and Governance Committee held two meeting
during fiscal 1999. This committee identifies and proposes to the full Board
nominees to serve on the Board. This committee will consider nominees to serve
on the Board recommended by stockholders. Stockholders should submit such
recommendations to Susanne Riley, Shareholder Services Manager, 400 E. Cottage
Place, Carpentersville, Illinois 60110.
The Nominating and Governance Committee will consider nominees recommended
by security holders. Security holders may submit in writing the names of persons
they wish to recommend to the attention of the Chairman of the Nominating and
Governance Committee, addressed to the Company at its principal executive
offices.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, Messrs. Barton (commencing February, 1999), Giles,
Harris, Johnson, and Tomfohrde and Ms. Collins (up to June 30, 1999, the
effective date of her resignation as a director) served as members of the
Compensation Committee of the Board, none of whom has ever served as an officer
or employee of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge based on review of copies of such forms
furnished to the Company and written representations, all Forms 3, 4 and 5
required by Section 16(a) of the Securities Exchange Act of 1934, as amended,
have been timely filed with respect to the most recently concluded fiscal year.
B-7
<PAGE> 24
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation paid to the Company's
Chief Executive Officer and its other four most highly paid executive officers
(the "named executives") in the fiscal years ended October 31, 1997 ("fiscal
1997"), October 31, 1998 ("fiscal 1998") and fiscal 1999 for services rendered
in all capacities to the Company:
ANNUAL COMPENSATION (1)
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
------------------------------
ALL OTHER STOCK
COMPENSATION UNDERLYING
NAME & PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(2) ($)(2)(3) AWARDS ($)(4) OPTIONS (#)
------------------------- ---- ---------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
John R. Stevenson......................... 1999 $383,087 $ 0 $ 26,816 $499,986 0
Chairman 1998 $442,316 $ 0 $ 36,500 $ 0 6,897
1997 $392,318 $315,816 $146,303 $ 0 8,696
Jeffrey M. Nodland........................ 1999 $372,314 $ 0 $ 26,062 $ 0 25,000
President & 1998 $305,382 $ 0 $ 25,180 $ 0 3,547
Chief Executive Officer 1997 $273,842 $156,090 $ 80,694 $ 0 5,693
Douglas J. Graff.......................... 1999 $172,692 $ 80,000 $ 37,688 $ 54,375 5,000
President, 1998 $157,692 $ 77,269 $ 37,134 $ 0 5,000
Composite Polymers 1997 $138,439 $ 49,526 $ 21,306 $ 0 7,000
Douglas B. Rahrig......................... 1999 $186,092 $ 7,583 $ 14,505 $ 0 5,000
Vice President, 1998 $178,766 $ 7,200 $ 15,817 $ 0 788
Global Technical Marketing 1997 $170,454 $ 65,122 $ 32,015 $ 0 1,242
Donald J. Crawford........................ 1999 $176,539 $ 12,200 $ 763 $ 0 20,000
President,
Global Coating Resins
</TABLE>
- -------------------------
(1) Includes amounts earned in fiscal year, whether or not deferred.
(2) Pursuant to the McWhorter Technologies, Inc. Key Employee Annual Bonus Plan,
certain employees could elect to receive all or part of their bonus for
fiscal 1999 in the form of McWhorter Stock Equivalents. This election will
entitle the participant to an additional 25% of the amount deferred to be
allocated to his/her account in the form of McWhorter Stock Equivalents.
This 25% additional amount is reflected in the "All other Compensation"
column in the table above. Termination of employment with McWhorter prior to
October 31, 2002 will result in the loss of that 25% Company contribution.
The following are the amounts of the 25% Company contribution in McWhorter
Stock Equivalents:
<TABLE>
<CAPTION>
COMPANY 25%
MATCH ($) /
NAME (MWT STOCK EQUIVALENTS)
---- -----------------------
<S> <C>
Douglas B. Rahrig..................................... $ 948 / 69
Douglas J. Graff...................................... $ 20,000/1,461
Donald J. Crawford.................................... $ 763 / 56
</TABLE>
(3) Includes contributions or allocations by the Company to defined contribution
or savings plans (tax-qualified and supplemental) on behalf of the named
executives as follows: Mr. Stevenson $26,816, Mr. Nodland $26,062, Mr. Graff
$17,688, and Mr. Rahrig 13,557.
(4) For fiscal 1999, the 22,922 shares of Restricted Stock for Mr. Stevenson
were granted pursuant to his employment agreement dated November 12, 1998,
and the 2,500 shares of Restricted Stock for Mr. Graff were awarded pursuant
to a discretionary grant by the Board.
B-8
<PAGE> 25
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding individual grants of
stock options made during fiscal 1999 to the named executives:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
------------------------------------------------- ASSUMED ANNUAL RATES
NUMBER OF OF STOCK
SECURITIES PERCENT OF TOTAL EXERCISE OR PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED TO BASE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------
NAME GRANTED (1) FISCAL 1999 SHARE DATE 5% (2) 10% (2)
---- ----------- ------------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
John R. Stevenson................... 0 0 0 0 0 0
Jeffrey M. Nodland.................. 25,000 13.2% 16.50 2/17/09 259,419 657,419
Douglas J. Graff.................... 5,000 2.6% 21.75 11/18/08 68,392 173,319
Douglas B. Rahrig................... 5,000 2.6% 21.75 11/18/08 68,392 173,319
Donald J. Crawford.................. 20,000 10.6% 19.875 1/19/09 249,986 633,513
</TABLE>
- -------------------------
(1) These options become exercisable in 20% annual increments beginning one year
from the date of grant and accelerate upon certain "change of control"
events.
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and therefore
are not intended to forecast possible future appreciation, if any, in the
market value of the Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the named
executives concerning the exercise of options during fiscal 1999 and unexercised
options held as of October 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
OCTOBER 31, 1999 (#) OCTOBER 31, 1999 ($)*
SHARES ACQUIRED VALUE REALIZED ---------------------------- ----------------------------
NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John R. Stevenson........... 0 0 82,163 17,621 0 0
Jeffrey M. Nodland.......... 0 0 48,573 36,687 0 0
Douglas J. Graff............ 0 0 17,940 15,200 0 0
Douglas B. Rahrig........... 0 0 24,973 7,170 0 0
Donald J. Crawford.......... 0 0 0 20,000 0 0
</TABLE>
- -------------------------
* The value of the unexercised in-the-money options is based on the
difference between the exercise price of the options and the fair market value
of the Common Stock on October 31, 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the previously announced transition of Mr. Stevenson's
responsibilities as Chief Executive Officer of the Company to Mr. Nodland, (as
of February 1, 1999), while continuing Mr. Stevenson's services to the Company,
including his services as Chairman of the Board, the Company and Mr. Stevenson
entered into an employment agreement dated November 12, 1998 (the "Agreement").
The Agreement provides for Mr. Stevenson's employment by the Company through
February 29, 2004 at a salary of $350,000 for the period from March 1, 1999
through February 29, 2000, a salary of $250,000 for the period from March 1,
2000 through February 28, 2001 and for the subsequent three years, a salary
equal to the compensation paid by the Company to its non-employee directors. The
Agreement does not contemplate that Mr. Stevenson will receive a bonus for any
of these periods. The Agreement prohibits Mr. Stevenson from accepting any other
full-time employment before February 28, 2004 and obligates him, during the
employment term and for two years thereafter, to abide by certain prohibitions
on the disclosure of confidential information, the solicitation of Company
employees for other employment and other acts detrimental to the Company or its
employees. Pursuant to the Agreement, Mr. Stevenson was also awarded 22,922
shares of restricted stock on November 12, 1998 and is entitled to participate
in certain of the Company's benefit plans, including life, health, dental and
long-term disability insurance programs and its ESOP and 401(k) Plan. The
B-9
<PAGE> 26
Agreement also provides for Mr. Stevenson to receive a cash payment of $250,000,
his full salary and the other benefits under the Agreement if his employment is
terminated without "cause" (as defined in the Agreement) by the Company or is
terminated for any reason following a "change of control" (as defined in the
Agreement) of the Company. See Employment/Severance Agreements under Item 3 of
the Statement with respect to the continued employment of certain officers of
the Company.
STOCK PERFORMANCE GRAPH
The graph below compares the Company's cumulative total stockholder return
from April 11, 1994 (the date on which the stock commenced trading on a "when
issued" basis) to October 31, 1999 with the cumulative total return of (1) the
Standard & Poor's 500 Stock Index ("S&P 500") and (2) Standard & Poor's
Specialty Chemical Group ("S&P Specialty Chemical").
COMPARISON OF TOTAL RETURN
AMONG THE COMPANY, THE S&P 500, AND THE S&P SPECIALTY CHEMICAL
The graph assumes the investment of $100 in the Common Stock at April 11,
1994, and the S&P 500 and the S&P Specialty Chemical at April 29, 1994 and the
reinvestment of all dividends. The comparisons in this graph are required by the
Securities and Exchange Commission and are not intended to forecast or be
indicators of possible future performance of the Common Stock.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
MCWHORTER TECHNOLOGIES S&P 500 S&P SPECIALITY CHEMICALS
---------------------- ------- ------------------------
<S> <C> <C> <C>
4/11/94 100 100 100
10/31/94 131 106 95
10/31/95 114 134 105
10/31/96 135 167 128
10/31/97 181 223 135
10/31/98 143 272 122
10/31/99 73 318 144
</TABLE>
B-10
<PAGE> 27
EXHIBIT INDEX
The following Exhibits are filed herewith:
<TABLE>
<S> <C>
Exhibit 1 Offer to Purchase (incorporated by reference to Exhibit
(a)(1) to the Schedule TO).*
Exhibit 2 Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to the Schedule TO).*
Exhibit 3 Agreement and Plan of Merger dated May 3, 2000, by and among
Eastman, Purchaser and the Company (incorporated by
reference to Exhibit (d)(1) to the Schedule TO).
Exhibit 4 Confidentiality Agreement, dated as of November 12, 1999,
between Eastman and the Company (incorporated by reference
to Exhibit (d)(2) to the Schedule TO).
Exhibit 5 Letter to Stockholders of the Company, dated May 12, 2000.*
Exhibit 6 Opinion of Lehman Brothers, dated May 3, 2000 (included as,
and incorporated by reference to, Annex A attached hereto).
Exhibit 7 Joint Press Release of Eastman and the Company, dated May 4,
2000 (incorporated by reference to the Company's filing of
the Joint Press Release with the Securities and Exchange
Commission under cover of Schedule 14D-9 on May 5, 2000).
Exhibit 8 Certificate of Incorporation of the Company, as amended
(incorporated by reference to the Company's annual report on
Form 10-K for the year ended October 31, 1994).
Exhibit 9 Bylaws of the Company, as amended (incorporated by reference
to the Company's annual report on Form 10-K for the year
ended October 31, 1996).
Exhibit 10 The Information Statement of the Company, dated May 12, 2000
(included as, and incorporated by reference to, Annex B
attached hereto).
Exhibit 11 Third Amendment to Rights Agreement, dated as of May 9, 2000
between the Company and EquiServe Trust Company, N.A.
Exhibit 12 Employment Agreement dated as of November 12, 1998, by and
between the Company and John R. Stevenson.
Exhibit 13 Amendment to Employment Agreement dated as of April 12,
2000, by and between the Company and John R. Stevenson.
</TABLE>
- -------------------------
* Included in copies mailed to stockholders.
B-11
<PAGE> 1
[Letterhead of McWhorter Technologies, Inc.]
May 12, 2000
To Our Stockholders:
I am pleased to inform you that McWhorter Technologies, Inc. (the
"Company") has entered into an Agreement and Plan of Merger dated as of May 3,
2000 (the "Merger Agreement") providing for the acquisition of the Company by
Tartan, Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary
of Eastman Chemical Company, a Delaware corporation ("Parent"). Pursuant to the
Merger Agreement, Purchaser has today commenced a tender offer (the "Offer") to
purchase all of the outstanding shares of the Company's common stock, $.01 par
value per share, at a cash price of $19.70 per share. Following consummation of
the Offer and subject to certain conditions, Purchaser will merge with and into
the Company (the "Merger"). In the Merger, each share of the Company's common
stock not acquired in the Offer will be converted into the right to receive
$19.70 in cash. The Offer is currently scheduled to expire at 12:00 midnight,
New York City time, on June 9, 2000.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE TERMS OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER
AND THE MERGER, ARE ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY'S STOCKHOLDERS, HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES OF COMMON STOCK PURSUANT TO THE OFFER.
Purchaser's Offer to Purchase and related materials, including a Letter of
Transmittal to be used for tendering your shares, are enclosed in the package
with this letter. These documents set forth in detail the terms and conditions
of the Offer and the Merger and provide instructions on how to tender your
shares. I urge you to read the enclosed materials carefully.
Attached to this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Recommendation")
filed with the Securities and Exchange Commission, which includes information
regarding the factors considered by your Board of Directors in its
deliberations, and certain other information regarding the Offer and the Merger.
Included as Annex A to the Recommendation is a copy of the written opinion,
dated May 3, 2000, of Lehman Brothers Inc., the Company's financial advisor, to
the effect that, as of such date and based upon and subject to certain matters
stated therein, the $19.70 per share cash consideration to be received in the
Offer and the Merger by stockholders (other than Parent and its affiliates) was
fair, from a financial point of view, to such stockholders. YOU ARE URGED TO
READ THIS OPINION CAREFULLY IN ITS ENTIRETY.
If you have any questions or require assistance, please call Georgeson
Shareholder Communications Inc. toll-free at (800) 223-2064 or Chase Securities
Inc. at (212) 270-3272.
Your Directors thank you for your continued support.
On Behalf of the Board of Directors
Sincerely,
/s/ Jeffrey M. Nodland
Jeffrey M. Nodland
President and Chief Executive Officer
B-12
<PAGE> 1
EXHIBIT 11
THIRD AMENDMENT TO RIGHTS AGREEMENT
THIRD AMENDMENT, dated as of May 9, 2000 (the "Third Amendment"),
amending the Rights Agreement, dated as of February 1, 1994 (the "Rights
Agreement"), between McWhorter Technologies, Inc., a Delaware corporation (the
"Company"), and Equiserve Trust Company, N.A. (as successor to Wachovia Bank of
North Carolina, N.A., a North Carolina corporation), as Rights Agent (the
"Rights Agent").
WHEREAS, the Company and the Rights Agent are parties to the
Rights Agreement, specifying the terms of the Rights (as defined therein);
WHEREAS, the parties amended the Rights Agreement as set forth
in the First Amendment to Rights Agreement dated April 27, 1999 and as set forth
in the Second Amendment to Rights Agreement dated June 28, 1999;
WHEREAS, the Company and the Rights Agent desire to further
amend the Rights Agreement in accordance with Section 27 thereof;
WHEREAS, the Board of Directors of the Company has voted to
authorize this Third Amendment pursuant to resolutions adopted at a special
meeting held on May 3, 2000;
NOW THEREFORE, in consideration of the premises and mutual
agreements set forth in the Rights Agreement and this Third Amendment, the
parties hereby agree as follows:
1. Section 1(a) of the Rights Agreement is hereby further
amended by adding the following sentence at the end of such Section:
"Notwithstanding the foregoing provisions contained in this
Section 1(a), for so long as the Agreement and Plan of Merger
dated as of May 3, 2000 (the "Merger Agreement"), by and among
the Company, Eastman Chemical Company, a Delaware corporation
("Eastman"), and Tartan, Inc., a Delaware corporation
("Purchaser"), has not been terminated pursuant to Section 7.1
thereof, none of a "Distribution Date," "Stock Acquisition
Date" or "Flip-In Event" shall occur or be deemed to occur,
and neither Eastman nor the Purchaser shall become an
"Acquiring Person," as a result of the execution, delivery or
performance of the Merger Agreement or by the announcement,
making or consummation of the Offer (as defined in the Merger
Agreement), the acquisition of Shares pursuant to the Offer or
the Merger (as each such term is defined in the Merger
Agreement), the consummation of the Merger (as so defined) or
any other transaction contemplated by the Merger Agreement."
<PAGE> 2
2. Clauses (i) and (ii) of the first sentence of Section 7 of
the Rights Agreement are hereby deleted in their entirety and replaced with the
following:
"(i) the first to occur of (A) the close of business on
February 1, 2004 or (B) the opening of business on the date
that includes the consummation of the Offer, as defined in the
Merger Agreement (such earlier time being herein referred to
as the "Final Expiration Date") or (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the
earlier of clause (i) or (ii) being herein referred to as the
"Expiration Date")."
3. This Third Amendment shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts made and to be performed entirely within such State.
4. This Third Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
5. All references in the Rights Agreement to "Wachovia Bank of
North Carolina, N.A." or "Rights Agent" are hereby amended to refer to
"Equiserve Trust Company, N.A., a national banking association".
6. Subsections (e) and (f) of Section 1 of the Rights
Agreement are hereby deleted in their entirety and replaced with the following:
"(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in The
Commonwealth of Massachusetts are authorized or obligated by
law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00
p.m., Eastern time, on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 p.m.,
Eastern time, on the next succeeding Business Day."
7. Section 2 of the Rights Agreement is hereby amended to add
the following at the end of the second sentence after the word "desirable":
", upon ten (10) days' prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and
shall in no event be liable for, the acts or omissions of any
such co-Rights Agent."
2
<PAGE> 3
8. The word "negligence" is hereby deleted in the second
sentence of Section 18(a) and the first sentence of Section 20(c) of the Rights
Agreement, and in each instance is hereby replaced with the words "gross
negligence".
9. Clause (a) of the fourth sentence of Section 21 of the
Rights Agreement is hereby deleted in its entirety and replaced with the
following:
"(a) a corporation or trust company organized and doing
business under the laws of the United States or of the States
of _________ or New York (or of any other state of the United
States so long as such corporation is authorized to do
business as a banking institution in the States of
________________ or New York), in good standing, having a
principal office in the States of ________________ or New
York, which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or
examination by federal or state authority or"
10. In Section 26 of the Rights Agreement, the address block
relating to notices or demands to be given or made to the Rights Agent is hereby
deleted in its entirety and replaced with the following:
Equiserve Trust Company, N.A.
c/o Equiserve Limited Partnership
150 Rayall Street
Canton, MA 92021
Attention: Client Administration
11. Except as expressly set forth herein, this Third Amendment
shall not by implication or otherwise alter, modify, amend, or in any other way
affect any of the terms, conditions, obligations, covenants, or agreements
contained in the Rights Agreement, all of which are ratified and affirmed in all
respects and shall continue in full force and effect.
* * * * *
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this Third Amendment
to Rights Agreement as of the date first written above.
McWHORTER TECHNOLOGIES, INC.
By: /s/ Warren B. Grayson
-----------------------------
Name: Warren B. Grayson
Title: Vice President
EQUISERVE TRUST COMPANY, N.A.
By: /s/ Darlene DioDato
-----------------------------
Name: Darlene DioDato
Title: Senior Managing Director
4
<PAGE> 1
EXHIBIT 12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is hereby made and entered
into as of this 12th day of November, 1998, by and between McWhorter
Technologies, Inc., a Delaware corporation (the "Company"), and John R.
Stevenson (the "Employee").
WITNESSETH
WHEREAS, the Employee is currently employed by the Company as its
Chief Executive Officer;
WHEREAS, the Employee desires to resign from his duties and position
as Chief Executive Officer effective March 1, 1999 (the "Effective Date");
WHEREAS, the Employee possesses an intimate knowledge of the business
and affairs of the Company and its policies, procedures, methods and personnel;
and
WHEREAS, the Company desires to secure the services and employment of
the Employee on behalf of the Company in such other capacities as the parties
may determine, and the Employee is willing to render such services on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Employment Term. Subject to the terms and conditions of this Agreement,
following his resignation as the Company's Chief Executive Officer, Employee
hereby agrees to remain in the employment of the Company, and the Company hereby
agrees to continue to employ Employee, for the period commencing on the
Effective Date and ending on February 29,2004 (the "Employment Term"). The term
of this Agreement shall be coincident with the Employment Term.
2. Duties.
(a) During the Employment Term, the Employee shall serve as an employee of
the Company in such capacities, offices or positions as may be mutually agreed
upon between the Company and the Employee. In such capacities, Employee agrees
to perform such duties, services and responsibilities incident to and consistent
with such position(s) as reasonably determined from time to time by the Board of
Directors of the Company (the "Board") and the Company's Chief Executive
Officer, including but not limited to, continuing involvement in such areas as
strategic planning, corporate development, and the colorant business.
<PAGE> 2
(b) The Employee will devote the level of time to his employment that is
specified for the applicable time periods in Schedule A hereto. The Employee
will not, without the prior written approval of the Board, engage in any other
business activity that would reduce the number of such expected hours.
(c) Employee further agrees that, during the period beginning on the
Effective Date and ending on February 28, 2004, he will not accept full time
employment with another employer and will remain available to return to full
time employment with the Company as its Chief Executive Officer, and in such
additional offices or positions as the Employee and the Company may mutually
agree upon. Notwithstanding anything to the contrary in this Agreement whether
express or implied, Employee shall not be obligated to return to full time
employment with the Company after the Effective Date unless Employee and the
Company mutually agree on all of the relevant terms and conditions relating to
such full time employment, including compensation and other benefits. In the
event the parties fail reach a mutually acceptable agreement regarding any such
requested return to full time employment, this Agreement and Employee's
employment hereunder shall continue in accordance with the remaining terms
hereof.
3. Compensation and Certain Benefits.
(a) In consideration of the performance by Employee of his obligations
during the Employment Term, the Company will pay Employee a base annual salary
(the "Salary") at an annual rate set forth for each year during the Employment
Term as follows:
Period Annual Salary
3/11/1999 - 2/29/2000 $350,000.00
3/1/2000 - 2/28/2001 $250,000.00
During each of the remaining periods of the Employment Term, Employee's Salary
shall equal the annual compensation paid by the Company to its non-employee
directors (including, but not limited to, annual retainers, meeting fees, etc.).
Payments under this Section 3(a) shall be made in regular installments in
accordance with the Company's general payroll practices; provided that payments
under the preceding sentence shall be made at the same time or times as the
Company pays such compensation to its non-employee directors.
(b) On the date hereof, the Company will grant to Employee an award of
22,922 restricted shares of Common Stock of the Company, pursuant to the
Company's 1996 Incentive Stock Plan (the "Plan"). The terms and conditions of
such restricted stock award shall be more fully set forth in a formal stock
award entered into between the Company and Employee substantially in the form
attached as Exhibit A hereto. Following the Company's fiscal year ending October
31, 1999, Employee shall be considered an eligible participant in the Plan and
shall be entitled to receive an additional award of restricted shares of Common
Stock for that number of shares, if any, as may be determined by the Board in
its sole
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<PAGE> 3
discretion.
(c) Employee shall be solely responsible for taxes imposed on him by reason
of any compensation or benefits provided hereunder and the Company shall be
entitled to withhold from all such compensation and benefits all applicable
taxes required to be withheld pursuant to federal, state or local law.
4. Benefits. In addition to the payments and benefits described above,
during the Employment Term:
(a) The Company shall furnish Employee with, and Employee shall be allowed
full use of, office facilities, automobiles, secretarial and clerical
assistance, and other Company property and services of a quality, nature and to
the extent made available to executive employees, during the first two years of
the Employment term, and to non-employee directors, during the balance of the
Employment Term, of the Company from time to time;
(b) Except as otherwise provided in Section 4(d) hereof, Employee shall be
eligible to participate in any non-discretionary compensation or employee
benefit plans or programs, if any, maintained by the Company from time to time
for its executive employees, including, but not limited to, life, health,
dental, and long-term disability insurance programs, employee stock ownership
plans, 401(k) and other pension programs, and other fringe benefit programs, in
all events subject to the terms of such plans or programs adopted by the
Company;
(c) Employee shall also be eligible to participate in, and to receive
benefits under, any discretionary compensation plans or programs, if any,
maintained by the Company from time to time for its executive employees,
including, but not limited to, stock purchase programs, stock option plans,
bonus plans, or other incentive or deferred compensation plans or programs,
provided that Employee's participation, if any, under any such discretionary
plans or programs shall at all times be determined by the Board in its sole
discretion;
(d) If at any time during the Employment Term Employee is not otherwise
eligible to participate in the Company's group medical or dental plans because
he does not work the minimum number of hours specified in the plan for
eligibility, and during periods after the Employment Term (but not beyond the
earlier of (i) the deaths of both he and his spouse or (ii) he and his spouse
both attaining age 65), Employee and his spouse shall be eligible to participate
in such plans on the same basis and at the same cost as former married employees
of the Company who have elected COBRA continuation coverage under Part 6 of
Title I of ERISA (without regard to the time limit in Section 602(2)(A)(i) of
ERISA).
-3-
<PAGE> 4
(e) The Company shall reimburse Employee for all reasonable out-of-pocket
expenses incurred by Employee in the performance of his duties hereunder in
accordance with the Company's policies from time to time in effect, provided
that Employee presents an itemized statement of such expenditures, which
itemized statement shall comply with the Company's expense reimbursement
procedures.
5. Termination. Notwithstanding anything to the contrary in this Agreement
whether express or implied, Employee's employment with the Company and the
Employment Term shall terminate upon the expiration of the Employment Term or
upon the earlier occurrence of any of the following events:
(a) The death of the Employee.
(b) The voluntary termination of employment by Employee. Employee shall
have the right to terminate this Agreement and the Employment Term at any time
and for any reason upon delivery of prior written notice to the Company not less
than sixty (60) days prior to the effective date of such termination.
Notwithstanding anything to the contrary herein, whether express or implied, in
the event that Employee voluntarily terminates his employment with the Company
at any time following a "Change of Control" of the Company (as defined in the
Grant of Nonqualified Stock Option to Employee from the Company dated November
13, 1997), Employee's employment shall be deemed for all purposes of this
Agreement to have been terminated by the Company without Cause, thereby
entitling the Executive to the post-termination benefits provided for under
Section 5(f) hereof.
(c) The termination of employment by the Company for Cause. Termination of
employment for "Cause" shall mean termination based on the Employee's breach of
this Agreement, conduct by the Employee that is dishonest, fraudulent or
unlawful, gross negligence, or willful misconduct by the Employee, in any case,
which discredits or materially damages the Company.
(d) The termination of employment by the Company for Disability. In the
event that during the Employment Term Employee shall be unable to perform his
duties under this Agreement for 180 consecutive days during any twelve-month
period due to illness, accident or other incapacity (as determined in good faith
by the Board) or if a physician selected in good faith by the Board (and
consented to by Employee or his personal representative) examines Employee and
advises the Company that it is likely that Employee will be unable to perform
such duties for 180 consecutive days during the succeeding twelve-month period
(a "Disability"), the Company may elect to terminate Employee's employment by
sending written notice of such election to Employee at any time during the
period of such disability.
-4-
<PAGE> 5
(e) After any termination of Employee's employment hereunder for any
reason, Employee (or his legal representative) shall be entitled to receive
accrued and unpaid Salary and expense reimbursements due for the period ending
on the effective date of such termination. After termination of Employee's
employment hereunder for any reason, the Company and the Employee shall have no
further obligations hereunder except as otherwise described in this Section 5(e)
and in Sections 4(d), 5(f), 5(g), 6, and 9 hereof.
(f) If the Employee's employment with the Company terminates after the
date hereof for any reason other than (i) a termination by the Company for Cause
pursuant to Section 5(c) hereof, or (ii) a voluntary termination by Employee
pursuant to Section 5(b) (except as otherwise expressly provided in the last
sentence of Section 5(b) hereof), in addition to the amounts described in the
preceding paragraph, the Company will be obligated to continue to pay Employee
an amount equal to Employee's Salary at the rates set forth in Section 3 hereof,
for the period beginning on the effective date of such termination and ending on
February 29,2004.
(g) In the event of termination of this Agreement for any reason other than
Employee's death or Disability, Employee agrees to cooperate with the Company
and to be reasonably available to the Company with respect to continuing and/or
future matters arising out of the Employee's employment or any other
relationship with the Company, whether such matters are business-related, legal
or otherwise. The provisions of this paragraph shall survive termination of this
Agreement.
6. Expenses. The Company will pay or reimburse Employee for all costs and
expenses (including court costs and reasonable attorneys' fees) incurred by
Employee as a result of any claim, action or proceeding arising out of, or
challenging the validity or enforceability of, this Agreement or any provision
hereof.
7. Mitigation. In the event of a termination of Employee's employment for
any reason, Employee shall not be required to seek other employment; in
addition, no amount payable under Section 6 of this Agreement, if any, following
the termination of Employee's employment with the Company, shall be reduced by
any compensation earned by Employee as a result of employment by another
employer after such termination of employment with the Company.
8. Designated Beneficiary. In the event of the death of Employee while in
the employ of the Company, or at any time thereafter during which amounts remain
payable to Employee under Section 5 hereof, such payments shall thereafter be
made to such person or persons as Employee may specifically designate
(successively or contingently) to receive payments
-5-
<PAGE> 6
under this Agreement following Employee's death by filing a written beneficiary
designation with the Company during Employee's lifetime. Such beneficiary
designation shall be in such form as may be prescribed by the Company and may be
amended from time to time or may be revoked by Employee pursuant to written
instruments filed with the Company during his lifetime. Beneficiaries designated
by Employee may be any natural or legal person or persons, including a
fiduciary, such as a trustee of a trust or the legal representative of an
estate. Unless otherwise provided by the beneficiary designation filed by
Employee, if all of the persons so designated die before Employee or on the
occurrence of a contingency not contemplated in such beneficiary designation, or
if Employee shall have failed to provide such beneficiary designation, then the
amount payable under this Agreement shall be paid to Employee's estate.
9. Employee Covenants.
(a) During the Employment Term and for a period of two years thereafter,
the Employee shall not (i) disclose any information likely to be regarded as
confidential and relating to the Company's business, (ii) solicit the Company's
employees to work for a competitor of the Company, or (iii) perform any act
detrimental to the Company or its employees, including, but not limited to,
disparaging the Company, its senior management or its products.
(b) The Employee agrees that any breach or threatened breach of Section
9(a) shall entitle the Company to apply for and to obtain injunctive relief,
which shall be in addition to any and all other rights and remedies available to
the Company at law or in equity.
(c) All of the Employee rights and benefits under this Agreement shall
cease upon any material breach by the Employee of Section 9(a) of this
Agreement.
10. Non-Waiver of Rights. The failure to enforce at any time the provisions
of this Agreement or to require at any time performance by the other party of
any of the provisions hereof shall in no way be construed to be a waiver of such
provisions or to affect either the validity of this Agreement or any part
hereof, or the right of either party to enforce each and every provision in
accordance with its terms.
11. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed by first class mail, return
receipt requested, to the recipient at the address below indicated:
-6-
<PAGE> 7
Notices to Employee:
John R. Stevenson
12637 East Laurel Lane
Scottsdale, AZ 85259
Notices to the Company:
McWhorter Technologies, Inc.
400 East Cottage Place
Carpentersville, IL 60110
Attn: Chief Executive Officer
In each case with a copy to:
McDermott, Will & Emery
227 W. Monroe
Chicago, IL 60606-5096
Attn: Mr. Thomas J. Murphy
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed. Every notice relating to this Agreement shall be in writing and shall
be given by personal delivery or by registered or certified mail, postage
prepaid, return receipt requested.
12. Binding Effect; Assignment. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, executors,
personal representatives, estates, successors (including, without limitation, by
way of merger) and assigns. Notwithstanding the provisions or the immediately
preceding sentence, the Employee shall not assign all or any portion of this
Agreement without the prior written consent of the Company.
13. Entire Agreement. This Agreement sets forth the entire understanding of
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements, written or oral, between them as to such subject matter. This
Agreement may not be amended, nor may any provision hereof be modified or
waived, except by an instrument in writing duly signed by the party to be
charged.
-7-
<PAGE> 8
14. Severability. If any provision of this Agreement, or any application
thereof to any circumstances, is invalid, in whole or in part, such provision or
application shall to that extent be severable and shall not affect other
provisions or applications of this Agreement.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois, without reference to
the principles of conflict of laws.
16. Modifications and Waivers. No provision of this Agreement may be
modified, altered or amended except by an instrument in writing executed by the
parties hereto. No waiver by either party hereto of any breach by the other
party hereto of any provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions at the time
or at any prior or subsequent time.
17. Headings. The headings contained herein are solely for the purposes of
reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
[Signature page follows]
-8-
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by authority of its Board of Directors, and the Employee has hereunto
set his hand, the day and year first above written.
McWHORTER TECHNOLOGIES, INC. JOHN R. STEVENSON
/s/ Jeffrey M. Nodland /s/ John R. Stevenson
- --------------------------------------- -------------------------------
By: Jeffrey M. Nodland
Title: President and Chief Operating
Officer
ACKNOWLEDGED AND AGREED ON
BEHALF OF THE COMPENSATION
COMMITTEE
/s/ Heinn F. Tomfohrde III
- --------------------------------------------
By: Heinn F. Tomfohrde III
Title: Chairman of the Compensation
Committee
<PAGE> 10
Schedule A
During the first two years of the Employment Term, Employee shall
devote an average of approximately 30 hours per week to his employment with the
Company, including time spent in his home office and travel time, and will use
his reasonable best efforts during such time to promote the interests of the
Company. During the balance of the Employment Term, Employee shall devote a
reasonable amount of time commensurate with his compensation level, currently
expected to be an average of approximately 25 hours per calendar quarter, to his
employment with the Company.
<PAGE> 1
EXHIBIT 13
AMENDMENT TO EMPLOYMENT AGREEMENT
BY AND BETWEEN
McWHORTER TECHNOLOGIES, INC.
AND
JOHN R. STEVENSON
(the "Agreement")
This Amendment to the Agreement is made this 12th day of April, 2000
by and between John R. Stevenson (the "Employee") and McWhorter Technologies,
Inc. (the "Company"). Unless otherwise set forth in this Amendment, all
capitalized terms used in this Amendment shall have the meanings set forth in
the Agreement.
The parties have agreed to amend the Agreement as follows:
1. At the end of Section 5(f) the following sentence is hereby added:
Provided that a Change of Control occurs on or before February 2,
2001, if Employee's termination occurs after a Change of Control, as
defined in Section 5(b) above, the Employee shall receive from the
Company, in addition to any other benefits to which he may be entitled
to pursuant to this Agreement, the sum of $250,000, such amount to be
paid within sixty (60) days after the date of the Change of Control.
2. Except as set forth in this Amendment, the Agreement remains in full
force and effect, enforceable in accordance with its terms.
The parties have executed this Amendment to the Agreement as of the
day and date first set forth above.
This amendment may be signed in counterparts which taken together
shall constitute one original executed amendment.
JOHN R. STEVENSON McWHORTER TECHNOLOGIES, INC.
/s/ John R. Stevenson By: /s/ Jeffrey Nodland
- ------------------------------ -------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
ACKNOWLEDGED AND AGREED ON
BEHALF OF THE COMPENSATION
COMMITTEE OF THE BOARD OF
DIRECTORS
By: /s/ Heinn F. Tomfohrde III
----------------------------
Heinn F. Tomfohrde III
Chairman of the Compensation
Committee
