SC 14D9

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LAWTER INTERNATIONAL INC. LETTERHEAD
 
                                  May 4, 1999
 
Dear Stockholder:
 
     We are pleased to inform you that Lawter International, Inc. (the
"Company") has entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Eastman Chemical Company ("Parent") and Lipstick Acquisition
Corp. ("Purchaser"). Pursuant to the Merger Agreement, Purchaser today commenced
a tender offer to purchase all outstanding shares of the Company's common stock
at $12.25 per share in cash. Under the Merger Agreement, the tender offer will
be followed by a merger of Purchaser with and into the Company. In the merger,
each outstanding share of common stock will be converted into $12.25 in cash
(other than shares held by Parent or any of its subsidiaries, the Company or any
of its subsidiaries, and dissenting stockholders).
 
     Your Board of Directors has unanimously approved the Merger Agreement, the
tender offer and the merger and determined that the tender offer and merger are
fair to, and in the best interest of, the stockholders. Accordingly, the Board
of Directors recommends that stockholders accept the offer and tender their
shares.
 
     In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including the opinion of ABN AMRO Incorporated that the cash
consideration of $12.25 per share to be received by stockholders pursuant to the
offer and the merger is, as of the date of such opinion and based upon and
subject to certain matters and assumptions stated therein, fair to such
stockholders from a financial point of view. You are urged to read such opinion,
which is included as Annex A to the enclosed Schedule 14D-9, in its entirety.
 
     In addition to the attached Schedule 14D-9 relating to the tender offer,
also enclosed is the Offer to Purchase, dated May 4, 1999, of Purchaser,
together with related materials. These documents set forth the terms and
conditions of the tender offer and the merger and provide instructions as to how
to tender your shares. We urge you to read the enclosed materials carefully.
 
                                             Sincerely,
                                        /s/ John O'Mahoney
 
                                             Chairman and
                                             Chief Executive Officer
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                            ------------------------
 
                                 SCHEDULE 14D-9
                     SOLICITATION/RECOMMENDATION STATEMENT
                      PURSUANT TO SECTION 14(d)(4) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                            ------------------------
 
                           LAWTER INTERNATIONAL, INC.
                           (Name of Subject Company)
 
                           LAWTER INTERNATIONAL, INC.
                      (Name of Person(s) Filing Statement)
 
                    COMMON STOCK, PAR VALUE $1.00 PER SHARE
                         (Title of Class of Securities)
 
                                   520786104
                     (CUSIP Number of Class of Securities)
 
                               JOHN P. O'MAHONEY
                      CHAIRMAN AND CHIEF EXECUTIVE OFFICER
                           LAWTER INTERNATIONAL, INC.
                                 ONE TERRA WAY
                                8601 95TH STREET
                       PLEASANT PRAIRIE, WISCONSIN 53158
                                 (414) 947-7300
 
  (Name, Address and Telephone Number of Persons Authorized to Receive Notice
        and Communications on Behalf of the Person(s) Filing Statement)
                            ------------------------
 
                                With a copy to:
 
                                J. CRAIG WALKER
                               BELL, BOYD & LLOYD
                       70 WEST MADISON STREET, SUITE 3300
                          CHICAGO, ILLINOIS 60602-4207
                                 (312) 372-1121
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ITEM 1. SECURITY AND SUBJECT COMPANY.
 
     The name of the subject company is Lawter International, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is One Terra Way, 8601 95th Street, Pleasant Prairie, Wisconsin
53158. The title of the class of equity securities to which this Solicitation/
Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-9") relates is
the Company's common stock, par value $1.00 per share (the "Common Stock").
Unless the context otherwise requires, as used herein, the term "Shares" shall
mean shares of the Common Stock.
 
ITEM 2. TENDER OFFER OF THE BIDDER.
 
     This statement relates to the tender offer (the "Offer") by Lipstick
Acquisition Corp. ("Purchaser"), a Delaware corporation and a wholly owned
subsidiary of Eastman Chemical Company, a Delaware corporation ("Parent"), to
purchase all the issued and outstanding Shares at a price of $12.25 per Share,
net to the seller in cash, without interest thereon, subject to the terms and
conditions set forth in Purchaser's Offer to Purchase, dated May 4, 1999, and
the related Letter of Transmittal (together with the Offer to Purchase, the
"Offer Documents"). The Offer is described in the Tender Offer Statement on
Schedule 14D-1 filed by Purchaser with the Securities and Exchange Commission on
May 4, 1999 (as amended or supplemented, the "Schedule 14D-1"). The Offer
Documents indicate that the principal executive offices of Purchaser and Parent
are located at 100 N. Eastman Road, Kingsport, Tennessee 37660.
 
     The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of April 27, 1999 (the "Merger Agreement") by and among the Company,
Purchaser and Parent. The Merger Agreement, which is Exhibit 1 to this Schedule
14D-9, is incorporated herein by reference in its entirety.
 
     The Merger Agreement provides that, following the consummation of the
Offer, upon the satisfaction or waiver of certain conditions, Purchaser will be
merged with and into the Company (the "Merger"), with the Company continuing as
the surviving corporation (the "Surviving Corporation"). In the Merger, each
Share outstanding immediately prior to the effective time of the Merger (other
than Shares held in the treasury of the Company, Shares owned by Parent,
Purchaser or any other wholly owned subsidiary of Parent, or Shares held by
stockholders who properly exercise their dissenters' rights under the Delaware
General Corporation Law) will be converted, by virtue of the Merger and without
any action by the holder thereof, into the right to receive $12.25 per Share (or
any higher price paid per Share in the Offer), net to the seller in cash,
without interest thereon (the "Offer Price"). The Merger Agreement is summarized
in Item 3 of this Schedule 14D-9.
 
ITEM 3. IDENTITY AND BACKGROUND.
 
     (a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above. Unless the context otherwise
requires, references to the Company in this Schedule 14D-9 are to the Company
and its direct and indirect subsidiaries, viewed as a single entity.
 
     (b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of its executive officers, directors
or affiliates are described in Schedule I attached to this Schedule 14D-9 and
incorporated herein by reference.
 
     Except as described below in this Item 3(b) or incorporated by reference
herein, to the knowledge of the Company, as of the date hereof, there exists no
material contract, agreement, arrangement or understanding and no actual or
potential conflict of interest between the Company or its affiliates and (i) the
Company's executive officers, directors or affiliates or (ii) Purchaser, Parent
or their respective executive officers, directors or affiliates.
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ARRANGEMENTS WITH PARENT, PURCHASER OR THEIR AFFILIATES
 
THE MERGER AGREEMENT
 
     The following is a summary of certain provisions of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement, a copy of which is filed with the Commission as an
exhibit to this Schedule 14D-9. Capitalized terms not otherwise defined below
shall have the meanings set forth in the Merger Agreement. The Merger Agreement
may be examined, and copies obtained, at the places and in the manner as set
forth in Section 9 of Purchaser's Offer to Purchase, which is enclosed with this
Schedule 14D-9.
 
     The Offer.  The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the satisfaction or waiver of
the conditions of the Offer, the Purchaser will purchase all Shares validly
tendered pursuant to the Offer. The obligation of the Purchaser to accept for
payment and pay for any Shares validly tendered and not withdrawn prior to the
expiration of the Offer is conditioned upon satisfaction of the Minimum
Condition and the satisfaction or waiver of the conditions described in Annex A
to the Merger Agreement. The Merger Agreement provides that the Purchaser may
not amend or waive the Minimum Condition, or decrease the Offer Price or the
number of Shares sought, or amend any other condition of the Offer in any manner
adverse to the holders of Shares without the written consent of the Company.
Notwithstanding the foregoing provisions, if on the initial scheduled expiration
of the Offer (as it may be extended), all conditions to the Offer have not been
satisfied or waived, the Offer may be extended from time to time until October
31, 1999. In addition, the Offer Price may be increased and the Offer may be
extended to the extent required by law in connection with such increase, in each
case without the consent of the Company.
 
     Designation of Directors.  The Merger Agreement provides that, promptly
upon the purchase of and payment for Shares by Parent or any of its subsidiaries
which represent at least a majority of the outstanding Shares (on a fully
diluted basis), Parent will be entitled to designate such number of directors,
rounded up to the next whole number, on the Company's Board of Directors (the
"Company Board") so that the percentage of Parent's nominees on the Company
Board equals the percentage of outstanding Shares beneficially owned by Parent,
the Purchaser and their affiliates. The Company will, upon request of Parent,
use its best efforts promptly either to increase the size of the Company Board
or to secure the resignations of incumbent directors, or both, and cause
Parent's designees to be so elected or appointed to the Company Board.
Notwithstanding the foregoing, until the effective time of the Merger (the
"Effective Time"), the Company will use its reasonable efforts to retain as
members of the Company Board at least two directors who were directors of the
Company on the date the Merger Agreement was executed; provided, that,
subsequent to the purchase of and payment for Shares pursuant to the Offer,
Parent will always have its designees represent at least a majority of the
entire Company Board. The Company's obligation to elect or appoint Parent's
designees to the Company Board is subject to compliance with Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder. Following the election
of Parent's designees to the Company Board, any amendment of the Merger
Agreement, any termination of the Merger Agreement by the Company, any extension
of time for performance of any of the obligations of Parent or the Purchaser, or
any waiver of any condition or any of the Company's rights thereunder may be
effected only by the action of a majority of the directors of the Company then
in office who were directors on the date of the Merger Agreement, which action
will be deemed to constitute the action of the full Company Board; provided,
that, if there are no such directors, such actions may be effected by the
majority vote of the entire Company Board, and provided, further, that if there
are no such directors, the Merger Agreement may not be amended to reduce the
Merger Consideration to be less than the Offer Price or otherwise amended in a
manner materially adverse to the holders of Shares other than Parent and the
Purchaser.
 
     The Merger.  The Merger Agreement provides that, subject to the terms and
conditions thereof, the Purchaser will be merged with and into the Company, with
the Company continuing as the Surviving Corporation and a wholly owned
Subsidiary of Parent. At Parent's election, the Merger may be restructured so
that the Company is merged with and into Parent or any other direct or indirect
Subsidiary of Parent or so that any direct or indirect Subsidiary of Parent
other than the Purchaser is merged with and into the Company. At
 
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the Effective Time, each issued and outstanding Share (other than Shares owned
by Parent, the Purchaser or any other wholly owned Subsidiary of Parent, Shares
owned by the Company as treasury stock and Shares held by holders who perfect
any available dissenters rights under the Delaware General Corporation Law
("DGCL")) will be converted into the right to receive the Offer Price, without
interest thereon, and each issued and outstanding share of common stock of the
Purchaser will be converted into and become one fully paid and nonassessable
share of common stock of the Surviving Corporation.
 
     Treatment of Options.  The Merger Agreement provides that Parent and the
Company will take all actions necessary so that, as of the Effective Time, each
outstanding option to purchase Shares which has been granted under the Company's
stock option plans, whether or not then vested or exercisable, will be
cancelled. In consideration for such cancellation, Parent will, or will cause
the Surviving Corporation to, pay to the holder of each option to purchase
Shares, an amount equal to the product of (A) the excess, if any, of the Offer
Price over the per share exercise price thereof and (B) the number of Shares
subject to such option. The Merger Agreement provides that the Company will take
all actions necessary so that, as of the Effective Time, all plans, programs or
arrangements of the Company providing for the issuance or grant of options or
other interests in the capital stock of the Company will be terminated.
 
     Conditions.  The respective obligations of each party to effect the Merger
are subject to the satisfaction on or prior to the closing of the Merger, of
each of the following conditions: (a) the Merger Agreement and the Merger have
been approved and adopted by the requisite vote of the holders of Shares if
required by the DGCL in order to consummate the Merger; (b) no statute, rule,
order, decree or regulation has been enacted or promulgated by any Governmental
Entity of competent jurisdiction which prohibits the consummation of the Merger
and all foreign or domestic governmental consents, orders and approvals required
for the consummation of the Merger and the transactions contemplated by the
Merger Agreement have been obtained and are in effect at the Effective Time; (c)
there is no order or injunction of a foreign or United States federal or state
court or other governmental authority of competent jurisdiction in effect
precluding, restraining, enjoining or prohibiting consummation of the Merger;
and (d) Parent, the Purchaser or their affiliates have purchased Shares pursuant
to the Offer.
 
     Stockholders' Meeting.  Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger, (i) duly call,
give notice of, convene and hold a special meeting of its stockholders as soon
as practicable following the acceptance for payment and purchase of Shares by
the Purchaser pursuant to the Offer for the purpose of considering and taking
action upon the Merger Agreement; (ii) prepare and file with the Commission a
preliminary proxy or information statement relating to the Merger and the Merger
Agreement and will use its best efforts to cause a definitive Proxy Statement to
be mailed to its stockholders; (iii) include in the Proxy Statement the
recommendation of the Company Board that stockholders of the Company vote in
favor of the approval of the Merger and the adoption of the Merger Agreement;
and (iv) use its best efforts to solicit from holders of Shares proxies in favor
of the Merger and take all other action necessary to secure any stockholder
approval required by the DGCL to effect the Merger. In the event that Parent,
the Purchaser or any other Subsidiary of Parent acquires at least 90% of the
outstanding Shares, pursuant to the Offer, exercise of the option granted
pursuant to the Stock Option Agreement or otherwise, the parties will take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after such acquisition, without a meeting of the Company's
stockholders, in accordance with the DGCL.
 
     Representations and Warranties.  The Merger Agreement contains various
representations and warranties of the parties thereto, including representations
by the Company as to, among other things (i) organization, good standing and
Subsidiaries, (ii) capitalization, (iii) authorization, validity of the Merger
Agreement and the Stock Option Agreement and all required Company action taken
with respect to the Offer and the Merger, (iv) vote required to approve the
Merger, (v) required consents or approvals, (vi) no material misstatements in
filings made with the Commission or financial statements, (vii) absence of
material adverse changes, (viii) no undisclosed liabilities, (ix) no
misstatements or omissions of a material fact in the Schedule 14D-9, Proxy
Statement or other filings with the Commission with respect to the Offer and the
Merger, (x) employee benefit plans and ERISA, (xi) litigation, (xii) compliance
with environmental laws and regulations, (xiii) tax returns and tax liabilities,
(xiv) labor relations, (xv) compliance with laws,
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(xvi) insurance, (xvii) material contracts, (xviii) accounts receivable, (xix)
valid title to, or leasehold interests in, property, (xx) valid title to, or
leasehold interests in, plant and equipment, (xxi) all necessary permits and
licenses, (xxii) intellectual property, (xxiii) Year 2000 issues, (xxiv) major
customers, (xxv) receipt of fairness opinion from financial advisor and (xxvi)
full disclosure. In addition, the Merger Agreement contains representations by
Parent and the Purchaser as to, among other things, (i) organization and good
standing, (ii) authorization, validity of the Merger Agreement and the Stock
Option Agreement and all required Parent and Purchaser action taken with respect
to the Offer and the Merger, (iii) required consents or approvals, (iv) no
misstatements or omissions of a material fact in the Schedule 14D-1 or other
filings with the Commission with respect to the Offer and the Merger, (v)
financing the Offer and the Merger and (vi) operations of the Purchaser.
 
     Interim Operations.  Pursuant to the Merger Agreement, the Company has
agreed that after the date of the Merger Agreement and prior to the Effective
Time, unless Parent otherwise agrees in writing or except as otherwise
contemplated by the Merger Agreement:
 
          (a) the business of the Company and each of its Subsidiaries will be
     conducted only in the ordinary and usual course and, to the extent
     consistent therewith, each of the Company and its Subsidiaries will use its
     reasonable best efforts to preserve its business organization intact and
     maintain its existing relations with customers, suppliers, employees,
     creditors and business partners;
 
          (b) the Company will not, and will not permit its Subsidiaries to: (i)
     amend its certificate of incorporation or by-laws or similar organizational
     documents; (ii) declare, set aside or pay any dividend or other
     distribution payable in cash, stock or property with respect to its capital
     stock; (iii) issue, sell, transfer, pledge, dispose of or encumber any
     shares of, or securities convertible into or exchangeable for, or options,
     warrants, calls, commitments or rights of any kind to acquire, any shares
     of capital stock of any class or bonds, debentures, notes or other
     indebtedness having general voting rights (or convertible into securities
     having such rights) ("Voting Debt") of the Company or any of its
     Subsidiaries, other than Shares reserved for issuances pursuant to the
     exercise of stock options outstanding on the date of the Merger Agreement;
     (iv) split, combine or reclassify the outstanding Shares or any outstanding
     capital stock of any of its Subsidiaries; or (v) redeem, purchase or
     otherwise acquire directly or indirectly any shares of its capital stock or
     any instrument or security which consists of or includes a right to acquire
     such shares;
 
          (c) the Company will not, and will not permit any of its Subsidiaries
     to, transfer, lease, license, sell, mortgage, pledge, dispose of or
     encumber any assets other than in the ordinary and usual course of business
     and consistent with past practice, provided that such transactions, other
     than sales of inventory, do not exceed $25,000 per transaction and $250,000
     in the aggregate and other than sales of specified property, provided,
     however, that Parent's consent is required for any indemnification
     provision or for the incurrence or obligation to incur any environmental
     remediation costs related to any such sale of property;
 
          (d) the Company will not, and will not permit any of its Subsidiaries
     to, acquire or publicly propose to acquire or agree to acquire (i) by
     merging or consolidating with, or by purchasing an equity interest in or a
     substantial portion of the assets of, or by any other manner, any business
     or any corporation, partnership, joint venture, association or other
     business organization or division thereof or (ii) any assets except
     purchases of assets in the ordinary course of business consistent with past
     practice and which do not individually exceed $150,000 or in the aggregate
     $1,500,000 and other than a purchase of specified property;
 
          (e) the Company will not, and will not permit any of its Subsidiaries
     to: (i) grant any increase in the compensation payable or to become payable
     by the Company or any of its Subsidiaries to any of its executive officers
     or employees or (A) enter into or adopt any new, or (B) amend or otherwise
     increase, or accelerate the payment or vesting of any benefit or amount
     payable or to become payable under any bonus, incentive compensation,
     deferred compensation, severance, profit sharing, stock option, stock
     purchase, insurance, pension, retirement or other employee benefit plan, or
     other contract, agreement, commitment, arrangement, plan, trust fund or
     policy maintained or contributed to or entered into by the Company or any
     of its Subsidiaries; or (ii) enter into any employment (other than "at
     will") or severance
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     agreement with or, except in accordance with the written policies of the
     Company existing on the date of the Merger Agreement, grant any severance
     or termination pay to any officer, director or employee of the Company or
     any of its Subsidiaries;
 
          (f) the Company will not, and will not permit any of its Subsidiaries
     to, (i) except in the ordinary course of business consistent with past
     practice, enter into new contracts, modify, amend, terminate, renew or fail
     to use reasonable business efforts to renew any contract or agreement to
     which the Company or any of its Subsidiaries is a party, which is material
     to the Company and its Subsidiaries taken as a whole and provided that the
     term of any new contract or any contract modification, amendment or renewal
     does not exceed twelve (12) months and, provided further, that no loans or
     advances may be made or extended to any customers in connection with any
     such contract, modification, amendment or renewal, or waive, release or
     assign any material rights or claims therein, or (ii) enter into, modify,
     amend or renew any contract or agreement outside the ordinary course of
     business or on a basis not consistent with past practice if the dollar
     value of such new contract or agreement, or existing contract or agreement
     as so amended, modified or renewed, is or would be in excess of $150,000
     (not to exceed $1,500,000 in the aggregate) or have an initial term (or a
     renewal or extension term) greater than twelve (12) months;
 
          (g) the Company will, and will cause each of its Subsidiaries to,
     maintain with financially responsible insurance companies insurance in such
     amounts and against such risks and losses as are customary for companies
     engaged in the business of the Company and its Subsidiaries, consistent
     with the Company's past practices;
 
          (h) the Company will not, and will not permit any of its Subsidiaries
     to: (i) incur or assume any long-term debt, or except in the ordinary
     course of business, incur or assume any short-term indebtedness in amounts
     not consistent with past practice; (ii) assume, guarantee, endorse or
     otherwise become liable or responsible (whether directly, contingently or
     otherwise) for the obligations of any other person; (iii) make any loans,
     advances or capital contributions to, or investments in, any other person
     (other than to wholly owned Subsidiaries of the Company consistent with
     past practice); or (iv) make any new capital expenditure or expenditures
     which exceed the amounts budgeted therefor in the 1999 capital expenditure
     budget for the Company;
 
          (i) the Company will not, and will not permit any of its Subsidiaries
     to, change any of the accounting principles used by it except as required
     by law, rule, regulation or United States generally accepted accounting
     principles;
 
          (j) the Company will not, and will not permit any of its Subsidiaries
     to, make any material Tax election other than in the ordinary course of
     business and consistent with past practice, or settle or compromise any Tax
     liability in excess of $100,000 arising from or in connection with any
     single issue;
 
          (k) the Company will not, and will not permit any of its Subsidiaries
     to, pay, discharge or satisfy any claims, liabilities or obligations
     (absolute, accrued, asserted or unasserted, contingent or otherwise), other
     than the payment, discharge or satisfaction of any such claims, liabilities
     or obligations, (i) in the ordinary course of business and consistent with
     past practice, properly reflected or reserved against in the consolidated
     financial statements (or the notes thereto) as of and for the fiscal year
     ended December 31, 1998 of the Company and its consolidated Subsidiaries,
     (ii) incurred since December 31, 1998 in the ordinary course of business
     and consistent with past practice or (iii) which are immaterial in nature
     and amount;
 
          (l) the Company will not, and will not permit any of its Subsidiaries
     to, adopt a plan of complete or partial liquidation, dissolution, merger,
     consolidation, restructuring, recapitalization or other reorganization of
     the Company or any of its Subsidiaries (other than the Merger);
 
          (m) the Company will not, and will not permit any of its Subsidiaries
     to, amend, renew, terminate or cause to be extended any lease, agreement or
     arrangement relating to any of its leased real properties or enter into any
     lease, agreement or arrangement with respect to any real property;
 
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          (n) the Company will, and will cause each of its Subsidiaries to, use
     reasonable best efforts to maintain in effect all existing Permits that are
     material to the operations of the Company or any of its Subsidiaries;
 
          (o) subject to certain other restrictions set forth in the Merger
     Agreement, the Company will not, and will not permit any of its
     Subsidiaries to, enter into any agreement or arrangement with any of their
     respective affiliates other than such agreements and arrangements as are
     entered into in the usual, ordinary and regular course of business and
     which have been negotiated on an arms-length basis and are no less
     favorable to the Company or its Subsidiaries than the Company or such
     Subsidiary would have obtained from an unaffiliated third party;
 
          (p) the Company will not, and will not permit any of its Subsidiaries
     to, take, or agree to commit to take, any action that (i) would make any
     representation or warranty of the Company contained in the Merger Agreement
     inaccurate in any respect at, or as of any time prior to, the Effective
     Time, (ii) would result in any of the conditions to the Offer or any
     conditions to the consummation of the Merger not being satisfied, or (iii)
     would materially impair the ability of the Company, Parent or the Purchaser
     to consummate the Offer or the Merger in accordance with the terms of the
     Merger Agreement or materially delay such consummation; and
 
          (q) the Company will not, and will not permit any of its Subsidiaries
     to, enter into an agreement, contract, commitment or arrangement to do any
     of the foregoing, or to authorize, recommend, propose or announce an
     intention to do any of the foregoing.
 
     No Solicitation.  Pursuant to the Merger Agreement, the Company has agreed
that from the date of the Merger Agreement until the earlier of the termination
of the Merger Agreement in accordance with its terms or the expiration of the
Offer without Parent or the Purchaser or their affiliates, as the case may be,
having purchased any Shares pursuant thereto, neither the Company nor any of its
Subsidiaries or affiliates will (and the Company will use its reasonable best
efforts to cause its and each of its Subsidiaries' officers, directors,
employees, representatives and agents, including, but not limited to, investment
bankers, attorneys and accountants, not to), directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, provide
any information to, or enter into any agreement with, any corporation,
partnership, person or other entity or group (other than Parent, any of its
affiliates or representatives) concerning any merger, business combination,
tender offer, exchange offer, sale of assets (other than as expressly permitted
by Section 5.1 of the Merger Agreement), sale of shares of capital stock or debt
securities or similar transactions involving the Company or any Subsidiary,
division or operating or principal business unit of the Company (an "Acquisition
Proposal"). The Company also agreed to immediately cease any existing
activities, discussions or negotiations with any other persons with respect to
any of the foregoing. Notwithstanding the foregoing, the Company may, directly
or indirectly, provide access and furnish information concerning its business,
properties or assets to any corporation, partnership, person or other entity or
group pursuant to appropriate confidentiality agreements, and may negotiate and
participate in discussions and negotiations with such entity or group if (w)
such entity or group has submitted an unsolicited bona fide written proposal to
the Company Board relating to any such transaction, (x) such proposal provides
for the acquisition for cash and/or publicly traded securities of all of the
outstanding Shares, (y) the Company Board determines in good faith, after
consultation with its independent financial advisor, that such proposal is
financially superior to the Offer and the Merger and fully financed or
reasonably capable of being financed, and (z) the Company Board determines in
good faith, after consultation with independent legal counsel, that the failure
to provide such information or access or to engage in such discussions or
negotiations would violate their fiduciary duties to the Company's stockholders
under applicable law. A proposal meeting all of the criteria in the preceding
sentence is referred to in the Merger Agreement as a "Superior Proposal." The
Merger Agreement does not prohibit the Company or the Company Board from taking
and disclosing to the Company's stockholders a position with respect to a tender
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act. The Company has agreed to immediately notify Parent of any
Acquisition Proposal, or if an inquiry is made, to keep Parent fully apprised of
all developments with respect thereto, to immediately provide to Parent copies
of any written materials received by the Company in connection with any
Acquisition Proposal or inquiry, and to identify the party making any
Acquisition Proposal or inquiry or engaging in such
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discussion or negotiation. The Company has also agreed to promptly provide to
Parent any non-public information concerning the Company provided to any other
party which was not previously provided to Parent. The Company has agreed not to
release any third party from, or waive any provisions of, any confidentiality or
standstill agreement to which the Company is a party. The Merger Agreement
provides that, except in connection with the valid termination of the Merger
Agreement in connection with a Superior Proposal, neither the Company Board nor
any committee thereof shall (i) withdraw, or modify or change in a manner
adverse to Parent or the Purchaser the approval or recommendation by the Company
Board of the Offer, the Merger Agreement or the Merger or propose to do so, (ii)
approve or recommend any Acquisition Proposal or propose to do so, or (iii)
enter into any agreement (other than a confidentiality agreement) with respect
to any Acquisition Proposal.
 
     Directors' and Officers' Indemnification and Insurance.  The Merger
Agreement provides that for six years after the Effective Time, the Surviving
Corporation will indemnify, defend and hold harmless to the fullest extent
permitted under Delaware law the present and former officers, directors,
employees and agents of the Company and its Subsidiaries against all losses,
claims, damages, liabilities, fees and expenses (including reasonable fees and
disbursements of counsel and judgments, fines, losses, claims, liabilities and
amounts paid in settlement (provided that any such settlement is effected with
the written consent of Parent or the Surviving Corporation)) in connection with
any claim, suit, action, proceeding or investigation that is, in whole or in
part, based on or arising out of the fact that such person is or was a director,
officer, employee or agent of the Company or its Subsidiaries and arising out of
actions or omissions occurring at or prior to the Effective Time.
 
     The Merger Agreement further provides that for six years after the
Effective Time, Parent will, or will cause the Surviving Corporation to,
maintain in effect, if available, directors' and officers' liability insurance
covering those persons currently covered by the Company's directors' and
officers' liability insurance policy, to the extent that it provides coverage
for events occurring on or prior to the Effective Time, on terms (including the
amounts of coverage and the amounts of deductibles, if any) that are no less
favorable than the terms of the Company's current policy. If the premium for
such coverage exceeds 150% of the annual premium currently paid by the Company
for such coverage, Parent or the Surviving Corporation are required only to
purchase a policy with the greatest coverage available for an annual premium up
to such amount.
 
     Termination.  The Merger Agreement provides that it may be terminated or
abandoned at any time prior to the Effective Time, whether before or after
stockholder approval thereof:
 
          (a) by the mutual consent of the Parent Board and the Company Board.
 
          (b) by either of the Company Board or the Parent Board:
 
             (i) if Shares have not been purchased pursuant to the Offer on or
        prior to October 31, 1999; provided, that the right to terminate the
        Merger Agreement pursuant to this paragraph is not available to any
        party whose failure to fulfill any obligation under the Merger Agreement
        has been the cause of, or resulted in, the failure of the Purchaser to
        purchase Shares pursuant to the Offer on or prior to such date; or
 
             (ii) if any Governmental Entity has issued an order, decree or
        ruling or taken any other action (which order, decree, ruling or other
        action the parties will use their reasonable efforts to lift), in each
        case permanently restraining, enjoining, or otherwise prohibiting the
        transactions contemplated by the Merger Agreement and such order,
        decree, ruling or other action has become final and non-appealable.
 
          (c) by the Company Board:
 
             (i) if, prior to the purchase of Shares pursuant to the Offer, the
        Company Board has withdrawn, or modified or changed in a manner adverse
        to Parent or the Purchaser, its approval or recommendation of the Offer,
        the Merger Agreement or the Merger in order to approve and permit the
        Company to execute a definitive agreement providing for a Superior
        Proposal; provided that (A) at least five business days prior to
        terminating the Merger Agreement pursuant to this
 
                                        7
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        paragraph the Company has provided Parent with written notice advising
        Parent that the Company Board has received a Superior Proposal that it
        intends to accept, specifying the material terms and conditions of such
        Superior Proposal and identifying the person making such Superior
        Proposal, and (B) the Company has caused its financial and legal
        advisors to negotiate in good faith with Parent to make such adjustments
        in the terms and conditions of the Merger Agreement as would enable the
        Company to proceed with the transactions contemplated therein on such
        adjusted terms; and further provided that the Company may not terminate
        the Merger Agreement pursuant to this paragraph if the Company is in
        material breach of the Merger Agreement; or
 
             (ii) if, prior to the purchase of Shares pursuant to the Offer,
        Parent or the Purchaser breaches in any material respect any of its
        material covenants, agreements, representations or warranties contained
        in the Merger Agreement, which breach is incapable of being cured within
        30 days of notice from the Company to Parent; or
 
             (iii) if Parent or the Purchaser has terminated the Offer, or the
        Offer has expired, without Parent or the Purchaser, as the case may be,
        purchasing any Shares pursuant thereto; provided that the Company may
        not terminate the Merger Agreement pursuant to this paragraph if the
        Company is in material breach of the Merger Agreement.
 
          (d) by the Parent Board:
 
             (i) if, due to an occurrence that if occurring after the
        commencement of the Offer would result in a failure to satisfy any of
        the conditions set forth in Section 14 below, Parent, the Purchaser, or
        any of their affiliates has failed to commence the Offer on or prior to
        five business days following the date of the initial public announcement
        of the Offer, provided that Parent may not terminate the Merger
        Agreement pursuant to this paragraph if Parent or the Purchaser is in
        material breach of the Merger Agreement; or
 
             (ii) if prior to the purchase of Shares pursuant to the Offer, the
        Company Board has withdrawn, or modified or changed in a manner adverse
        to Parent or the Purchaser, its approval or recommendation of the Offer,
        the Merger Agreement or the Merger or has recommended an Acquisition
        Proposal or offer, or has executed an agreement in principle or
        definitive agreement providing for a tender offer or exchange offer for
        any shares of capital stock of the Company, or a merger, consolidation
        or other business combination with a person or entity other than Parent,
        the Purchaser or their affiliates (or the Company Board resolves to do
        any of the foregoing); provided that Parent may not terminate the Merger
        Agreement pursuant to this paragraph if Parent or the Purchaser is in
        material breach of the Merger Agreement; or
 
             (iii) if Parent or the Purchaser has terminated the Offer, or the
        Offer has expired without Parent or the Purchaser purchasing any Shares
        thereunder, provided that Parent may not terminate the Merger Agreement
        pursuant to this paragraph if it or the Purchaser has failed to purchase
        Shares in the Offer in violation of the material terms thereof.
 
     Effect of Termination; Termination Fee.  The Merger Agreement provides that
in the event of termination, the Merger Agreement will forthwith become null and
void, and there will be no liability on the part of Parent, the Purchaser or the
Company except (A) for fraud or for willful material breach of the Merger
Agreement and (B) as described below with respect to the payment of certain fees
and expenses.
 
     Set forth below are the circumstances under which a Termination Fee (as
defined below) is payable under the terms of the Merger Agreement. All
references to paragraph numbers refer to the section entitled "Termination"
above.
 
     If (w) the Company Board terminates the Merger Agreement pursuant to
paragraph (c)(i), (x) the Parent Board terminates the Merger Agreement pursuant
to paragraph (d)(ii), (y) the Company Board terminates the Merger Agreement
pursuant to paragraph (b)(i) or paragraph (c)(iii) or the Parent Board
terminates the Merger Agreement pursuant to paragraph (b)(i) or (d)(iii) and
prior thereto there has been publicly announced another Acquisition Proposal or
(z) the Parent Board, due to a material breach of the
 
                                        8
   11
 
Merger Agreement by the Company, terminates the Merger Agreement pursuant to
paragraph (d)(i) or (d)(iii), (each such case of termination being referred to
as a "Trigger Event"), then the Company is obligated to pay to Parent $14
million. Such payment is due not later than one business day after such
termination of the Merger Agreement except in the case of any termination by the
Company pursuant to paragraph (c)(i), in which case, payment is due
simultaneously with the termination.
 
     The Merger Agreement further provides that upon the termination of the
Merger Agreement due to the occurrence of a Trigger Event, the Company will also
promptly reimburse Parent for the actual, documented and reasonable
out-of-pocket expenses of Parent, the Purchaser and their affiliates (including
the fees and expenses of legal counsel, accountants, financial advisors, other
consultants, financial printers and financing sources) ("Expenses") in
connection with the Offer and the Merger Agreement, in an amount not to exceed
$2.5 million.
 
     The Merger Agreement also provides that if the Company terminates the
Merger Agreement pursuant to paragraph (c)(ii), and the Company is not in
material breach of the Merger Agreement at the time of such termination, Parent
will pay to the Company (not later than one business day after such termination)
$14 million plus an amount not to exceed $2.5 million as reimbursement to the
Company for its actual, documented and reasonable out-of-pocket Expenses.
 
     Fees and Expenses.  The Merger Agreement provides that, except as set forth
above, all costs and expenses incurred in connection with the Merger Agreement
and the transactions contemplated thereby will be paid by the party incurring
such expenses.
 
STOCK OPTION AGREEMENT
 
     The following is a summary of certain provisions of the Stock Option
Agreement. This summary is not a complete description of the terms and
conditions of the Stock Option Agreement and is qualified in its entirety by
reference to the full text of the Stock Option Agreement, a copy of which is
filed with the Commission as an exhibit to this Schedule 14D-9. Capitalized
terms not otherwise defined below have the meanings set forth in the Stock
Option Agreement. The Stock Option Agreement may be examined, and copies
obtained, at the places and in the manner as set forth in Section 9 of
Purchaser's Offer to Purchase, which is enclosed with this Schedule 14D-9.
 
     Grant and Exercise of Option.  Under the Stock Option Agreement, the
Company has granted to the Purchaser an irrevocable option (the "Stock Option")
to purchase up to that number of newly issued Shares that, when added to the
number of Shares owned by the Purchaser and its affiliates immediately following
consummation of the Offer, will constitute 90% of the Shares then outstanding on
a fully diluted basis (giving effect to the issuance of the Shares under the
Stock Option) (up to a maximum of 19.9% of the Shares outstanding at the time of
the grant of the Stock Option) at a price of $12.25 per Share. The Stock Option
may be exercised by the Purchaser at any time after the acceptance for payment
by the Purchaser of Shares pursuant to the Offer. The Stock Option will
terminate upon the earlier of (i) the termination of the Merger Agreement in
accordance with its terms or (ii) the Effective Time.
 
     Adjustment Upon Changes in Capitalization.  The Stock Option Agreement
provides that, in the event of any change in the number of issued and
outstanding Shares by reason of any stock dividend, subdivision, merger,
recapitalization, combination, conversion or exchange of shares, or any other
change in the corporate or capital structure of the Company (including, without
limitation, the declaration or payment of any extraordinary dividend of cash or
securities) which would have the effect of diluting or otherwise adversely
affecting the Purchaser's rights and privileges under the Stock Option
Agreement, the number and kind of the shares and the consideration payable in
respect of the shares will be appropriately and equitably adjusted to restore to
the Purchaser its rights and privileges under the Stock Option Agreement.
 
CONFIDENTIALITY AGREEMENT
 
     The following is a summary of certain provisions of the Confidentiality
Agreement. This summary is not a complete description of the terms and
conditions of the Confidentiality Agreement and is qualified in its
 
                                        9
   12
 
entirety by reference to the full text of the Confidentiality Agreement, a copy
of which is filed with the Commission as an exhibit to this Schedule 14D-9.
Capitalized terms not otherwise defined below shall have the meanings set forth
in the Confidentiality Agreement. The Confidentiality Agreement may be examined,
and copies obtained, at the places and in the manner as set forth in Section 9
of Purchaser's Offer to Purchase, which is enclosed with this Schedule 14D-9.
 
     Pursuant to the terms of the Confidentiality Agreement that Parent and the
Company entered into on October 30, 1998, the Company and Parent agreed to
provide, among other things, for the confidential treatment of their discussions
regarding the Offer and the Merger and the exchange of certain confidential
information concerning each of them. The parties agreed that for a period of two
years from the date of the Confidentiality Agreement that they will not
knowingly, as a result of knowledge or information obtained from the exchange of
certain confidential information (i) divert or attempt to divert any business or
customer of the other party or any of its affiliates nor (ii) employ or attempt
to employ or divert any employee of the party. The parties further agreed that,
upon receipt of proprietary, non-public, confidential information, neither of
them would propose to the other or any other person any transaction between the
companies or their securityholders or involving any of their securities or
securityholders unless the other company has requested in writing that such a
proposal be made, and that neither company will acquire, or assist, advise or
encourage any other persons in acquiring, directly or indirectly, control of the
other company or any of the other company's securities, businesses or assets for
a period of two years from the date of the Confidentiality Agreement unless the
other company has consented in advance in writing to such acquisition.
 
ARRANGEMENTS WITH EXECUTIVE OFFICERS AND DIRECTORS
 
EMPLOYMENT AGREEMENTS
 
     The Company currently maintains an employment agreement with John P.
O'Mahoney, its Chairman and Chief Executive Officer, described under the section
captioned "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" in Schedule I hereto. In the event of a change
in control (as defined therein), that agreement contains provisions allowing Mr.
O'Mahoney to terminate the agreement in exchange for a lump sum payment equal to
all salary and benefits owed to him for the balance of the agreement term (three
years from the date of the change in control) (i) if the location of the
Company's office is changed by more than 150 miles or his position and duties
are changed following the change in control, or (ii) upon giving written notice
not less than six months nor more than 12 months after the change in control.
The purchase of Shares pursuant to the Offer will constitute a change in control
for purposes of that agreement. The lump sum amount that would be payable to Mr.
O'Mahoney if that agreement were terminated in accordance with its terms would
be approximately $1.2 million at April 30, 1999.
 
     Parent and the Company have agreed to new employment arrangements with Mr.
O'Mahoney that, effective upon the date that a majority of Shares are acquired
by Parent (the "Acquisition Date"), will replace Mr. O'Mahoney's current
employment agreement with the Company. The following is a summary of certain
provisions of the new agreement. This summary is not a complete description of
the terms and conditions of the new agreement and is qualified in its entirety
by reference to the full text of the new agreement, a copy of which is filed
with the Commission as an exhibit to this Schedule 14D-9. Capitalized terms not
otherwise defined below shall have the meanings set forth in the new agreement.
The new agreement may be examined, and copies obtained, at the places and in the
manner as set forth in Section 9 of Purchaser's Offer to Purchase, which is
enclosed with this Schedule 14D-9.
 
     The new agreement provides that in lieu of any payment under Mr.
O'Mahoney's current agreement Mr. O'Mahoney will be employed by Parent for an
initial period of two years after the Acquisition Date, at an initial annual
base salary of $350,000, subject to increase at the discretion of Parent, and
will receive fringe benefits and perquisites at least equal to those received by
Mr. O'Mahoney immediately before the date of the new agreement. The new
agreement also provides that Mr. O'Mahoney will receive, upon the Acquisition
Date, a signing bonus of $100,000 in cash and a grant of shares of restricted
stock of Parent with a value of $300,000 and, provided his employment with
Parent continues on the day following the first anniversary of the Acquisition
Date, a grant of shares of restricted stock of Parent with a value of $300,000
on such day. In
 
                                       10
   13
 
addition, after executing the Merger Agreement on April 27, 1999, Parent agreed
to grant to Mr. O'Mahoney, upon Parent becoming an owner of a majority of the
issued and outstanding Shares (provided that such date is not later than October
31, 1999), an option to purchase 5,000 shares of common stock of Parent at an
exercise price equal to the stock's closing price on the last regular trading
day of the New York Stock Exchange immediately preceding the grant date. The
option is exercisable in two equal installments on each of the first and second
anniversaries of the grant date.
 
     Pursuant to the new agreement, if Parent terminates Mr. O'Mahoney's
employment without cause, as defined in the agreement, then Parent will pay Mr.
O'Mahoney an amount equal to the amount of salary he would have earned during
the remaining initial two-year term of that Agreement. In addition, if Mr.
O'Mahoney's employment is terminated without cause (i) on or before the first
anniversary of the Acquisition Date, then he will receive a cash payment of
$300,000 and all restrictions on his restricted stock will be lifted, or (ii)
after the day following the first anniversary of the Acquisition Date but before
the second anniversary of the Acquisition Date, then all restrictions on his
restricted stock will be lifted. If Mr. O'Mahoney terminates his employment or
if Parent terminates Mr. O'Mahoney's employment for cause, then Mr. O'Mahoney
will not receive any payments other than payments owed to him up to the date of
his termination. That agreement also provides that for a period of eighteen
months following Mr. O'Mahoney's termination of employment with Parent, Mr.
O'Mahoney may not, directly or indirectly, engage in any business which competes
with Parent or the Company.
 
     The new agreement places certain restrictions upon Mr. O'Mahoney's ability
to communicate confidential information concerning Parent or the Company to
third parties. The new agreement also provides that Parent will pay Mr.
O'Mahoney such additional amounts as may be necessary to cover certain taxes
that Mr. O'Mahoney would have to pay on certain payments he is entitled to
receive.
 
     In addition, the Company has employment agreements with Jack Baarends, a
Vice President of the Company, and Mark W. Joslin, its Chief Financial Officer
and Treasurer, described under the section captioned "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" in Schedule I
hereto. Nathan Goodnow, who became a Vice President of the Company in October
1999, also has a similar agreement. In the event of a change in control (as
defined therein), Mr. Baarends, Mr. Joslin and Mr. Goodnow may, under certain
circumstances, terminate the agreements and be entitled to lump sum payments
equal to all salary owed for the balance of the agreement term (two years from
the date of the change in control). The purchase of Shares pursuant to the Offer
will constitute a change in control for purposes of those agreements. The lump
sum amounts that would be payable to Mr. Baarends, Mr. Joslin and Mr. Goodnow if
their respective agreements were terminated in accordance with their terms would
be approximately $300,000, $380,000 and $300,000, respectively, at April 30,
1999.
 
OPTIONS HELD BY EXECUTIVE OFFICERS AND DIRECTORS
 
     In exchange for cancellation of their options at the Effective Time,
pursuant to the terms of the Merger Agreement the Company's directors and
executive officers would receive payments as follows: John P. O'Mahoney,
$516,250.00; William P. Clark, $20,625.00; Arthur A. Hartman, $20,625.00;
Leonard P. Judy, $20,625.00; Richard D. Nordman, $24,375.00; Fred G.
Steingraber, $20,625.00; Jack Baarends, $90,400.00; Nathan Goodnow, $129,375.00;
and Mark W. Joslin, $175,384.38.
 
DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE
 
     The discussion under the section "Merger Agreement -- Directors' and
Officers' Indemnification and Insurance" above is incorporated herein by
reference.
 
APPRAISAL RIGHTS
 
     Stockholders do not have dissenters' rights as a result of the Offer.
However, if the Merger is consummated, stockholders of the Company at the
Effective Time who did not vote in favor of or consent in writing to the Merger
will have the right under Delaware law to dissent and demand appraisal of, and
to receive payment in cash of the fair value of, their Shares in accordance with
Section 262 of the DGCL. Under
 
                                       11
   14
 
said Section 262, dissenting stockholders who comply with the statutory
procedures will be entitled to receive a judicial determination of the fair
value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) and to receive payment of such fair
value in cash, together with a fair rate of interest, if any. Any such judicial
determination of the fair value of the Shares could be based upon considerations
other than or in addition to the price paid in the Merger or the market value of
the Shares. Stockholders should recognize that the value so determined could be
higher or lower than the price per Share paid pursuant to the Merger. THE
FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT PURPORT TO
BE A COMPLETE STATEMENT OF PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO
EXERCISE THEIR DISSENTERS' RIGHTS. THE PRESERVATION AND EXERCISE OF APPRAISAL
RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
 
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
 
     (a) Recommendation of the Board of Directors.
 
     The Company's Board of Directors has unanimously approved the Merger
Agreement and determined that the Offer and the Merger are fair to and in the
best interests of the stockholders of the Company (other than Parent and its
subsidiaries) and recommends that all stockholders of the Company accept the
Offer and tender all their Shares pursuant to the Offer. This recommendation is
based in part upon an opinion received by the Board of Directors of the Company
from ABN AMRO Incorporated that the Offer Price to be received by the holders of
Common Stock in the Offer and in the Merger is, as of the date of such opinion
and based on and subject to certain matters and assumptions stated therein, fair
to such stockholders (other than Parent and its affiliates) from a financial
point of view. The full text of the fairness opinion received by the Board of
Directors of the Company from ABN AMRO Incorporated (the "ABN AMRO Opinion") is
filed as an exhibit to this Schedule 14D-9 and as Annex A hereto and is
incorporated herein by reference. Stockholders are urged to read such opinion in
its entirety.
 
     A copy of the press release issued jointly by the Company and Parent on
April 28, 1999 announcing the Merger and the Offer is filed as an exhibit to
this Schedule 14D-9 and is incorporated herein by reference in its entirety.
 
     (b) Background of the Offer; Reasons for the Recommendation
 
BACKGROUND
 
     The Company had become aware in the fall of 1997 that the estate of Daniel
J. Terra (the "Estate"), which then owned approximately 25% of the outstanding
Shares, had engaged an investment banking firm to explore alternatives with
respect to the Shares held by the Estate, including the sale of such Shares or
the possible sale of the Company. During late 1997 and early 1998 the Company's
Board of Directors considered the possibility of a sale of the Company, as well
as the effects of a possible sale of the Estate's Shares. The Company's Board
determined that it was then in the Company's best interests to continue as an
independent company, without the potential concerns arising from the existence
of a single large stockholder such as the Estate (or any person to whom the
Estate might sell its Shares). On April 1, 1998 the Company's Board approved,
and the Company entered into, an agreement providing for the purchase by the
Company of the Shares held by the Estate at a price of $11.375 per Share. The
purchase occurred on April 1, 1998.
 
     Prior to and after the repurchase from the Estate, management of the
Company had continued to explore and evaluate ways of expanding the Company's
business through potential acquisitions, joint ventures or other arrangements.
On July 1, 1998, the Company engaged an advisor to evaluate possible acquisition
targets in connection with such growth plans. During the second half of 1998,
the Company held preliminary discussions with several companies, both in its
industry and in aligned industries, concerning acquisitions by the Company of
all or part of those companies. Management's evaluation of several specific
potential candidates for acquisition by the Company continued through the second
half of 1998, with one such acquisition (of Robert Kraemer in Germany) occurring
in December 1998. As part of its continuing evaluation, management also
considered the increasing consolidation in its industry and in the industries of
its principal customers, and the
 
                                       12
   15
 
potential need for greater resources than those of the Company alone to most
effectively implement management's growth plans for the Company.
 
     In mid-October 1998, Earnest W. Deavenport, Jr., Chairman of the Board and
Chief Executive Officer of Parent, contacted John P. O'Mahoney, Chairman of the
Board and Chief Executive Officer of the Company, regarding the possibility of a
meeting to learn more about the Company. On October 19, 1998, Mr. Deavenport,
Allan R. Rothwell, Senior Vice President and Chief Financial Officer of Parent,
and Bruce E. Moore, Vice President and General Manager of Coatings, Inks &
Resins of Parent, met with Mr. O'Mahoney at the Company executive offices in
Pleasant Prairie, Wisconsin. At that meeting, Parent expressed its interest in
entering into a business combination transaction with the Company.
 
     As a result of this meeting, Parent and the Company agreed to enter into a
confidentiality agreement, with Parent executing the confidentiality agreement
on October 30, 1998 and the Company executing the confidentiality agreement on
November 3, 1998.
 
     On November 3, 1998, at Parent's executive offices in Kingsport, Tennessee,
Messrs. Rothwell and Moore, together with other members of senior management of
Parent and Parent's financial advisor, met with Mr. O'Mahoney, Mark W. Joslin,
Chief Financial Officer and Treasurer of the Company, Jack Baarends, Vice
President of the Company, and other Company representatives. This meeting
continued to be exploratory in nature, with the parties discussing in general
terms the strategic benefits of Parent's proposed combination with the Company.
Members of management of Parent and the Company met again on November 20, 1998,
and held more detailed discussions throughout December 1998.
 
     Members of management of Parent and the Company, together with their
respective advisors, met on January 7, 1999 and Messrs. Rothwell and O'Mahoney
met again on January 25, 1999. None of these contacts led to any agreements or
understandings regarding an acquisition of the Company by Parent and on February
4, 1999, the Parent Board determined to terminate negotiations regarding
Parent's potential acquisition of the Company.
 
     During the period beginning in late summer of 1998, management of the
Company also held informal preliminary discussions with several other parties,
including representatives of another company ("Company A") which executed a
confidentiality agreement. The Company initially expressed an interest in
acquiring part of the business of Company A. However, Company A was interested
in a possible business combination with the Company that would have involved
Company A taking a majority interest in the Company. Management of the Company
indicated it was not interested in such a structure. In further discussions in
February and March 1999, Company A then raised the possibility of acquiring the
entire equity interest in the Company. Management of the Company discussed the
possible terms of such an acquisition with Company A, but no agreement was
reached.
 
     At its March 19, 1999 meeting, the Company's Board of Directors, after
hearing a presentation from management concerning its discussions with several
parties who had indicated an interest in acquiring a part or all of the Company,
directed management to request those interested parties to present a specific
proposal by the Board's next meeting on April 7. The Board also determined that
the purchase price in any transaction would have to be at least $12.00, and
instructed management to pursue discussions with interested parties seeking to
obtain a price in excess of $12.00. (On March 18, 1999, the closing sales price
of the Common Stock was $6.25.)
 
     Company A continued to express a desire to negotiate an acquisition of the
Company, but indicated that it would need to do substantial due diligence before
proposing a price. On March 30, 1999 and for the remainder of that week,
representatives of Company A conducted a due diligence investigation of the
Company. On April 5, 1999 Company A submitted a letter proposing to acquire the
Company through a cash merger, together with a draft merger agreement.
 
     During the last week of March and first week of April, management also
engaged in discussions with a third company ("Company B") about a possible
business combination. This combination would have involved Company B acquiring a
majority, but not all, of the Shares.
 
                                       13
   16
 
     In late March 1999, Mr. O'Mahoney informed Mr. Rothwell that other
companies had expressed interest in acquiring the Company and inquired as to
whether Parent would again be interested in entering into a business combination
with the Company. As a result of this conversation, on April 1, 1999, Messrs.
Rothwell, Moore and Prentice McKibben, Business Development Director for Parent,
met with Mr. O'Mahoney to renew negotiations regarding a business combination
transaction.
 
     Throughout the next week, the parties engaged in a series of conversations.
On April 6, 1999, Mr. Deavenport sent a letter to Mr. O'Mahoney submitting a
non-binding proposal to acquire, subject to Parent's due diligence
investigation, all of the Company's issued and outstanding shares at a price in
the range of $12.25 to $12.75 per Share. Following conversations between Mr.
Rothwell and Mr. O'Mahoney, on April 7, 1999, Mr. Deavenport sent a letter to
Mr. O'Mahoney submitting a non-binding proposal to acquire, subject to Parent's
due diligence investigation, all of the Company's issued and outstanding Shares
at a price in the range of $12.50 to $12.75 per Share.
 
     At its April 7 meeting, the Company's Board, after being informed of the
status of discussions with all parties, authorized management to continue
discussions with Parent and Company A and Company B and to permit Parent and
Company A to proceed with their due diligence.
 
     On April 8, 1999, Parent, its financial advisor and independent auditors
met with the Company and one lawyer from its outside law firm and commenced
Parent's due diligence investigation. Parent expanded its due diligence
activities to include the world-wide operations of the Company, and engaged in
due diligence until execution of the Merger Agreement. From April 10 through
April 12, Messrs. Rothwell, Moore and O'Mahoney continued discussions regarding
the terms of Parent's proposed acquisition of the Company, with Parent's
representatives informing Mr. O'Mahoney that after due diligence conducted thus
far Parent was then considering a price range of $12.00 to $12.25.
 
     On April 13, 1999, Mr. Rothwell and Mr. O'Mahoney discussed a non-binding
proposal to acquire, still subject to completion of ongoing due diligence, all
of the Company's issued and outstanding shares at a price in the range of $12.25
to $12.50 per Share. At its April 13 meeting, the Company's Board, having heard
management's presentation updating the status of discussions with the three
potential acquirers, determined that (i) discussions with Company B, which was
not interested in an acquisition of the entire equity interest in the Company,
should be terminated as not being in the best interests of stockholders; (ii)
discussions with Company A should only be continued if Company A would consider
a higher price; and (iii) discussions with Parent should be continued, with
management attempting to get Parent to raise its price. The Company subsequently
terminated discussions with Company A as all the prices discussed with Company A
were below the price eventually agreed to by Parent.
 
     On April 19, 1999, outside legal counsel to Parent and the Purchaser
provided initial drafts of the Merger Agreement and the Stock Option Agreement
to the Company and its outside legal counsel. During the period from April 19,
1999 through April 27, 1999, the parties conducted negotiations with respect to
the Merger Agreement and the Stock Option Agreement and related business issues
including price, the amount of the termination fee, the right of the Company to
a termination fee in the event of a breach by Parent, Parent's request for a
"lock-up" option and certain terms of the Offer and the Merger.
 
     On April 21, 1999, the Company engaged ABN AMRO Incorporated as a financial
advisor in connection with analyzing the fairness of the proposed transaction
from a financial point of view.
 
     On April 24, 1999, following Parent's due diligence investigation, Messrs.
Rothwell, Moore and McKibben conducted discussions with Mr. O'Mahoney in which
Parent's representatives initially suggested a price of $12.00 per share. Mr.
O'Mahoney responded that the Company was seeking a price of $12.50. Further
discussions between Mr. O'Mahoney and Parent's representatives resulted in a
tentative agreement on a price of $12.25 per share, subject to satisfactory
completion of negotiations with respect to the Merger Agreement and the Stock
Option Agreement. On April 26, 1999, the parties agreed on the amount of the
termination fee and expense reimbursement, agreed that the Company would be
entitled to a termination fee in the event of a breach by Parent and that the
Company would not grant a "lock-up" option. On April 27, 1999, the remaining
details of the Merger Agreement and Stock Option Agreement were finalized.
 
                                       14
   17
 
     At a meeting of the Board of Directors of Parent (the "Parent Board"), held
on April 27, 1999, the Parent Board approved and adopted the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger,
and the Stock Option Agreement.
 
     At a meeting of the Company Board held on April 27, 1999, the Company Board
discussed Parent's proposal, ABN AMRO Incorporated delivered to the Company
Board its opinion to the effect that, as of such date and based upon and subject
to certain matters and assumptions stated therein, the consideration to be
received by the holders of Shares pursuant to the Offer and under the terms of
the Merger Agreement is fair to such holders from a financial point of view, and
management discussed the effect of the Merger on outstanding options and the
terms of Mr. O'Mahoney's new employment agreement. At the conclusion of its
discussion, the Company Board unanimously approved and adopted the Merger
Agreement and the transactions contemplated thereby, including the Offer, the
Merger and the Stock Option Agreement, and determined that the terms of the
Offer and the Merger are fair to, and in the best interests of, the holders of
the Shares, and unanimously recommended that stockholders of the Company accept
the Offer and tender their Shares.
 
     Following the approval of the Company Board, on April 27, 1999, Parent, the
Purchaser and the Company executed and delivered the Merger Agreement and on
April 28, 1999, they issued a press release announcing the execution of the
Merger Agreement and the transactions contemplated thereby.
 
     On May 4, 1999, pursuant to the terms of the Merger Agreement, Purchaser
and Parent commenced the Offer.
 
REASONS FOR THE RECOMMENDATION
 
     In reaching its conclusions to approve the Merger and recommend that
stockholders accept the Offer, the Board of Directors of the Company considered
a number of factors, including, without limitation, the following:
 
          (i) the financial and other terms and conditions of the Offer and the
     Merger Agreement;
 
          (ii) the Company's business, financial condition, results of
     operations, assets, liabilities, business strategy and prospects, as well
     as various uncertainties associated with those prospects;
 
          (iii) the intense competition in the Company's markets and the
     Company's ability at its current size to continue to effectively compete in
     those markets;
 
          (iv) the Board of Directors' review over the last ten months of the
     Company's strategic plan and its reevaluation of whether remaining
     independent was the best means to achieve the Company's business goals;
 
          (v) that the $12.25 per Share price to be received by the Company's
     stockholders in both the Offer and the Merger represents an approximately
     37% premium over the closing market price of $8.9375 per Share on April 27,
     1999, the last full trading day prior to the announcement of the execution
     of the Merger Agreement, and premiums of approximately 56% and 75% over the
     average closing prices for the one-week period and the four-week period,
     respectively, preceding April 26, 1999, and that such price would be
     payable in cash, thus eliminating any uncertainties in valuing the
     consideration to be received by the Company's stockholders;
 
          (vi) that the Offer and the Merger would not be subject to any
     financing condition and that Parent has represented that the funds
     necessary to consummate the Offer and the Merger are available and will be
     provided to Purchaser;
 
          (vii) the written opinion of ABN AMRO Incorporated that the Offer
     Price to be received by the holders of Common Stock in the Offer and the
     Merger is fair to such stockholders (other than Parent and its affiliates)
     from a financial point of view; a copy of the ABN AMRO Opinion is attached
     to this Schedule 14D-9 as Annex A and is incorporated herein by reference.
     Holders are urged to read such
 
                                       15
   18
 
     opinion in its entirety for a description of the procedures followed,
     assumptions and qualifications made, matters considered and limitations of
     the review undertaken by ABN AMRO Incorporated;
 
          (viii) the presentation of ABN AMRO Incorporated to the Board of
     Directors at its meeting on April 27, 1999, as to various financial and
     other matters involving the Company and the transaction which the Board of
     Directors deemed relevant, including, among other things, (a) a review of
     the Company's historical and projected financial performance and other data
     provided to ABN AMRO Incorporated by the Company relating to the Company's
     business, (b) a review of the historical stock prices and trading volumes
     of the Shares, (c) a review of the trading and operating performance of
     certain publicly traded specialty chemicals companies, (d) a review of
     certain transactions in the specialty chemicals industry, (e) a review of
     premiums paid in certain other transactions, (f) a discounted cash flow
     valuation of the Company, and (g) an analysis of the consideration implied
     by the Offer Price as a multiple of various measures of the Company's
     operating performance;
 
          (ix) the fact that management of the Company had held discussions with
     other parties, including all of the companies it reasonably considered to
     be a potential interested party, concerning possible business combinations,
     and such discussions had resulted in only one other party making a serious
     proposal, which involved a proposed merger at a lower price per share than
     the Offer Price;
 
          (x) the fact that, to the extent required by the fiduciary obligations
     of the Company's Board of Directors to the stockholders under Delaware law,
     the Company may terminate the Merger Agreement in order to approve a tender
     offer or exchange offer for the Shares or other proposed business
     combination by a third party on terms more favorable to the Company's
     stockholders than the Offer and the Merger taken together, upon the payment
     of a $14 million termination fee and up to $2.5 million of Parent's
     expenses associated with the Offer and the Merger;
 
          (xi) the fact that, provided that the Company is not in material
     breach of the Merger Agreement, Parent shall pay the Company a $14 million
     termination fee and up to $2.5 million of the Company's expenses incurred
     in connection with the Offer if the Company's Board of Directors terminates
     the Merger Agreement due to Parent's or Purchaser's breach of or material
     failure to perform or comply with its material covenants and agreements
     contained in the Merger Agreement or breach of its representations and
     warranties in any material respect;
 
          (xii) the future of the Company's employees and Parent's expressed
     intention to keep the Company's existing work force substantially in place;
     and
 
          (xiii) the impact of the Offer and the Merger on existing options and
     employment agreements with Company personnel and the terms and conditions
     of the new employment agreement to be entered into between the Company,
     Parent and Mr. O'Mahoney.
 
     The foregoing is not intended to be exhaustive, but is intended to include
many of the material factors considered by the Company's Board. In view of the
complexity and variety of the issues, the Board did not attempt to quantify or
otherwise attempt to assign any relative or specific weights to the specific
factors considered, and individual directors may have given differing weights to
different factors.
 
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
 
     First Analysis Securities Corporation has served as financial advisor to
the Company in connection with a possible transaction involving the Company and
Parent. Upon completion of the Merger, First Analysis Securities Corporation
will be entitled to a fee of $2.5 million.
 
     In the ordinary course of business, First Analysis Securities Corporation
may actively trade the Company Common Stock and other securities of the Company,
as well as the common stock of Parent and other securities of Parent, for its
own account and for the accounts of customers and may, therefore, at any time
hold a long or short position in such securities.
 
                                       16
   19
 
     The Company also retained ABN AMRO Incorporated on April 21, 1999 as a
financial advisor in connection with analyzing the fairness of the proposed
transaction from a financial point of view. Pursuant to its agreement with the
Company, ABN AMRO Incorporated became entitled to receive $350,000, $50,000 of
which was paid upon signing of the agreement by ABN AMRO and the Company, and
the balance upon delivery of the ABN AMRO Opinion. In addition the Company has
agreed to reimburse ABN AMRO Incorporated for its out-of-pocket expenses,
including the fees and disbursements of its counsel, and to indemnify ABN AMRO
Incorporated and its partners, employees, agents, affiliates or controlling
persons against certain liabilities relating to or arising out of its
engagement, including liabilities under Federal securities laws.
 
     In the ordinary course of business, ABN AMRO Incorporated may actively
trade the Company Common Stock and other securities of the Company, as well as
the common stock of Parent and other securities of Parent, for its own account
and for the accounts of customers and may, therefore, at any time hold a long or
short position in such securities.
 
     Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on its
behalf with respect to the Offer and the Merger.
 
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
 
     (a) During the past 60 days, no transactions in the Shares have been
effected by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate, or subsidiary of the Company.
 
     (b) To the best knowledge of the Company, all of its executive officers and
directors currently intend to tender pursuant to the Offer all Shares held of
record or beneficially owned by them.
 
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
 
     (a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
 
     (b) Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that relates
to or would result in one or more of the events referred to in Item 7(a) above.
 
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
 
     (a) State Business Combination Law
 
     Delaware.  The Company has elected not to be governed by Section 203 of the
Delaware General Corporation Law.
 
     Wisconsin.  Although the Company is organized under the laws of the State
of Delaware, since the Company's executive offices and principal place of
business are located in the State of Wisconsin, the Offer could be subject to
Chapter 552 of the Wisconsin Statutes, the Wisconsin Corporate Take-Over Law
("Chapter 552"). Chapter 552 makes it unlawful, under certain circumstances, for
any person to make a "take-over offer" involving a "target company" in Wisconsin
which meets certain criteria, or to acquire any equity securities of such a
target company pursuant to the take-over offer, unless a registration statement
has been filed with the Division of Securities of the Wisconsin Department of
Financial Institutions at least ten days prior to the commencement of the
take-over offer and that agency does not delay the effectiveness of the
take-over offer by order or request for a hearing. The Company believes that it
meets an exception to the registration provisions of Chapter 552 and,
consequently, such provisions of Chapter 552 should be
 
                                       17
   20
 
inapplicable to the Offer and the Merger. However, Chapter 552 also imposes
certain reporting and filing requirements on persons making a take-over offer
and makes unlawful certain fraudulent and deceptive practices in connection with
a take-over offer. Parent and Purchaser have indicated their intent to comply
with such requirements and prohibitions to the extent required by Chapter 552.
The foregoing description of Chapter 552 is not necessarily complete and is
qualified by reference to the provisions of Chapter 552 and the rules and
regulations promulgated thereunder.
 
     (b) Antitrust
 
     The Offer and the Merger are subject to the HSR Act and the rules
promulgated thereunder, which provide that certain acquisition transactions may
not be consummated unless certain information has been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") and certain waiting
period requirements have been satisfied.
 
     A Notification and Report Form with respect to the Offer is expected to be
filed under the HSR Act on or about May 4, 1999 by each of Parent and the
Company. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Shares pursuant to the Offer may not be consummated until the
expiration of a 15-calendar-day waiting period following the filing by the
Parent, unless the Antitrust Division and the FTC terminate the waiting period
prior thereto. Accordingly, if Parent makes such filing on May 4, 1999, the
waiting period under the HSR Act applicable to the Offer will expire at 11:59
p.m., New York City time, on May 19, 1999, unless, prior to the expiration or
termination of the waiting period, the FTC or the Antitrust Division extends the
waiting period by requesting additional information or documentary material. If
such a request is made, the waiting period will be extended and would expire at
11:59 p.m., New York City time, on the tenth calendar day after the date of
substantial compliance by Parent with such request. Only one extension of the
waiting period pursuant to a request for additional information is authorized by
the HSR Act. Thereafter, such waiting period may be extended only by court order
or with the consent of Parent. Purchaser will not accept for payment Shares
tendered pursuant to the Offer unless and until the waiting period requirements
imposed by the HSR Act with respect to the Offer have been satisfied.
 
     The Merger may not be consummated until 30 calendar days after receipt by
the Antitrust Division and the FTC of the Notification and Report Forms of both
Parent and the Company unless Purchaser acquires 50% or more of the outstanding
Shares pursuant to the Offer or the 30-day period is earlier terminated by the
Antitrust Division and the FTC.
 
     The FTC and the Antitrust Division frequently scrutinize the legality under
the Antitrust Laws (as defined below) of transactions such as the Offer and the
Merger. At any time before or after Purchaser's acquisition of Shares pursuant
to the Merger, the Antitrust Division or the FTC could take such action under
the Antitrust Laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the acquisition of Shares pursuant to the Offer or
otherwise seeking divestiture of Shares acquired by Purchaser or divestiture of
substantial assets of Parent, the Company or their respective affiliates.
Private parties and state attorneys general may also bring legal action under
the Antitrust Laws under certain circumstances.
 
     As used in this Schedule 14D-9, "Antitrust Laws" shall mean and include the
Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal
Trade Commission Act, as amended, and all other Federal and state statutes,
rules, regulations, orders, decrees, administrative and judicial doctrines, and
other laws that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of trade.
 
     Foreign Laws.  Parent, the Company and certain of their subsidiaries
conduct business in several foreign countries where regulatory filings or
approvals may be required or desirable in connection with the consummation of
the Offer. Certain of such filings or approvals, if required or desirable, may
not be made or obtained prior to the currently scheduled Expiration Date.
Purchaser has informed the Company that Purchaser is seeking further information
regarding the applicability of any such laws and currently intends to take such
action as may be required or desirable. Pursuant to the Merger Agreement, if any
such filings or approvals may not be made or obtained prior to the currently
scheduled Expiration Date, the Purchaser has
 
                                       18
   21
 
the right, in its sole discretion, to extend the Offer until such time as all
required or desirable filings and approvals may be made or obtained, provided
that the Offer may not be extended beyond October 31, 1999.
 
     (c) Environmental
 
     The Company will be required to comply with the New Jersey Industrial Site
Recovery Act ("ISRA") and the rules promulgated thereunder with respect to the
Company's South Kearney, Plainfield and Newark, New Jersey facilities. To comply
with ISRA, the Company will be required to apply for and obtain New Jersey
Department of Environmental Protection ("NJDEP") approval of a remediation
agreement with respect to the South Kearney and Plainfield facilities prior to
the Purchaser's acquisition of Shares pursuant to the Offer or the Merger. With
respect to the Newark facility, the Company intends to apply for a waiver of the
ISRA requirements on the basis that the previous owner of the facility is in the
process of an ISRA proceeding in connection with a previous sale of assets to
the Company. NJDEP approval of the waiver application must be obtained prior to
the Purchaser's acquisition of Shares pursuant to the Offer or the Merger. NJDEP
approval of ISRA remediation agreements and waiver applications are typically
issued within 14 business days after receipt of the relevant application and
associated documentation. The Company intends to file the relevant applications
and associated documentation with the NJDEP no later than May 21, 1999.
 
                                       19
   22
 
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
 


        EXHIBIT
         NUMBER                                   DESCRIPTION
        -------                                   -----------
                       
           1              -- Merger Agreement among the Company, Eastman Chemical
                             Company and Lipstick Acquisition Corp. dated as of April
                             27, 1999 (incorporated herein by reference to Exhibit
                             (c)(1) to Schedule 14D-1 of Lipstick Acquisition Corp.,
                             filed on May 4, 1999).
           2              -- Short Form Merger Option Agreement among the Company,
                             Eastman Chemical Company and Lipstick Acquisition Corp.
                             dated as of April 27, 1999 (incorporated herein by
                             reference to Exhibit (c)(2) to Schedule 14D-1 of Lipstick
                             Acquisition Corp., filed on May 4, 1999).
           3              -- Employment Agreement dated April 27, 1999 between John P.
                             O'Mahoney, Eastman Chemical Company and the Company and
                             letter of Eastman Chemical Company, dated April 27, 1999,
                             to John P. O'Mahoney.
           4              -- Opinion of ABN AMRO Incorporated, dated April 27, 1999
                             (attached to Schedule 14D-9 mailed to stockholders as
                             Annex A).
           5              -- Consent of ABN AMRO Incorporated (included in Exhibit 4).
           6              -- Press Release issued jointly by the Company and Eastman
                             Chemical Company on April 28, 1999 (incorporated herein
                             by reference to Exhibit 99.1 to the Company's current
                             report on Form 8-K dated April 28, 1999).
           7              -- Confidentiality Agreement dated October 30, 1998 between
                             the Company and Eastman Chemical Company (incorporated
                             herein by reference to Exhibit (c)(3) to Schedule 14D-1
                             of Lipstick Acquisition Corp., filed on May 4, 1999).
           8              -- Letter dated April 28, 1999 from John P. O'Mahoney to the
                             stockholders of the Company (included with Schedule 14D-9
                             mailed to stockholders).

 
                                       20
   23
 
                                   SIGNATURE
 
     After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
 
                                            LAWTER INTERNATIONAL, INC.
 
                                            By:    /s/ JOHN P. O'MAHONEY
                                              ----------------------------------
                                                     John P. O'Mahoney
                                            Chairman and Chief Executive Officer
 
May 4, 1999
 
                                       21
   24
 
                                 EXHIBIT INDEX
 


        EXHIBIT
         NUMBER                                   DESCRIPTION
        -------                                   -----------
                       
           1              -- Merger Agreement among the Company, Eastman Chemical
                             Company and Lipstick Acquisition Corp. dated as of April
                             27, 1999 (incorporated herein by reference to Exhibit
                             (c)(1) to Schedule 14D-1 of Lipstick Acquisition Corp.,
                             filed on May 4, 1999).
           2              -- Short Form Merger Option Agreement among the Company,
                             Eastman Chemical Company and Lipstick Acquisition Corp.
                             dated as of April 27, 1999 (incorporated herein by
                             reference to Exhibit (c)(2) to Schedule 14D-1 of Lipstick
                             Acquisition Corp., filed on May 4, 1999).
           3              -- Employment Agreement dated April 27, 1999 between John P.
                             O'Mahoney, Eastman Chemical Company and the Company and
                             letter of Eastman Chemical Company, dated April 27, 1999,
                             to John P. O'Mahoney.
           4              -- Opinion of ABN AMRO Incorporated, dated April 27, 1999
                             (attached to Schedule 14D-9 mailed to stockholders as
                             Annex A).
           5              -- Consent of ABN AMRO Incorporated (included in Exhibit 4).
           6              -- Press Release issued jointly by the Company and Eastman
                             Chemical Company on April 28, 1999 (incorporated herein
                             by reference to Exhibit 99.1 to the Company's current
                             report on Form 8-K dated April 28, 1999).
           7              -- Confidentiality Agreement dated October 30, 1998 between
                             the Company and Eastman Chemical Company (incorporated
                             herein by reference to Exhibit (c)(3) to Schedule 14D-1
                             of Lipstick Acquisition Corp., filed on May 4, 1999).
           8              -- Letter dated April 28, 1999 from John P. O'Mahoney to the
                             stockholders of the Company (included with Schedule 14D-9
                             mailed to stockholders).

 
                                       22
   25
 
                                   SCHEDULE I
 
                           LAWTER INTERNATIONAL, INC.
                                 ONE TERRA WAY
                                8601 95TH STREET
                       PLEASANT PRAIRIE, WISCONSIN 53158
 
                       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 4, 1999 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of Lawter International, Inc. (the "Company") to the holders of record
of shares of Common Stock, par value $1.00 per share, of the Company (the
"Shares"). You are receiving this Information Statement in connection with the
possible election of persons designated by the Purchaser (as defined below) to a
majority of the seats on the Board of Directors of the Company.
 
     On April 27, 1999, the Company, Eastman Chemical Company, a Delaware
corporation ("Parent"), and Lipstick Acquisition Corp., a Delaware corporation
("Purchaser") and wholly-owned subsidiary of Parent, entered into an Agreement
and Plan of Merger (the "Merger Agreement") in accordance with the terms and
subject to the conditions of which (i) Parent will cause the Purchaser to
commence a tender offer (the "Offer") for all outstanding Shares, at a price of
$12.25 per Share net to the seller in cash, and (ii) Purchaser will be merged
with and into the Company (the "Merger"). As a result of the Offer and the
Merger, the Company will become a wholly owned subsidiary of Parent.
 
     The Merger Agreement requires the Company to take such action as Purchaser
may reasonably request to cause Purchaser's designees to be elected to the Board
of Directors under the circumstances described therein. See "Board of Directors
and Executive Officers -- Right to Designate Directors; Parent Designees" below.
 
     You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in the Schedule
14D-9.
 
     Pursuant to the Merger Agreement, Purchaser commenced the Offer on May 4,
1999. The Offer is scheduled to expire at 12:00 midnight, New York City Time, on
Tuesday, June 1, 1999, unless the Offer is extended.
 
     The information contained in this Information Statement concerning
Purchaser and Parent has been furnished to the Company by Purchaser and Parent,
and the Company assumes no responsibility for the accuracy or completeness of
such information.
 
                   BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
 
     The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of April 27, 1999, there were
33,068,076 shares outstanding and 2,226,465 shares reserved for issuance upon
exercise of outstanding options. The Board of Directors currently consists of
six members. At each annual meeting of stockholders, directors are elected to
hold office for one year terms, until the next annual meeting of stockholders.
 
RIGHT TO DESIGNATE DIRECTORS; PARENT DESIGNEES
 
     The Merger Agreement provides that, promptly upon the purchase of and
payment for any Shares satisfying the Minimum Condition, Parent shall be
entitled to designate the number of directors, rounded up to the nearest whole
number, on the Company's Board of Directors that equals the product of (i) the
total number of directors on the Company's Board of Directors (giving effect to
the directors designated by Parent)
 
                                       I-1
   26
 
multiplied by (ii) the percentage that the aggregate number of Shares
beneficially owned by Parent, Purchaser and any of their affiliates bears to the
total number of Shares then outstanding. The Company has agreed that, upon
request of Parent, it will use its best efforts promptly either to increase the
size of its Board of Directors or secure the resignations of such number of its
incumbent directors, or both, as is necessary to enable Parent's designees to be
so elected or appointed to the Company's Board of Directors, and that it shall
cause Parent's designees to be so elected or appointed at such time.
 
     Purchaser has indicated that it will designate Allan R. Rothwell, Bruce E.
Moore, Darryl K. Williams and David A. Beanblossom as Parent's designees (the
"Parent Designees").
 
     Allan R. Rothwell is President of the Purchaser. Mr. Rothwell is also
Senior Vice President and Chief Financial Officer of Parent. Mr. Rothwell joined
Parent in 1969 and was appointed Business Director, Industrial Intermediates, in
1993. In 1994, he became Vice President and General Manager, Container Plastics,
was appointed Vice President, Corporate Development and Strategy, in 1997, and
assumed his current position in 1998.
 
     Bruce E. Moore is Vice President and General Manager of Coatings, Inks &
Resins of Parent. He joined Parent in 1962 as a sales trainee in the Chemicals
Division, was named Director of Marketing in the International Division in 1984
and Director of Field Marketing in the Chemicals Division in 1986. In 1990, Mr.
Moore became the Chemicals Division Director of Product Management, was named
Vice President of Asia Pacific and Latin America Sales in 1991 and appointed to
Director of Eastman Chemical Asia Pacific Pte. Ltd. He was appointed to his
present position in 1998.
 
     Darryl K. Williams is Senior Vice President, Technology and Quality, of
Parent. Mr. Williams joined Parent in 1965. He was appointed President of
Eastman Chemical Japan Ltd., in 1992, was named Vice President, Asia Pacific
Regional Support Services, in 1993, was appointed Vice President, Asia Pacific
Sales, in 1994, and was named Senior Vice President, Technology, in 1996. He
assumed his current position in 1998.
 
     David A. Beanblossom is Managing Counsel, Corporate Mergers and
Acquisitions and Joint Ventures for Parent. He joined Parent in 1987 as Senior
Counsel. Prior to joining Parent, he was General Counsel for The Stone Petroleum
Corporation from 1981 to 1987. Prior to this, he was a partner in the law firm
of Frost & Jacobs, Cincinnati, Ohio. He joined Frost & Jacobs after graduating
from law school in 1971.
 
     None of the Parent Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any directors
or executive officers of the Company, or (iii) to the best knowledge of Parent
and Purchaser, beneficially owns any securities (or rights to acquire such
securities) of the Company. The Company has been advised by Parent and Purchaser
that, to the best of Parent's and Purchaser's knowledge, none of the Parent
Designees has been involved in any transactions with the Company or any of its
directors, executive officers or affiliates which are required to be disclosed
herein or in the Schedule 14D-9.
 
     It is expected that the Parent Designees may assume office at any time
following the acceptance for payment of, and payment for, any Shares pursuant to
the Offer, and that, upon assuming office, the Parent Designees will thereafter
constitute at least a majority of the Board of Directors.
 
     Biographical information concerning each of the Company's current directors
and executive officers is presented on the following pages.
 
                                       I-2
   27
 
                                   DIRECTORS
 
     The names of the members of the Board of Directors, and certain information
with respect to each, are as follows:
 


                                                                  YEAR FIRST
                                                              ELECTED A DIRECTOR
                                                              ------------------
                                                           
William P. Clark, 67........................................         1985
  Chief Executive Officer, Clark Company, private
  investments, since 1985. Senior Counsel to the law firm of
  Clark, Cali & Negranti, since 1996. Chairman, US-ROC
  (Taiwan) Business Council, since 1997. He is a director of
  SBC Communications, Inc.(1)(2)(3)
Arthur A. Hartman, 72.......................................         1994
  Senior Consultant, APCO Associates, Inc., international
  business consultant since 1989. He is a director of Ford
  Meter Box, Co., Dreyfus Funds, and Chairman, First NIS
  Investment Fund.(1)(2)(3)
Leonard P. Judy, 50.........................................         1993
  Private investor since August 1994. Chairman of the Board
  and Chief Executive Officer 1988-1994, Rust-Oleum
  Corporation, manufacturer and marketer of premium
  coatings.(1)(2)(3)
Richard D. Nordman, 52......................................         1982
  Consultant, 1996-1997. President and Chief Operating
  Officer of the Company, 1986-1995, Chairman, Crown
  Financial Group, Inc., investment advisors, since
  1996.(1)(3)
John P. O'Mahoney, 42.......................................         1996
  Chairman, since July 1996 and Chief Executive Officer,
  since January 1996, Vice President, 1993-1995, of the
  Company.
Fred G. Steingraber, 60.....................................         1993
  Chairman of the Board and Chief Executive Officer,
  1986-1995 and 1999, Chief Executive Officer, since 1983,
  A.T. Kearney, Inc., international management consultants.
  He is a director of Maytag Corporation, Mercury Finance
  Company, Southeastern Thrift and Bank Fund, and A.T.
  Kearney, Inc.(1)(2)(3)

 
- ---------------
 
(1) Member of Audit Committee.
 
(2) Member of Compensation Committee.
 
(3) Member of Nominating Committee.
 
     The Board of Directors of the Company held ten meetings during 1998. The
Board has three committees, the Audit Committee, which held two meetings during
1998, the Compensation Committee, which held three meetings during 1998, and the
Nominating Committee, which did not meet during 1998. Each director attended at
least 75% of the aggregate of the meetings of the Board and the committees of
which he is a member.
 
     The functions of the Audit Committee are to recommend to the Board of
Directors the independent auditors to be selected for each year and to discuss
with the auditors the scope of the annual audit, the results thereof, and the
adequacy of the Company's accounting, financial and operating controls.
 
     The functions of the Compensation Committee are to review the performance
and compensation of officers and to approve stock options granted to officers
and other key employees.
 
     The function of the Nominating Committee is to recommend nominees for
election to the Board of Directors. The Nominating Committee will consider
recommendations for nominees for directorships
 
                                       I-3
   28
 
submitted by stockholders. Stockholders may submit such recommendations in
writing to the Secretary at the Company's Corporate Headquarters.
 
     No authority under the enclosed proxy will be exercised to vote for any
person as a director who is not included in the nominees named above, unless any
of such nominees should become unable to serve, in which case it is intended
that the proxy will be voted for a nominee or nominees who will be designated by
the Board of Directors. The Board has no reason to believe that any of the above
nominees will cease to be a candidate prior to the meeting.
 
                               EXECUTIVE OFFICERS
 
     Information with respect to the executive officers of the Company is as
follows:
 


                                                                                              YEAR
NAME                                                    POSITION                       AGE   ELECTED
- ----                                                    --------                       ---   -------
                                                                                    
John P. O'Mahoney.................  Chairman of the Board and Chief Executive Officer  42     1996
Mark W. Joslin....................  Chief Financial Officer, Treasurer and Secretary   39     1996
Jacob F. Baarends.................  Vice President                                     51     1998
Nathan L. Goodnow.................  Vice President                                     36     1998

 
     Mr. O'Mahoney served as Vice President of the Company, 1993-1995. Mr.
Joslin served as the Corporate Controller of ANGUS Chemical Company, 1991-1996.
Mr. Baarends served as the European and Pacrim Technical Director of the
Company, 1991-1998. Mr. Goodnow served as Operations Manager of BASF
Corporation, 1993-1998.
 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
     Each director and officer of the Company is required to report to the
Securities and Exchange Commission his or her transactions in the Common Stock
of the Company. During 1998, all reports were filed on a timely basis.
 
          COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     The Compensation Committee is composed of William P. Clark, Arthur A.
Hartman, Leonard P. Judy and Fred G. Steingraber, the four independent,
non-employee directors.
 
     Mr. Arthur A. Hartman, a Director of the Company, also serves as the
Chairman and President of the Terra Foundation For The Arts, which is the sole
remainder beneficiary of the estate of Daniel J. Terra (the "Estate"). On March
19, 1998, the Company agreed to repurchase all 11,503,130 shares of Company
Common Stock held by the Estate, representing approximately 25.4% of the
Company's outstanding Common Stock at that time, at a price of $11.375 per
share, for a total purchase price of $130,848,104. Consummation of the
transaction was completed on April 1, 1998.
 
                                       I-4
   29
 
                           COMPENSATION OF DIRECTORS
 
     Directors of the Company who are not officers were paid an annual fee of
$15,000 plus $1000 for each Board or Committee meeting attended.
 
     Pursuant to the Company's 1995 Non-Qualified Stock Option Plan for
Non-Employee Directors (the "Director's Plan"), each eligible director, upon his
or her initial election by the stockholders to the Board of Directors, is
automatically granted an option to purchase a total of 15,000 shares of Common
Stock, and upon his or her next election, is automatically granted one
additional option to purchase 15,000 shares of Common Stock. Each director of
the Company who is eligible to be granted an option under the Director's Plan
shall thereafter receive an automatic grant for 5,000 shares the third and each
subsequent time he or she is elected a director by the stockholders. On April
23, 1998, each of the non-employee directors received a grant of options
covering 5,000 shares of Common Stock under the Director's Plan at an exercise
price of $10.375 per share.
 
                        SECURITY OWNERSHIP OF MANAGEMENT
 
     The following table sets forth certain information as of February 12, 1999
as to the beneficial ownership of the Company's outstanding Common Stock by the
directors and named executive officers of the Company and by all directors and
executive officers of the Company as a group:
 


                                                               SHARES OF
                                                             COMMON STOCK          PERCENT
NAME                                                     BENEFICIALLY OWNED(1)   OF CLASS(1)
- ----                                                     ---------------------   -----------
                                                                           
Jack Baarends..........................................           61,571              (2)
William P. Clark.......................................           55,000              (2)
Arthur A. Hartman......................................        1,383,487(3)          4.1%
John P. Jilek..........................................          271,000              (2)
Mark W. Joslin.........................................           95,350              (2)
Leonard P. Judy........................................           64,000              (2)
Richard D. Nordman.....................................          222,857              (2)
John P. O'Mahoney......................................          423,767             1.2%
Fred G. Steingraber....................................           55,000              (2)
All directors and executive officers as a group........        2,660,603             7.8%

 
- ---------------
 
(1) The numbers and percentages of shares owned as shown in the table assume
    that currently unexercised stock options covering shares which were
    exercisable within 60 days of February 12, 1999 had been exercised as
    follows: Mr. Baarends 33,000, Mr. Clark 55,000; Mr. Hartman 55,000; Mr.
    Jilek 255,000, Mr. Joslin 59,350; Mr. Judy 55,000; Mr. Nordman 200,000; Mr.
    O'Mahoney 325,000; Mr. Steingraber 55,000; and all current directors and
    executive officers as a group 1,092,350. Such persons and the members of
    such group disclaim any beneficial ownership of the shares subject to such
    options.
 
(2) Less than 1%.
 
(3) Includes 1,328,487 shares owned by the Terra Foundation For The Arts of
    which Mr. Hartman is the President and Chairman.
 
                                       I-5
   30
 
               EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
                       AND CHANGE-IN-CONTROL ARRANGEMENTS
 
     The Company has employment agreements with Mr. O'Mahoney, Mr. Baarends and
Mr. Joslin, that are activated only on a change in control. Until then, these
employees remain subject to termination at will. The employment agreements with
Mr. O'Mahoney, Mr. Baarends and Mr. Joslin will become effective upon a "change
in control" (defined as (i) an event that would be required to be reported as
such pursuant to Schedule 14A of Regulation 14A promulgated under the Exchange
Act; (ii) certain changes in membership of the Board of Directors; or (iii) for
Mr. O'Mahoney, upon failure to be re-elected as a director following the
occurrence of either the foregoing clause (i) or (ii)). Providing that each
individual is still serving as an officer at the time of such a change in
control, the agreements provide that the Company will continue to employ Mr.
O'Mahoney for a period of three years, and Mr. Baarends and Mr. Joslin for a
period of two years, after such change in control at a guaranteed minimum salary
equal to his salary at the time thereof. The agreements also provide that Mr.
O'Mahoney, Mr. Baarends and Mr. Joslin may participate without discrimination in
all of the Company's benefit plans available to its officers, prohibits Mr.
O'Mahoney, Mr. Baarends and Mr. Joslin from disclosing confidential information
during or after employment and prohibits Mr. O'Mahoney, Mr. Baarends and Mr.
Joslin from working for a competitor of the Company during employment and for a
period of eighteen months following termination of employment. In the event that
the location of the Company's office is changed by more than 150 miles, or their
positions and duties are changed following the agreement becoming effective upon
a change in control, Mr. O'Mahoney, Mr. Baarends and Mr. Joslin may terminate
their agreements, whereupon their salary and benefits for the remainder of the
term will become payable in a lump sum. Mr. O'Mahoney may also terminate the
agreement upon a change in control by submitting written notice of such
termination not less than six months nor more than 12 months from the change in
control. In addition, if an excise tax is imposed pursuant to the applicable
provisions of the Internal Revenue Code upon any payments to Mr. O'Mahoney, Mr.
Baarends or Mr. Joslin by the Company, the agreements provide that they will be
paid an additional amount calculated so as to provide them with the same
compensation they would have received had no excise tax been imposed.
 
     On September 17, 1998, the Company entered into a settlement agreement and
release with Mr. Jilek, the Company's former president and chief financial
officer. Under the terms of this agreement, Mr. Jilek agreed to make himself
available a maximum of two and one half days per month through March 31, 2000 to
provide information and assistance regarding operating and administrative
matters. Mr. Jilek also agrees to release the Company and all related parties
from all present and future claims. In exchange, Mr. Jilek is to receive
payments, at his salary level at the time his employment terminated, through
March 31, 2000, retain his rights through September 30, 2000 under Non-Qualified
Stock Option Agreements granted prior to September 8, 1998 and receive a payment
of an amount not to exceed $15,000 for outplacement services.
 
                                       I-6
   31
 
                             EXECUTIVE COMPENSATION
 
     The table below sets forth the annual, long term and other compensation for
services in all capacities to the Company for the three years ended December 31,
1998 of those persons who were (1) the Chief Executive Officer and (2) the other
three most highly compensated executive officers of the Company in 1998 (the
Named Officers):
 
                           SUMMARY COMPENSATION TABLE
 


                                                                      LONG TERM
                                                                    COMPENSATION
                                           ANNUAL COMPENSATION         AWARDS
                                         -----------------------   ---------------
                                                                     SECURITIES
                                                    OTHER ANNUAL     UNDERLYING         ALL OTHER
NAME AND PRINCIPAL POSITION       YEAR    SALARY    COMPENSATION   OPTIONS/SARS(#)   COMPENSATION(1)
- ---------------------------       ----   --------   ------------   ---------------   ---------------
                                                                      
John P. O'Mahoney...............  1998   $332,495     $    --          120,000          $ 25,746
  Chairman and                    1997    320,000          --           35,000            22,400
  Chief Executive Officer         1996    246,000      16,400(2)            --            17,220
Jack Baarends(3)................  1998    122,077          --           39,200             9,497
  Vice President                  1997    115,489          --            6,000             9,265
                                  1996    125,336          --            4,000            10,606
Mark W. Joslin..................  1998    157,083          --           56,250            11,921
  Chief Financial Officer and     1997    152,500          --           15,600            11,026
  Treasurer                       1996     70,000          --           25,000             7,100
John P. Jilek...................  1998    184,627(4)        --          30,000           108,627
  President and                   1997    225,000          --           25,000            15,750
  Chief Operating Officer         1996    192,000          --               --            13,440

 
- ---------------
 
(1) For Mr. O'Mahoney, Mr. Joslin and Mr. Jilek, the amounts in this column for
    1998 consist of Company contributions to the Company's 401K Profit Sharing
    Plan of $18,771, $9,208 and $2,000, respectively, and the Company's
    Nonqualified Deferred Compensation Plan of $6,975, $2,713 and $3,238,
    respectively. For Mr. Baarends, the amount in this column for 1998
    represents the Company's contribution for pension insurance in Belgium. For
    Mr. Jilek, an additional amount of $103,390 in this column for 1998
    represents payments made in accordance with the Settlement Agreement and
    Release between Mr. Jilek and the Company.
 
(2) This amount represents educational expenses paid by the Company for Mr.
    O'Mahoney's children who attended private schools as a result of being
    transferred from Belgium to the United States in 1996.
 
(3) In 1996, 1997 and a portion of 1998, Mr. Baarends' salary was paid in
    Belgian Francs. The U.S. dollars shown here are affected by exchange rates.
 
(4) Represents salary paid to Mr. Jilek through the date of his separation from
    the Company.
 
                                       I-7
   32
 
                                 STOCK OPTIONS
 
     Options are granted to officers and other key employees under the Company's
1992 Non-Qualified Stock Option Plan which is administered by the Compensation
Committee. Shown below is information with respect to the grant and exercise of
options during 1998 and the unexercised options held as of December 31, 1998 by
the Named Officers.
 
                           OPTION/SAR GRANTS IN 1998
 


                                                 INDIVIDUAL
                                                   GRANTS                          POTENTIAL REALIZABLE VALUE
                                         --------------------------                  AT ASSUMED ANNUAL RATES
                           NUMBER OF      % OF TOTAL                                     OF STOCK PRICE
                          SECURITIES     OPTIONS/SARS                                APPRECIATION FOR OPTION
                          UNDERLYING      GRANTED TO     EXERCISE                            TERM(3)
                         OPTIONS/SARS     EMPLOYEES       OR BASE     EXPIRATION   ---------------------------
                         GRANTED(3)(1)    IN 1998(2)    PRICE($/SH)      DATE          5%             10%
                         -------------   ------------   -----------   ----------   -----------   -------------
                                                                               
John P. O'Mahoney......     40,000(4)         7.4%       $11.8125       2-24-08     $297,153      $  753,043
                            80,000(6)        14.7%         8.5625      12-14-08      430,793       1,091,714
Jack Baarends..........     14,200(4)         2.6%        11.8125       2-24-08      105,489         267,330
                            10,000(5)         1.8%        10.0625       7-30-08       63,279         160,362
                            15,000(6)         2.8%         8.5625      12-14-08       80,774         204,696
Mark W. Joslin.........     18,750(4)         3.5%        11.8125       2-24-08      139,290         352,989
                            37,500(6)         6.9%         8.5625      12-14-08      201,934         511,741
John P. Jilek..........     30,000(4)         5.5%        11.8125       2-24-08      222,865         564,782

 
- ---------------
 
(1) The option grants were non-qualified stock options. These options become
    exercisable one year after the grant date.
 
(2) The percentage shown in the table is based on total options granted to
    officers and other key employees in 1998 of 543,415 shares of the Company's
    Common Stock.
 
(3) The potential realizable values shown in the table are based on assumed
    annual rates of stock price appreciation compounded annually. The actual
    value of the options will depend on the market value of the Company's Common
    Stock on the dates the options are exercised. No realization of value from
    the options is possible without an increase in the price of the Company's
    Common Stock, which would benefit all stockholders commensurately.
 
(4) The date of grant for these options was February 24, 1998.
 
(5) The date of grant for these options was July 30, 1998.
 
(6) The date of grant for these options was December 14, 1998.
 
                       AGGREGATED OPTION/SAR EXERCISES IN
                      1998 AND YEAR END OPTION/SAR VALUES
 


                                                        NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                                                       UNDERLYING UNEXERCISED             IN-THE-MONEY
                                                           OPTIONS/SARS AT                OPTIONS/SARS
                           SHARES                       DECEMBER 31, 1998(#)         AT DECEMBER 31, 1998(1)
                         ACQUIRED ON      VALUE      ---------------------------   ---------------------------
NAME                     EXERCISE(#)   REALIZED(1)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
- ----                     -----------   -----------   -----------   -------------   -----------   -------------
                                                                               
John P. O'Mahoney......      --            --          285,000        120,000        $93,750       $245,000
Jack Baarends..........      --            --           33,000         39,200          1,500         61,568
Mark W. Joslin.........      --            --           40,600         56,250          9,375        114,844
John P. Jilek..........      --            --          225,000         30,000         62,500             --

 
- ---------------
 
(1) The amounts reported here represent the mathematical differences before
    taxes between the aggregate exercise price and the market value on the
    actual dates of exercise or December 31, 1998 (if unexercised) rather than
    any actual net gain. Such amounts do not take into consideration the cost of
    funds used for purchase or additional taxes.
 
                                       I-8
   33
 
                           INDEBTEDNESS OF MANAGEMENT
 
     Under the terms of the stock option plan, officers may borrow funds from
the Company in order to exercise their stock options. Interest is charged on the
loans at the Company's effective rate to borrow funds, adjusted quarterly.
During 1998, the Company's weighted average interest rate on borrowed funds
domestically was 5.7%. The stock purchased is held as collateral by the Company.
The loans were originally repayable within eighteen months. The Board of
Directors extended these loans for an additional eighteen months. During 1998,
Mr. Jilek had a maximum amount borrowed of $322,851 and Mr. O'Mahoney had a
maximum amount borrowed of $158,079. Mr. Jilek paid off his loan in December
1998. As of February 28, 1999, the amount of the loan outstanding for Mr.
O'Mahoney was $159,422.
 
                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
 
     The following persons are known by the Company to be the beneficial owners
of more than 5% of the Company's outstanding Common Stock, as of February 15,
1999:
 


NAME AND ADDRESS                                            AMOUNT AND NATURE
OF BENEFICIAL OWNERS                                     OF BENEFICIAL OWNERSHIP   % OF CLASS
- --------------------                                     -----------------------   ----------
                                                                             
FMR Corp...............................................     4,088,900 shares          12.4%
  82 Devonshire Street
  Boston, Massachusetts 02109
Societe Generale Asset Management Corp.................     2,380,000 shares           7.2%
  1221 Avenue of the Americas
  New York, New York 10020
Geocapital, Corp.......................................     2,117,448 shares           6.4%
  767 Fifth Ave.
  45th Floor
  New York, New York 10153
Ryback Management Group................................     2,000,000 shares           6.0%
  7711 Carondelet Ave.
  Box 16900
  St. Louis, MO 63105

 
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     Mr. Arthur A. Hartman, a Director of the Company, also serves as the
Chairman and President of the Terra Foundation For The Arts, which is the sole
remainder beneficiary of the estate of Daniel J. Terra (the "Estate"). On March
19, 1998, the Company agreed to repurchase all 11,503,130 shares of Company
Common Stock held by the Estate, representing approximately 25.4% of the
Company's outstanding Common Stock at that time, at a price of $11.375 per
share, for a total purchase price of $130,848,104. Consummation of the
transaction was completed on April 1, 1998.
 
     On November 17, 1998, the Named Officers and other key employees purchased
349,972 shares of Lawter Common Stock through the Company's Key Employee
Investment Plan at the then market price of $8.75 per share. The number of
shares purchased by Mr. O'Mahoney, Mr. Baarends and Mr. Joslin were 76,571,
28,571 and 36,000, respectively. Under the terms and conditions of the plan, the
employees took out personal loans that are guaranteed by the Company to purchase
the stock, and must hold the stock for a period of three years unless the
employee separates from the Company or there is a change in control of the
Company.
 
                                       I-9
   34
 
ABN AMRO LOGO                                                            ANNEX A
                                                      ABN AMRO Incorporated
                                                      208 South LaSalle Street
                                                      Chicago, Illinois
                                                      60604-1003
                                                      (312) 855-7600
 
April 27, 1999
 
Board of Directors
Lawter International, Inc.
One Terra Way
8601 95th Street
Pleasant Prairie, Wisconsin 53158
 
Members of the Board:
 
     We understand that Lawter International, Inc. ("Lawter" or the "Company"),
Eastman Chemical Company ("Eastman") and Lipstick Acquisition Corp., a wholly
owned subsidiary of Eastman ("Acquisition Sub"), propose to enter into an
Agreement and Plan of Merger, substantially in the form of the agreement dated
as of April 27, 1999, (the "Merger Agreement") which provides, among other
things, for: (i) the commencement by Acquisition Sub of a tender offer (the
"Tender Offer") for all outstanding shares of common stock, par value $1.00 per
share, of the Company (the "Company Common Stock") for $12.25 per share net to
the seller in cash (the "Merger Consideration"); and (ii) the subsequent merger
(the "Merger") of Acquisition Sub with and into the Company. Pursuant to the
Merger, the Company will become a wholly owned subsidiary of Eastman and each
issued and outstanding share of Company Common Stock will be converted into the
right to receive $12.25 per share in cash.
 
     You have asked us whether, in our opinion, the Merger Consideration
pursuant to the Merger Agreement is fair, from a financial point of view, to the
holders of the Company Common Stock (other than Eastman and its affiliates).
 
     In connection with this opinion, we have, among other things:
 
          i. reviewed certain publicly available financial statements and other
     business information relating to the Company;
 
          ii. reviewed certain internal financial statements and other financial
     and operating data concerning the Company prepared by its management;
 
          iii. analyzed certain financial projections prepared by management of
     the Company;
 
          iv. discussed the past and current operations and financial condition
     and the prospects of the Company including information relating to certain
     strategic, financial and operational benefits anticipated from the
     transaction, with senior executives of the Company;
 
          v. reviewed recent discussions held by the Company with other
     potential acquirors and strategic third parties;
 
          vi. reviewed the reported prices and trading activity for the Company
     Common Stock;
 
          vii. compared the financial and operating performance of the Company
     and the prices and trading activities of the Company Common Stock with that
     of certain other publicly-traded companies that we considered to be
     relevant;
 
          viii. compared the proposed financial terms of the transaction with
     the financial terms, to the extent publicly available, of certain other
     transactions that we considered to be relevant;
   35
 
          ix. reviewed the draft Merger Agreement and certain related documents;
     and
 
          x. performed such other analyses and examinations and considered such
     other matters as we deemed appropriate.
 
     In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information reviewed by us and we have
not obtained, nor have we made or assumed responsibility for undertaking, any
independent verification of such information. We have assumed that financial
data relating to the prospects of the Company have been reasonably prepared on
bases reflecting the best currently available estimates and judgment of the
Company as to the future financial performance of the Company. We have also
relied upon, without independent verification, the assessment by the management
of the Company of the strategic and other benefits expected to result from the
transaction. In addition, we have assumed, with your consent, that the
transaction will be consummated in accordance with the terms set forth in the
Merger Agreement. We have not made an independent evaluation or appraisal of the
assets and liabilities of the Company or any of its subsidiaries. Our opinion is
necessarily based on the economic, monetary, market and other conditions as in
effect on, and the information made available to us, as of the date hereof.
 
     In connection with our engagement, we were not authorized to solicit, and
did not solicit, indications of interest from third parties with respect to a
possible transaction with the Company. We have acted as financial advisor to the
Board of Directors of the Company in connection with rendering this opinion and
will receive a fee for this opinion which is not contingent upon the
consummation of the transaction. In addition, in the ordinary course of our
business, we may actively trade the Company Common Stock and other securities of
the Company, as well as the Eastman Common Stock and other securities of
Eastman, for our own account and for the accounts of customers and may,
therefore, at any time hold a long or short position in such securities.
 
     It is understood that this letter is for the information and assistance of
the Board of Directors of the Company in its consideration of the transaction
contemplated by the Merger Agreement and may not be used for any other purpose
or reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose without our prior written consent, except that the Company may
use this letter in its entirety as part of any filing made by the Company in
respect of the transaction with the Securities and Exchange Commission. This
letter does not address the Company's underlying business decision to enter into
the transaction nor does it constitute a recommendation to any holder of the
company Common Stock in connection with the Tender Offer or how such holder
should vote with respect to the proposed Merger.
 
     Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Merger Consideration pursuant to the Merger Agreement is
fair, from a financial point of view, to the holders of Company Common Stock
(other than Eastman and its affiliates).
 
                                            Very truly yours,
                                            SIG
                                            ABN AMRO Incorporated
 
                                        2

EX-3

   1

                                                                      EXHIBIT 3

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT, dated as of April 27, 1999, between Eastman Chemical
Company, a Delaware corporation ("Company"), Lawter International, Inc., a
Delaware corporation ("Lawter"), and John P. O'Mahoney (hereinafter referred to
as the "Employee"),

                                  WITNESSETH:

         WHEREAS, the Employee currently serves as the Chairman and Chief
Executive Officer of Lawter, and in such connection Lawter and the Employee
have executed an Employment Agreement between such parties dated October 24,
1996 (the "Prior Employment Agreement"); and

         WHEREAS, the Company has commenced certain actions which may lead to
the acquisition of a majority of issued and outstanding common stock of Lawter
by the Company (with the date the majority of such issued and outstanding stock
is acquired by the Company being referred to herein as the "Acquisition Date",
provided that the Acquisition Date shall not be later than October 31, 1999);
and

         WHEREAS, because of Employee's extensive experience and his
familiarity with the affairs of Lawter, and because of the significant
challenges in consummating the acquisition of Lawter and in integrating the
business of Lawter with the Company's business, the Company wishes to assure
that it will continue to have the Employee available to perform duties for the
Company; and

         WHEREAS, the Employee is willing to commit to (i) the performance of
his services for the Company under the terms and conditions set forth herein,
and (ii) refraining from competition with the Company or disclosing
confidential information of the Company for 18 months following his termination
of employment with the Company;

         NOW, THEREFORE, in consideration of the mutual promises herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto as follows:

         1. Employment.

         The parties hereto agree that, as of the Acquisition Date (as defined
in the Recitals to this Agreement), and provided that the Employee is serving
as an employee of Lawter at that time, (a) the Company will employ the Employee
and the Employee hereby accepts such employment on the terms and conditions set
forth herein; and (b) the Employee as of such date releases and waives in their
entirety any and all rights he or any person or entity claiming through him may
have under the Prior Employment Agreement. It is understood that the Prior
Employment Agreement will remain in effect pursuant to its terms until the
Acquisition Date.


   2

         2. Term of Employment.

         (a) Subject to the provisions for termination set forth herein, the
term of the Employee's employment hereunder shall commence on the Acquisition
Date and shall extend until the second anniversary of the Acquisition Date.
This period shall be known as the "Employment Period."

         (b) At the conclusion of the Employment Period and at on each
anniversary thereof, this Agreement shall automatically be extended for one
additional year unless the Company gives to the Employee (or vice versa) notice
of nonrenewal of the Agreement at least sixty (60) days prior to the date such
contract extension would begin.

         3. Position and Duties

         (a) The Employee's initial position shall be the highest ranking
Employee of Lawter, operating as a wholly owned direct or indirect subsidiary
of the Company.

         (b) The Employee shall devote his best efforts to the business and
affairs of the Company, to carrying out the responsibilities assigned to him
from time to time under this Agreement, and shall diligently follow and
implement all management policies and decisions of the Company.

         4. Compensation

         The Employee shall receive a beginning salary at an annual rate of
$350,000 (the "Base Salary"). The Base Salary may be increased from time to
time at the discretion of the Company. In addition, the Employee shall be
eligible to participate in any long-term or short-term cash incentive programs
which from time to time are made available to Lawter's officers and key
employees.

         5. Working Facilities and Fringe Benefits; Expenses.

         The Employee shall be furnished with office space, secretarial
assistance and such other facilities and services as are appropriate to his
position and adequate for the performance of his duties. The Company also shall
provide or cause Lawter to provide to the Employee during the Employment Period
fringe benefits and perquisites at least equal to those provided to the
Employee immediately prior to the date thereof, and neither the Company nor
Lawter shall discriminate against the Employee with respect to any vacation or
holiday plan, medical, hospital, life and disability insurance programs,
savings programs and other similar welfare benefit programs from time to time
made available to Lawter's officers and key employees. The Company or Lawter
shall pay or reimburse Employee for all reasonable expenses actually incurred
or paid by him in the performance of services rendered by him pursuant to this
Agreement. Such expenses shall be supported by the documentary evidence
required to substantiate them as income tax deductions.

                                      -2-
   3

         6. Special Signing Bonus and Restricted Stock Grants.

         (a) Signing Bonus. On the Acquisition Date, the Company shall pay the
Employee a signing bonus of $100,000 in cash.

         (b) Initial Grant of Restricted Stock. On the Acquisition Date, the
Company shall grant to the Employee a special grant of Company common stock
under the Company's restricted stock program, the number of such restricted
shares to be determined by dividing $300,000 by the closing price of the
Company's common stock on the New York Stock Exchange on the last regular
trading day immediately prior to the Acquisition Date. All restrictions on such
stock shall lapse on the day following the first anniversary of the Acquisition
Date if the Employee is still then employed by the Company or as otherwise
provided under Section 8 of this Agreement.

         (c) Second Grant of Restricted Stock. If the Employee is still
employed by the Company on day following the first anniversary of the
Acquisition Date, then as of such date the Company shall grant to the Employee
a second special grant of Company common stock under the Company's restricted
stock program, the number of such restricted shares to be determined by
dividing $300,000 by the closing price of the Company's common stock on the New
York Stock Exchange on the last regular trading day immediately prior to the
date of such second grant. All restrictions on such second grant shall lapse on
the day following the second anniversary of the Acquisition Date if the
Employee is still then employed by the Company or as otherwise provided under
Section 8 of this Agreement.

         (d) The payments and grants described in this Section 6 shall be in
lieu of any other long-term or short-term equity incentive programs during the
Employment Period, provided, however, that this shall not restrict the Employee
from participating in any long-term or short-term cash incentive programs which
from time to time are made available to Lawter's officers and key employees.
Any grant of options of the Company's common stock, any additional grant of
Company restricted stock, or any declaration of eligibility to participate in
any other long-term or short-term cash or equity incentive program maintained
by the Company during the Employment Period for employees other than Lawter
employees shall be made in the sole and uncontrolled discretion of the
Compensation Committee of the Company's Board of Directors (the "Board").

         7. Termination of Employment

         (a) Death. The Employee's employment shall terminate upon his death.

         (b) Disability. The Company may terminate the employment of the
Employee if, in the reasonable judgment of the Board, he becomes unable to
satisfactorily perform his duties and responsibilities hereunder during the
term of his employment because of mental or physical disability.


                                      -3-
   4

         (c) Cause. The Company may terminate the Employee's employment for
"Cause". For purposes of this Agreement, "Cause" is defined as (i) a material
breach by Employee of the terms of this Agreement, (ii) the conviction of
Employee of any criminal act that the Board shall, in its sole and absolute
discretion, deem to be or have the potential of being a material risk in any
manner to the Company or its reputation, or (iii) conduct by Employee in his
office with the Company that is grossly inappropriate and demonstrably likely
to lead to material injury to the Company, as determined by the Board acting
reasonably and in good faith; provided, however, that in the case of (iii)
above, such conduct shall not constitute Cause unless the Board shall have
delivered to Employee notice setting forth with specificity (x) the conduct
deemed to qualify as Cause, (y) reasonable action that would remedy such
objection, and (z) a reasonable time (not less than thirty (30) days) within
which Employee may take such remedial action, and Employee shall not have taken
such specified remedial action within such specified reasonable time.

         (d) Termination by the Company without Cause. Notwithstanding the
foregoing provisions, the Company may terminate the Employee's employment
without Cause at any time, subject to the provisions of subsection 8(d) hereof.

         (e) Date of Termination. "Date of Termination" shall mean (i) if the
Employee's employment is terminated by death pursuant to subsection 7(a), the
date of the Employee's death; (ii) if the Employee's employment is terminated
by the Company as a result of the Employee's disability pursuant to subsection
7(b), the date of such termination, (iii) if the Employee's employment is
terminated by the Company for Cause pursuant to subsection 7(c), the date that
the Notice of Termination is communicated to the Employee, after the expiration
of the right to take remedial action in the case of paragraph 7(c)(iii), and
(iv) if the employment is terminated by the Company without Cause pursuant to
subsection 7(d), the date the Notice of Termination is communicated to the
Employee.

         8. Compensation and Other Rights of Employee Upon Termination

         (a) Death. If the Employee's employment shall be terminated due to
death pursuant to subsection 7(a), then (i) Company shall make, until the
second anniversary of the Acquisition Date, payments of Base Salary at a rate
equal to the Base Salary annual rate on the date of death, (ii) all of the
Company's common stock owned by the Employee subject to conditions,
restrictions, or limitations which lapse over time or upon a subsequent event
shall immediately be free of all such conditions, restrictions and limitations,
but neither the Employee's estate nor any other person or entity shall be
entitled to any other grant of restricted stock, and (iii) all other rights of
the Employee and his estate, guardian, legal representatives and heirs under
the incentive, savings and welfare plans described in Sections 4 and 5 shall be
determined by the terms and conditions of such plans as in effect on the date
of Employee's death and Lawter's applicable program and practices as in effect
on the date of Employee's death, as applicable.


                                      -4-
   5

         (b) Disability. If the Employee's employment shall be terminated due
to disability pursuant to subsection 7(b), then (i) Company shall make, until
the second anniversary of the Acquisition Date, payments to Employee of his
Base Salary at a rate equal to the Base Salary annual rate on the date of
disability, (ii) all of the Company's common stock owned by the Employee
subject to conditions, restrictions, or limitations which lapse over time or
upon a subsequent event shall immediately be free of all such conditions,
restrictions and limitations, but Employee shall not be entitled to any further
grants of restricted stock, and (iii) all other rights of the Employee and his
estate, guardian, legal representatives and heirs under the incentive, savings
and welfare plans described in Sections 4 and 5 shall be determined by the
terms and conditions of such plans as in effect on the date of Employee's
disability and Lawter's applicable program and practices as in effect on the
date of Employee's disability.

         (c) Termination by the Company for Cause or Termination by Employee
for any reason other than Death or Disability. If the Employee's employment
shall be terminated by (i) the Company for Cause pursuant to subsection 7(c),
or (ii) by the Employee for any reason other than death or disability, the
Company shall pay the Employee all Base Salary and payments owed to him up to
the Date of Termination. Any rights that Employee may have under the incentive,
savings and welfare plans described in Sections 4 and 5 shall be determined by
the terms and conditions of such plans as in effect on the Date of Termination
and Lawter's applicable programs and practices as in effect on the Date of
Termination, and all other rights under this Agreement shall be terminated.

         (d) Termination by the Company without Cause. If the Employee's
employment shall be terminated by the Company without Cause pursuant to
subsection 7(d), then the Company shall pay to the Employee all Base Salary and
payments owed to him up to the Date of Termination. In addition,

         (i)   within thirty (30) days following the Date of Termination, the
               Company shall pay to Employee a lump sum cash payment equal to
               the aggregate amount of Base Salary that would have been payable
               to the Employee between the Date of Termination and the second
               anniversary of the Acquisition Date, computed at the Employee's
               Base Salary rate in effect on the Date of Termination;

         (ii)  if the Date of Termination occurs on or before the first
               anniversary of the Acquisition Date, then (A) as of the Date of
               Termination all of the Company's common stock owned by the
               Employee subject to conditions, restrictions, or limitations
               which lapse over time or upon a subsequent event shall
               immediately be free of all such conditions, restrictions and
               limitations; and (B) in lieu of the grant of restricted stock
               described in Section 6(c), within thirty (30) days following the
               Date of Termination the Company shall pay the Employee a lump
               sum cash payment of $300,000;


                                      -5-
   6

         (iii) if the Date of Termination occurs after the day following the
               first anniversary of the Acquisition Date but before the second
               anniversary of the Acquisition Date, then all of the Company's
               common stock owned by the Employee subject to conditions,
               restrictions, or limitations which lapse over time or upon a
               subsequent event shall immediately be free of all such
               conditions, restrictions and limitations;

         (iv)  except as expressly provided in this Agreement, any rights that
               Employee may have under the incentive, savings and welfare plans
               described in Sections 4 and 5 shall be determined by the terms
               and conditions of such plans as in effect on the Date of
               Termination and Lawter's applicable programs and practices as in
               effect on the Date of Termination, and all other rights under
               this Agreement shall be terminated; and

         (v)   through the second anniversary of the Acquisition Date, the
               Company shall allow Employee and his family members to
               participate in all Lawter welfare plans described in Section 5
               on the same terms and conditions and at the same cost as to
               which they were entitled to participate immediately prior to the
               Date of Termination. If the Employee or his family members shall
               be ineligible to participate in any of such welfare plans as a
               result of Employee's ceasing to be an employee of the Company or
               Lawter, then the Company shall arrange to provide the Employee
               and his family members with substantially equivalent benefits as
               if Employee remained employed by Lawter throughout the
               Employment Period.

         (e) Employee understands that during the term of this Agreement the
Company may determine, in its sole discretion, that it is in the best interest
of the Company to make changes in the operations, management structure,
corporate form or reporting relationship of Lawter, and acknowledges that any
change in Employee's position or responsibilities set forth in Section 3(a) or
change in geographic location of his employment resulting from any such change
will not constitute a breach of this Agreement by the Company.

         9. Covenant Restricting. Competition: Nondisclosure of Confidential
            Information.

         (a) The Employee acknowledges that his services are special and
unique, and of an unusual and extraordinary character which gives them peculiar
value, the loss of which cannot adequately be compensated in damages.
Therefore, the Employee agrees that he will not, except with the written
consent of the Company, for a continuous period of eighteen (18) months
commencing immediately following termination of the Employee's employment
hereunder, directly or indirectly engage or become interested in, as a partner,
director, officer, principal, agent or employee, any business which competes
with products produced, marketed or in development by the Company or Lawter at
the time of such termination.


                                      -6-
   7

         (b) The Employee acknowledges that in his employment he is or will be
making use of, acquiring or adding to, confidential information of the Company
and Lawter, and is or will be familiar with the Company's and Lawter's
business, activities, employees, customers and suppliers. Therefore, in order
to protect the Company's and Lawter's confidential information and to protect
other employees who depend upon the Company for regular employment, Employee
agrees that, except in connection with his employment by the Company, or with
the, consent of the Company, he will not during or after the term of his
employment hereunder in any way utilize any of said confidential information
and he will not copy, reproduce, or take with him the original or any copies of
said confidential information and will not disclose any of said confidential
information to anyone.

         In the event of a breach of the covenants contained in this Section 9,
The Company shall be entitled to an injunction restraining such breach in
addition to any other remedies provided by law.

         If any provision of this Section 9 is adjudged by a court to be
invalid or unenforceable, the same will in no way affect any other provision of
this Section 9 or any other part of this Agreement, the application of such
provision in any other circumstances or the validity or enforceability of this
Agreement. If any such provision, or any part thereof, is held to be
unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court making such determination will have
the power to reduce the duration and/or area of such provision, and/or to
delete specific words or phrases, and in its reduced form such provision will
then be enforceable and will be enforced.

         10. Reimbursement of Certain Taxes.

         (a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Employee (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional
payments required under this Section 10) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Employee with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

         (b) Subject to the provisions of Section 10(c), all determinations
required to be made under this Section 10, including whether and when a
Gross-Up Payment is required


                                      -7-
   8

and the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by a certified public accounting
firm as may be designated by the Company (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Employee
within 15 business days of the receipt of notice from the Employee that there
has been a Payment, or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 10, shall be paid
by the Company to the Employee within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Employee. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 10(c) and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.

         (c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Employee is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Employee in writing prior to
the expiration of such period that it desires to contest such claim, the
Employee shall:

               (i) give the Company any information reasonably requested by the
Company relating to such claim,

               (ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company,

               (iii) cooperate with the Company in good faith in order
effectively to contest such claim, and

               (iv) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax 

                                      -8-
   9

or income tax (including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and expenses. Without
limitation of the foregoing provisions of this Section 10(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Employee to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Employee agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Employee to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Employee, on an
interest-free basis and shall indemnify and hold the Employee harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.

         (d) If, after the receipt by the Employee of an amount advanced by the
Company pursuant to Section 10(c), the Employee becomes entitled to receive any
refund with respect to such claim, the Employee shall (subject to the Company's
complying with the requirements of Section 10(c)) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 10(c), a determination is
made that the Employee shall not be entitled to any refund with respect to such
claim and the Company does not notify the Employee in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

         11. Assignment.

         This Agreement is binding upon and shall be for the benefit of the
successors and assigns of the Company, including any corporation or any other
form of business organization with which the Company may merge or consolidate,
or to which it may transfer substantially all of its assets. Employee shall not
assign his interest in this Agreement or any pan thereof.


                                      -9-
   10

         12. Consent of the Company.

         Any act, request, approval, consent or opinion of the Company under
this Agreement must be in writing and may be authorized, given or expressed
only by resolution of the Board or by the Chief Executive Officer of the
Company.

         13. Notice

         For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

             If to the Company:

             Chief Executive Officer
             Eastman Chemical Company
             100 North Eastman Road
             Kingsport, Tennessee 37660


             If to the Employee:

             John P. O'Mahoney
             545 Somerset Lane
             Northfield, Illinois 60093

or to such other address as either party may have furnished to the other in
writing.

         14. Governing Law.

         This Agreement shall be governed by and construed in accordance with
the laws of the State of Tennessee applicable to contracts made and to be
performed therein.

         15. Enforcement Expenses and Arbitration.

         The Company agrees to reimburse the Employee for all costs and
expenses incurred by him (including the reasonable fees of his counsel) in
successfully enforcing any of his rights under this Agreement or any claim
arising out of the breach thereof. In addition, the parties acknowledge the
relative economic power of the Company versus the Employee, and the ability of
the Company to resist the conclusion of litigation should the Employee
institute legal proceedings to enforce this Agreement or to recover damages for
the breach thereof. In recognition of this, any controversy or claim arising
out of or relating to this Agreement shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, at the sole election of the Employee; provided, however, that an
action by the Company to enforce its rights under Section 9 hereof shall be
excluded from the arbitration provisions of this Section.


                                     -10-
   11

         Any such election by Employee shall be made by written notice given to
the Company any time after such controversy or claim arises, and in the event
Employee is served with process relating to any court proceeding concerning any
such claim or controversy commenced by the Company, such election, to be
effective, shall be made by written notice within 15 days of the time Employee
is served with such process. Commencement of court proceedings by Employee
shall be deemed an election not to arbitrate. In the event the Company
commences court proceedings (other than an action by the Company solely to
enforce its rights under Section 9 hereof) and is given notice of the election
to arbitrate by the Employee within the time period set forth above, the
Company agrees to promptly dismiss such court proceedings and submit to
arbitration. In the event of such arbitration, judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.

         16. Miscellaneous

         Anything in this Agreement to the contrary notwithstanding, all
payments required to be made by the Company hereunder to the Employee, his
estate or legal representatives shall be subject to the withholding of such
amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.

                                    EASTMAN CHEMICAL COMPANY

                                    By: /s/Harold L. Henderson
                                        ----------------------------------
                                    Name: Harold L. Henderson 
                                          --------------------------------
                                    Its: Senior VP and General Counsel
                                         ---------------------------------


                                    LAWTER INTERNATIONAL, INC.

                                    By: /s/Mark Joslin
                                        ----------------------------------
                                    Name: Mark Joslin 
                                          --------------------------------
                                    Its: CFO and Treasurer
                                         ---------------------------------

                                    EMPLOYEE

                                             /s/John P. O'Mahoney
                                    --------------------------------------
                                              John P. O'Mahoney


                                     -11-
   12

[to be retyped on Eastman letterhead]

                                                                  April 27, 1999

John P. O'Mahoney
Lawter International, Inc.

         Re: Grant of Stock Options

Dear John:

         This will confirm our agreement that, effective upon the date Eastman
Chemical Company becomes the owner of a majority of the issued and outstanding
stock of Lawter International, Inc. (provided that such date is not later than
October 31, 1999), Eastman Chemical Company shall grant to you an option to buy
5,000 shares of common stock of Eastman Chemical Company. In accordance with
its standard practices, such options shall (i) be non-qualified options (rather
than incentive stock options), (ii) be exercisable at a price equal to the
closing price of Eastman Chemical Company common stock on the New York Stock
Exchange on the last regular trading day immediately prior to the date such
options are granted; (iii) provide that one-half of such options shall vest and
become exercisable on the first anniversary of the date of grant, and the other
held shall vest and become exercisable on the second anniversary of the date of
grant; and (iv) contain such other terms as are customary for grants of options
to senior executives of Eastman Chemical Company. This grant of options is in
addition to and not in lieu of any compensation and benefits provided for under
the Employment Agreement of even date herewith between you, Lawter
International, Inc. and Eastman Chemical Company.

                                       Very truly yours,



                                       Harold L. Henderson
                                       Senior Vice President
                                              and General Counsel