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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
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/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
UNIVAR CORPORATION
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
LOGO
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO APPROVE THE MERGER OF
UC ACQUISITION CORP.
WITH AND INTO
UNIVAR CORPORATION
To the Record Holders of Common Shares
of Univar Corporation:
NOTICE IS HEREBY GIVEN pursuant to Sections 23B.07.050, 23B.11.010 et.
seq., and 23B.13.200 of the Washington Business Corporation Act (the "WBCA")
that on September 30, 1996 a special meeting (the "Meeting") of shareholders of
Univar Corporation, a Washington corporation ("Company"), of record on September
2, 1996 (the "Record Date"), will be held at the 40th Floor Conference Room,
Columbia Seafirst Center, 701 Fifth Avenue, Seattle, Washington 98104 at 10:00
a.m., Seattle, Washington time, to consider (i) the adoption and approval of (A)
the merger (the "Merger") of UC Acquisition Corp., a Washington corporation
("Buyer"), into Company, as contemplated by that certain Agreement and Plan of
Reorganization by and among Company, Royal Pakhoed N.V. (a translation of
Koninklijke Pakhoed N.V.) ("Parent") and Buyer, dated May 31, 1996 (the
"Reorganization Agreement"), and (B) the Articles of Merger and Plan of Merger
between UC Acquisition Corp. and Company (the "Merger Agreement"); and (ii) such
other matters as may properly be brought before the Meeting. It is anticipated
that the Merger will be effected on September 30, 1996 or as soon thereafter as
practicable.
A cash tender offer commenced on June 7, 1996 by Buyer for all of Company's
outstanding common shares, no par value per share (the "Shares") at a price of
$19.45 per Share, net to the seller, in cash (the "Offer"). The Offer expired at
8:00 p.m., New York City time, on July 15, 1996, at which time Buyer accepted
for payment 14,977,480 Shares validly tendered by shareholders not affiliated
with Parent pursuant to the Offer and not withdrawn. This amount, including the
6,106,000 Shares owned by Parent and its affiliates prior to the Offer,
represents approximately 97.15% of the total number of outstanding Shares. The
Offer was conducted pursuant to the Reorganization Agreement, in which Parent
agreed to acquire Company in a two-step transaction, the first step being the
Offer, and the second step being the Merger of Buyer with and into Company.
The Board of Directors has fixed the close of business on the Record Date
for the determination of shareholders entitled to notice of and to vote at the
Meeting or any adjournment thereof. Only shareholders of record at the close of
business on the Record Date are entitled to notice of the Meeting and only
holders of record of Shares at the close of business on the Record Date are
entitled to vote at the Meeting. A complete list of such shareholders will be
available for examination at the offices of Company in Kirkland, Washington
during normal business hours by any Company shareholder, for any purpose germane
to the Meeting, for a period of 10 days prior to the Meeting.
SHAREHOLDERS ARE URGED, WHETHER OR NOT THEY PLAN TO ATTEND THE MEETING, TO
SIGN, DATE, AND MAIL THE ENCLOSED PROXY OR VOTING INSTRUCTION CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
If a shareholder who has returned a proxy attends the meeting in person,
such shareholder may revoke the proxy and vote in person on all matters
submitted at the meeting. PARENT AND BUYER COLLECTIVELY OWN 97.15% OF THE SHARES
OUTSTANDING AND HAVE AGREED IN THE REORGANIZATION AGREEMENT TO VOTE THEIR SHARES
FOR APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
<PAGE> 3
UNDER THE WBCA AND COMPANY'S ARTICLES OF INCORPORATION, PARENT AND BUYER
OWN SUFFICIENT SHARES TO APPROVE THE MERGER AGREEMENT AND THE MERGER AND NO
ACTION WILL BE REQUIRED BY SHAREHOLDERS OF COMPANY (OTHER THAN BUYER) FOR THE
MERGER TO BE EFFECTED.
Pursuant to the terms of the Reorganization and Merger Agreements, each
Share outstanding immediately prior to the effectiveness of the Merger and held
by persons other than Buyer, Parent, or any other direct or indirect subsidiary
of Parent, or Company will be converted into the right to receive $19.45 in cash
(without interest) (the "Merger Consideration"), payable upon surrender of the
certificate formerly evidencing such Share, subject to the right of the holder
of such Share to seek an appraisal of the fair value thereof as described in the
attached Proxy Statement (a "Dissenting Shareholder"). YOUR BOARD OF DIRECTORS
HAS UNANIMOUSLY APPROVED THE REORGANIZATION AND MERGER AGREEMENTS AND HAS
DETERMINED THAT THE OFFER AND THE MERGER, CONSIDERED AS A WHOLE, ARE FAIR TO AND
IN THE BEST INTERESTS OF THE SHAREHOLDERS OF COMPANY. In arriving at its
decision, the Board of Directors considered a number of factors, including the
opinion of Schroder Wertheim & Co. Incorporated ("Schroder Wertheim"), Company's
financial advisor, that the consideration to be received in the Offer and the
Merger by the holders of Shares other than Parent and its affiliates is fair,
from a financial point of view, to such holders of Shares.
A Letter of Transmittal to enable you to send in your Shares and receive
payment of the Merger Consideration is being mailed to you under separate cover.
To expedite receipt of this payment, you should fill out the Letter of
Transmittal promptly and return it, together with the certificates representing
your Shares, to the Paying Agent at the address indicated on the Letter of
Transmittal. The obligations of Company and Buyer to consummate the Merger are
subject to certain conditions. In the unlikely event that the Merger Agreement
is terminated without the Merger being consummated, certificates delivered to
the Paying Agent will be promptly returned.
Chapter 13 of the WBCA provides a procedure by which Dissenting
Shareholders who were record holders of Shares immediately prior to the
effectiveness of the Merger may seek an appraisal of the fair value of their
shares, exclusive of any element of value arising from the expectation or
accomplishment of the Merger, together with a fair rate of interest, if any, to
be paid thereon. ANY DISSENTING SHAREHOLDER WHO WISHES TO EXERCISE THIS RIGHT TO
AN APPRAISAL MUST (I) MAKE WRITTEN DEMAND TO COMPANY AT THE ADDRESS SET FORTH IN
THE PROXY STATEMENT, WHICH MUST BE RECEIVED BEFORE THE TAKING OF THE VOTE ON THE
MERGER, AND (II) NOT VOTE SUCH SHARES IN FAVOR OF THE MERGER. For purposes of
Section 23B.13.200 of the WBCA, this Notice of Special Meeting of Shareholders
is being mailed on September 9, 1996 to record shareholders of Company on the
Record Date.
DEMANDS FOR DISSENTERS' RIGHTS WILL NOT BE ACCEPTED UNLESS MADE BY OR ON
BEHALF OF PERSONS WHO ARE RECORD HOLDERS OF SHARES IMMEDIATELY PRIOR TO THE
EFFECTIVENESS OF THE MERGER.
Reference should be made to the section entitled "Dissenters' Rights" in
the attached Proxy Statement and to Exhibit E thereto (which sets forth the text
of Chapter 13 of the WBCA) for a description of the procedures which must be
followed to perfect dissenters' rights.
By order of the Board of Directors
William A. Butler
Corporate Secretary
September 9, 1996
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LOGO
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished to the shareholders of Univar
Corporation, a Washington corporation ("Company"), as of September 2, 1996 (the
"Record Date"), in connection with the proposed merger (the "Merger") of UC
Acquisition Corp., a Washington corporation ("Buyer"), into Company, as
contemplated by that certain Agreement and Plan of Reorganization by and among
Company, Royal Pakhoed N.V. (a translation of Koninklijke Pakhoed N.V.) a
publicly held limited liability company formed and existing under the laws of
The Netherlands ("Parent"), and Buyer, dated May 31, 1996 (the "Reorganization
Agreement"). Pursuant to the Reorganization Agreement, Buyer commenced a cash
tender offer on June 7, 1996 for all outstanding shares of common stock, no par
value per share (the "Shares"), of Company, at a price of $19.45 per Share, net
to the seller in cash (the "Offer"). The Offer expired at 8:00 p.m., New York
City time, on July 15, 1996, at which time Buyer accepted for payment 14,977,480
Shares validly tendered by shareholders not affiliated with Parent pursuant to
the Offer and not withdrawn. This amount, together with the 6,106,000 Shares
owned by Parent and its affiliates prior to the Offer, represents approximately
97.15% of the total number of outstanding Shares. The Merger will be consummated
on the terms and subject to the conditions set forth in the Reorganization
Agreement which includes Articles of Merger and a Plan of Merger (collectively,
the "Merger Agreement"). The Reorganization Agreement is attached as Exhibit A
to this Proxy Statement. Pursuant to and as a result of the Merger Agreement, at
the effective time of the Merger (the "Effective Time"): (i) Company will
continue as the surviving corporation (the "Surviving Corporation") and will
become an indirect wholly-owned subsidiary of Parent, and (ii) each of the
issued and outstanding Shares (other than "Dissenting Shares" held by Dissenting
Shareholders, as defined below, and Shares held by Buyer, Parent or any of their
affiliates) will be converted into the right to receive $19.45 net per Share in
cash, without interest (the "Merger Consideration"). A special meeting (the
"Meeting") of the shareholders of Company, of record on the Record Date, will be
held at the 40th Floor Conference Room, Columbia Seafirst Center, 701 Fifth
Avenue, Seattle, Washington 98104 at 10:00 a.m., Seattle, Washington time, on
September 30, 1996 to consider approval and adoption of the Merger and the
Merger Agreement.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC" OR THE "COMMISSION") NOR HAS THE COMMISSION
PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION OR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL
The date of this Proxy Statement is September 9, 1996. This Proxy Statement
and the accompanying form of proxy are being furnished by Company and were first
mailed on or about September 9, 1996 to shareholders of Company as of the close
of business on the Record Date.
THE BOARD OF DIRECTORS OF COMPANY (THE "BOARD" OR THE "BOARD OF
DIRECTORS"), BY THE UNANIMOUS VOTE OF ALL OF THE DIRECTORS OF COMPANY, APPROVED
THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF COMPANY.
The Washington Business Corporation Act (the "WBCA") requires that the adoption
of any plan of merger or consolidation of Company must be approved by Company's
Board of Directors and by the vote of the holders of two-thirds ( 2/3) of the
outstanding Shares entitled to vote thereon, unless otherwise provided by
Company's Articles of Incorporation. Article IX of Company's Articles of
Incorporation provides that only a majority of the outstanding Shares entitled
to vote thereon is required for the approval of the proposed Merger. Parent and
its affiliates own in the aggregate 21,083,480 Shares, representing
approximately 97.15% of the Shares outstanding as of the Record Date. UNDER THE
REORGANIZATION AGREEMENT, PARENT AND BUYER HAVE AGREED TO VOTE, OR CAUSE TO BE
VOTED, IN FAVOR OF THE MERGER ALL SHARES DIRECTLY OR INDIRECTLY BENEFICIALLY
OWNED BY THEM. Subsequent to and as a result of the expiration of the Offer,
Buyer acquired a majority of the outstanding
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Shares, and has sufficient voting power to approve the Merger, without the vote
of any other shareholder of Company.
TO RECEIVE PAYMENT AFTER THE MERGER OF $19.45 IN CASH (WITHOUT INTEREST)
PER SHARE, HOLDERS OF SHARES MUST DELIVER CERTIFICATES EVIDENCING SUCH SHARES
ALONG WITH A PROPERLY COMPLETED LETTER OF TRANSMITTAL, TO THE PAYING AGENT AT
THE ADDRESS SPECIFIED IN THE LETTER OF TRANSMITTAL (THE "PAYING AGENT").
The obligations of Company and Buyer to consummate the Merger are subject
to certain conditions. In the unlikely event that the Merger Agreement is
terminated without the Merger being consummated, certificates delivered to the
Paying Agent will be promptly returned.
Any holder of Shares who does not wish to accept the Merger Consideration
for his Shares has the right under the WBCA to dissent to the Merger and seek
payment for the fair cash value of his Shares. Holders of Shares seeking such
payments are referred to herein as "Dissenting Shareholders." To perfect this
right, a Dissenting Shareholder must (i) make written demand for such payment to
Company before the taking of the vote on the Merger and (ii) not vote in favor
of the Merger. A failure to vote against the Merger will not constitute a waiver
of a shareholder's right to dissent under the WBCA and a vote against the Merger
is not sufficient to perfect such rights under the WBCA. Dissenting Shareholders
are urged to carefully review this Proxy Statement and the Exhibits hereto in
their entirety in considering whether to seek payment pursuant to the WBCA. See
"DISSENTERS' RIGHTS" and Exhibit E to this Proxy Statement.
As of the Record Date, there were issued and outstanding 21,701,665 Shares.
Holders of record of Shares at the close of business on the Record Date are
entitled to one vote per share held on all matters submitted to a vote of
shareholders. Subsequent to the consummation of the Offer and the Merger, the
registration of the Shares under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") will be terminated.
The information contained in this Proxy Statement concerning Parent and
Buyer has been furnished to Company by Parent and Buyer, and Company assumes no
responsibility for the accuracy or completeness of such information.
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AVAILABLE INFORMATION
Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). The
Tender Offer Statement on Schedule 14D-1, as amended (the "Schedule 14D-1")
filed by Parent and its affiliates, Buyer, Pakhoed USA Inc. and Pakhoed
Investeringen B.V. in connection with the Offer and the
Solicitation/Recommendation Statement on Schedule 14D-9, as amended (the
"Schedule 14D-9") filed by Company in connection with the Offer, as well as such
reports, proxy statements and other information, may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Regional Offices of the Commission located at 7 World Trade Center, Suite 1300,
New York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained from the Commission
at prescribed rates by addressing written requests for such copies to the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, reports, proxy statements and
other information concerning Company should also be available for inspection at
the offices of the New York Stock Exchange 20 Broad Street, New York, New York.
The Shares are currently traded on the New York Stock Exchange and
registered under the Exchange Act. Following the Merger, Company will become an
indirect wholly owned subsidiary of Parent, and there will be no public trading
of the Shares. Accordingly, registration of the Shares will be terminated upon
application of Company to the Commission and trading of the Shares on the New
York Stock Exchange will cease when the Merger is consummated.
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TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION................................................................... 5
INTRODUCTION............................................................................ 7
THE SPECIAL MEETING..................................................................... 9
General............................................................................... 9
Vote Required......................................................................... 9
PROPOSAL: THE MERGER.................................................................... 11
Special Factors....................................................................... 11
Purpose of Merger.................................................................. 11
Plans for Company.................................................................. 11
Recommendation of the Board and Reasons for the Merger............................. 11
Opinion of Financial Advisor....................................................... 12
Financial Projections.............................................................. 16
Certain Effects of the Merger...................................................... 17
Certain Tax Consequences of the Merger............................................. 18
Interest of Certain Persons in the Merger.......................................... 18
Interest in Securities of Company.................................................. 19
Certain Information Concerning Company................................................ 20
Certain Information Concerning Parent and Buyer....................................... 20
Background of the Merger.............................................................. 21
Structure of the Merger............................................................... 25
Accounting Treatment of the Merger.................................................... 25
Financing the Acquisition............................................................. 25
The Reorganization Agreement.......................................................... 26
Washington Law........................................................................ 29
Regulatory and Other Approvals........................................................ 29
DISSENTERS' RIGHTS...................................................................... 30
CERTAIN LITIGATION...................................................................... 31
MARKET PRICES OF AND DIVIDENDS ON STOCK................................................. 32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS......................................... 32
SELECTED FINANCIAL INFORMATION CONCERNING COMPANY....................................... 33
INCORPORATION BY REFERENCE.............................................................. 33
INDEPENDENT PUBLIC ACCOUNTANTS.......................................................... 34
SHAREHOLDERS' PROPOSALS................................................................. 34
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EXHIBITS:
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EXHIBIT A Agreement and Plan of Reorganization
EXHIBIT B Fairness Opinion of Schroder Wertheim & Co. Incorporated
EXHIBIT C Company's Form 10-K, as amended, for the year ended February 29, 1996
EXHIBIT D Company's Form 10-Q for the quarter ended May 31, 1996
EXHIBIT E Dissenters' Rights
EXHIBIT F Directors and Executive Officers
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6
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INTRODUCTION
This Proxy Statement is being furnished to Company's shareholders as of the
Record Date in connection with the solicitation of proxies from holders of
Shares by the Board of Directors of Company for use at a special meeting of
shareholders of Company to consider the proposed Merger of Buyer with and into
Company pursuant to the Merger Agreement. Pursuant to the Reorganization
Agreement, Buyer commenced the Offer on June 7, 1996. The Offer expired at 8:00
p.m., New York City time, on July 15, 1996, as of which time Buyer accepted for
payment 17,750,147 Shares, including 2,772,667 Shares held by Pakhoed
Investeringen B.V., all of which were validly tendered pursuant to the Offer and
not withdrawn. This amount, as well as the Shares already owned by Parent and
its affiliates represents approximately 97.15% of the total number of
outstanding Shares. The Merger will be consummated on the terms and subject to
the conditions set forth in the Reorganization and Merger Agreements, as a
result of which, at the Effective Time (a) Company will continue as the
Surviving Corporation and will become an indirect wholly owned subsidiary of
Parent, and (b) each Share issued and outstanding (other than Dissenting Shares,
and Shares held by Buyer, Parent, or any of their affiliates) will be converted
into the right to receive $19.45 net per Share in cash, without interest.
The Meeting will be held on September 30, 1996 at the 40th Floor Conference
Room, Columbia Seafirst Center, 701 Fifth Avenue, Seattle, Washington 98104 at
10:00 a.m., Seattle, Washington time.
The purpose of the Meeting is to consider and vote upon (i) a proposal to
approve and adopt the Merger Agreement, and (ii) such other matters as may
properly be brought before the Meeting.
Only holders of record of Shares at the close of business on the Record
Date are entitled to vote at the Meeting. On such date, there were 21,701,665
Shares outstanding, each of which will be entitled to one vote on each matter to
be acted upon at the Meeting. All shareholders of Company are entitled to notice
of the Meeting.
The presence, in person or by proxy, at the Meeting of the holders of a
majority of the Shares outstanding and entitled to vote at the Meeting is
necessary to constitute a quorum at the meeting. The affirmative vote of the
holders of a majority of the Shares outstanding and entitled to vote thereon at
the Meeting is required to approve and adopt the Merger Agreement.
AS BUYER HAS ACQUIRED A MAJORITY OF THE OUTSTANDING SHARES, BUYER AND
PARENT HAVE SUFFICIENT VOTING POWER TO APPROVE THE MERGER WITHOUT THE VOTE OF
ANY OTHER SHAREHOLDER OF COMPANY. PURSUANT TO THE TERMS OF THE REORGANIZATION
AGREEMENT, BUYER AND PARENT HAVE AGREED TO VOTE SUCH SHARES FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
TO RECEIVE PAYMENT AFTER THE MERGER OF $19.45 IN CASH (WITHOUT INTEREST)
PER SHARE, HOLDERS OF SHARES MUST DELIVER CERTIFICATES EVIDENCING SUCH SHARES
ALONG WITH A PROPERLY COMPLETED LETTER OF TRANSMITTAL TO THE PAYING AGENT AT THE
ADDRESS SPECIFIED IN THE LETTER OF TRANSMITTAL. THE LETTER OF TRANSMITTAL IS
BEING MAILED TO ALL SHAREHOLDERS UNDER SEPARATE COVER. The obligations of
Company and Buyer to consummate the Merger are subject to certain conditions. In
the unlikely event that the Merger Agreement is terminated without the Merger
being consummated, certificates delivered to the Paying Agent will be promptly
returned.
Company expects that the Merger will be consummated as promptly as
practicable after the Meeting, assuming that the conditions to the Merger set
forth in the Reorganization Agreement have been satisfied. See "PROPOSAL: THE
MERGER: The Reorganization Agreement -- The Merger".
ANY DISSENTING SHAREHOLDER HAS THE RIGHT UNDER THE WBCA TO SEEK AN
APPRAISAL OF AND BE PAID THE FAIR VALUE OF HIS SHARES, TOGETHER WITH A FAIR RATE
OF INTEREST, IF ANY, TO BE PAID THEREON. IN ORDER TO PERFECT SUCH RIGHT OF
PAYMENT, A DISSENTING SHAREHOLDER MUST (i) MAKE A WRITTEN DEMAND FOR SUCH
PAYMENT TO COMPANY BEFORE THE TAKING OF THE VOTE ON THE MERGER AND (ii) NOT VOTE
HIS SHARES IN FAVOR OF THE MERGER. SUCH DEMAND MUST BE SENT TO COMPANY AT 6100
CARILLON POINT, KIRKLAND, WA 98033, ATTENTION: CORPORATE SECRETARY. A FAILURE TO
VOTE AGAINST THE MERGER WILL NOT CONSTITUTE A WAIVER OF A SHAREHOLDER'S RIGHT TO
DISSENT UNDER THE WBCA AND A VOTE AGAINST THE MERGER IS NOT SUFFICIENT TO
PERFECT SUCH RIGHTS UNDER THE WBCA. SEE "DISSENTERS' RIGHTS" AND EXHIBIT E TO
THIS PROXY STATEMENT.
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The accompanying Notice of Special Meeting of Shareholders constitutes the
notice to Dissenting Shareholders required by Section 23B.13.200 of the WBCA.
Dissenting Shareholders are urged to carefully review this Proxy Statement
and the Exhibits hereto in their entirety in considering whether to seek any
payment pursuant to the WBCA. IF A DISSENTING SHAREHOLDER DOES NOT PERFECT HIS
RIGHT TO PAYMENT WITH RESPECT TO HIS SHARES BEFORE THE TAKING OF THE VOTE ON THE
MERGER, SUCH SHARES WILL BE CONVERTED INTO THE RIGHT TO RECEIVE THE MERGER
CONSIDERATION AT THE EFFECTIVE TIME.
As of the Record Date, there were issued and outstanding 21,701,665 Shares.
Holders of record of Shares at the close of business on the Record Date are
entitled to one vote per share held on all matters submitted to a vote of
shareholders.
The Shares are currently traded on the New York Stock Exchange and
registered under the Exchange Act. Following the Merger, Company will become an
indirect wholly owned subsidiary of Parent, and there will be no public trading
of the Shares. Accordingly, registration of the Shares will be terminated upon
application of Company to the Commission and trading of the Shares on the New
York Stock Exchange will cease when the Merger is consummated.
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THE SPECIAL MEETING
GENERAL
The Special Meeting will be held at 10:00 a.m., local time, on September
30, 1996, at the 40th Floor Conference Room, Columbia Seafirst Center, 701 Fifth
Avenue, Seattle, Washington 98104, for the purpose of approving and adopting the
Merger Agreement, as required under Washington law.
Only holders of record of Shares outstanding at the close of business on
the Record Date (September 2, 1996) are entitled to vote at the Meeting.
On the Record Date, there were approximately 731 holders of record of
Shares, with 21,701,665 Shares issued and outstanding. Each Share entitles the
holder thereof to one vote on each matter submitted for shareholder approval.
Parent and Buyer are the only persons owning more than 5% of the outstanding
Shares. On the Record Date, other than Mr. Nicolaas J. Westdijk, a director of
Company, who is deemed pursuant to the regulations of the Commission to be the
beneficial owner of Shares owned by Parent and its affiliates, the directors and
executive officers of Company held no Shares. Mr. Westdijk disclaims beneficial
ownership of such Shares.
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the outstanding Shares will constitute a quorum for the transaction
of business, and approval and adoption of the Merger Agreement requires the
affirmative vote of a majority of the issued and outstanding Shares. In
determining whether the Merger Agreement has received the requisite number of
affirmative votes, abstentions and broker non-votes will have the same effect as
a vote against the Merger and the Merger Agreement.
At the date of this Proxy Statement, the Board of Directors does not know
of any business to be presented at the Meeting other than as set forth in the
notice accompanying this Proxy Statement. If any other matters should properly
come before the Meeting in accordance with the Bylaws of Company, it is intended
that the shares represented by proxies will be voted with respect to such
matters in accordance with the judgment of the persons voting such proxies.
All properly executed proxies that are not revoked will be voted at the
Meeting in accordance with the instructions contained therein. If a holder of
Shares executes and returns a proxy and does not specify otherwise, the shares
represented by such proxy will be voted "for" approval and adoption of the
Merger Agreement in accordance with the recommendation of the Board of Directors
of Company. A holder of Shares who has executed and returned a proxy may revoke
it at any time before it is voted at the Meeting by (i) executing and returning
a proxy bearing a later date, (ii) filing written notice of such revocation with
the Corporate Secretary of Company, stating that the proxy is revoked, or (iii)
attending the Meeting and voting in person.
In addition to solicitation by mail, the directors, officers, employees and
agents of Company may solicit proxies from their shareholders by personal
interview, telephone, telegram or otherwise. Company will bear the costs of the
solicitation of proxies from its shareholders. Arrangements will also be made
with brokerage firms and other custodians, nominees and fiduciaries who hold of
record securities of Company for the forwarding of solicitation materials to the
beneficial owners thereof. Company will reimburse such brokers, custodians,
nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by
them in connection therewith.
VOTE REQUIRED
The WBCA requires that the adoption of any plan of merger or consolidation
of Company must be approved by Company's Board of Directors and by the vote of
the holders of two-thirds ( 2/3) of the outstanding Shares entitled to vote
thereon, unless otherwise provided by Company's Articles of Incorporation.
Article IX of Company's Articles of Incorporation provides that only a majority
of the outstanding Shares entitled to vote thereon is required for the approval
of the Merger. Company's Board of Directors has unanimously approved the Merger
and the only further action of Company required to approve the Merger will be
the approval by a majority vote of shareholders.
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Article VII of Company's Articles of Incorporation requires that certain
Major Transactions, as defined therein, must be approved by 80% of the
outstanding Shares entitled to vote, which shall include the affirmative vote of
at least 50% of the outstanding Shares entitled to vote, other than shares held
by the Twenty Percent Shareholder, as defined therein, involved in such Major
Transaction. Buyer and Parent fall under the Articles of Incorporation's
definition of "Twenty Percent Shareholder" and the transactions contemplated by
the Reorganization Agreement constitute a "Major Transaction."
Company's Articles of Incorporation, however, also state that the
provisions of Article VII shall not apply to a Major Transaction if: (a) such
Major Transaction was approved by Company's Board of Directors after the Twenty
Percent Shareholder became a Twenty Percent Shareholder, and (b) the Twenty
Percent Shareholder sought and obtained the unanimous approval by Company's
Board of Directors of its acquisition of 20% or more of the outstanding Shares
entitled to vote prior to such acquisition being consummated. Parent and Pakhoed
Investeringen B.V. obtained their collective more than 20% interest in Company's
outstanding Shares prior to approval of Company's Board of Directors of the
transactions contemplated by the Reorganization Agreement and such transactions
were approved by the unanimous vote of the Board of Directors. Therefore, the
requirements for an approval by 80% of the outstanding Shares of a Major
Transaction, as described above, do not apply to the Merger.
The unanimous approval of the Reorganization Agreement by Company's Board
of Directors has rendered inapplicable the Washington Fair Price Statute,
Section 23B.17.020 of the WBCA, which would otherwise have required the vote of
the holders of two-thirds ( 2/3) of the outstanding Shares entitled to vote and
would have prevented the Shares held by Pakhoed USA Inc., Pakhoed Investeringen
B.V. and Buyer (as interested shareholders) from being counted towards the
required vote.
BUYER AND ITS AFFILIATES WILL VOTE ALL OUTSTANDING SHARES BENEFICIALLY
OWNED BY THEM IN FAVOR OF ADOPTION OF THE MERGER. COLLECTIVELY, BUYER AND ITS
AFFILIATES OWN APPROXIMATELY 97.15% OF THE OUTSTANDING SHARES. BUYER HAS
SUFFICIENT SHARES TO APPROVE THE MERGER WITHOUT THE AFFIRMATIVE VOTE OF ANY
OTHER SHAREHOLDERS OF COMPANY.
Although Buyer, Parent, and Company have agreed to consummate the Merger,
there can be no assurance that certain conditions to the Merger, some of which
are beyond the control of Buyer, Parent, and Company will be satisfied.
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<PAGE> 12
PROPOSAL: THE MERGER
SPECIAL FACTORS
Purpose of Merger
The purpose of the Merger is to enable Parent to acquire the entire equity
interest in Company. Through the Offer, as the first step in the acquisition of
Company, Parent obtained indirect ownership of 97.15% of the Shares. The purpose
of the Merger is to acquire all Shares not tendered and purchased pursuant to
the Offer or otherwise held by non-affiliates of Parent. Pursuant to the Merger,
each then-outstanding Share (other than Shares owned by Buyer and its
affiliates, and Dissenting Shares) will be converted into the right to receive
$19.45.
To ensure equal treatment of Company shareholders, the acquisition
transaction has been structured to be consummated in two steps: (1) the Offer, a
cash tender offer, followed by (2) the Merger, in which the remaining equity
interest in Company not acquired by Buyer pursuant to the Offer will be
subsequently converted into the right to receive $19.45 per Share, the same
amount offered to Company shareholders pursuant to the Offer. As a result of the
Merger, Company will become an indirect wholly-owned subsidiary of Parent.
Plans for Company
It is expected that following the Merger, the business and operations of
Company will be continued substantially as they are currently being conducted.
Parent's current intention is to keep Company's headquarters in Kirkland,
Washington.
Furthermore, except as described herein, Parent and Buyer have no present
plans or proposals that would result in: (a) an extraordinary corporate
transaction, such as a merger, consolidation, reorganization or liquidation
involving Company or any corporation, partnership, limited liability company, or
other entity in which Company owns, directly or indirectly, any equity interest
and whose financial statements are consolidated for accounting purposes under
generally accepted accounting principles ("GAAP") ("Company Subsidiaries"), (b)
a sale or transfer of a material amount of assets involving Company or any of
Company Subsidiaries, (c) any material changes in Company's present
capitalization or dividend policy of Company, or (d) any other material change
in Company's corporate structure or business. However, Buyer and its affiliates
are continuing their review of Company and its assets, corporate structure,
capitalization, operations, properties, policies, management and personnel.
After the completion of such review, Parent may propose or develop alternative
plans or proposals, including mergers, transfers of a material amount of assets
or other transactions or changes of the nature described above. Parent and Buyer
also reserve the right to effect any change in Company's operations, properties,
policies, management and personnel as may be deemed necessary as a result of
such continuing review thereof as well as changes to Company's Articles of
Incorporation and Bylaws.
Recommendation of the Board and Reasons for the Merger
In approving the Offer and the Reorganization Agreement and recommending
that all shareholders tender their Shares pursuant to the Offer, the Board
considered a number of factors including:
(a) the financial and other terms and conditions of the Offer and
Reorganization Agreement;
(b) the presentation of Schroder Wertheim at the May 31, 1996 Board
meeting and the written opinion of Schroder Wertheim to the effect that, as
of the date of such opinion, and based upon the considerations set forth
therein, the consideration to be received by the holders of Shares, other
than Parent, Buyer and their affiliates, in the Offer and the Merger was
fair to such holders from a financial point of view. The full text of the
written opinion of Schroder Wertheim, which sets forth assumptions made,
matters considered and limitations on the review undertaken in connection
with the opinion, is attached as Exhibit B and is incorporated herein by
reference and should be read in its entirety.
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<PAGE> 13
(c) the possible alternatives to the Offer and the Merger, including,
without limitation, continuing to operate Company as an independent entity,
and the risks and opportunities associated therewith;
(d) the familiarity of the Board with the business, results of
operations, and prospects of Company and the nature of the industry in
which it operates, and the risks associated therewith;
(e) the fact that the terms and procedures of the Offer and the
Reorganization Agreement should not unduly discourage other third parties
from making bona fide proposals to acquire Company subsequent to the
execution of the Reorganization Agreement and, if any such proposals were
made, the Board, in the exercise of its fiduciary duties, could determine
to provide information to and engage in negotiations with any such third
party subject to the terms and conditions of the Reorganization Agreement;
(f) the regulatory approvals required to consummate the Merger,
including, among others, antitrust approvals, and the prospects for
receiving such approvals;
(g) the general relatively high level of stock prices on the New York
Stock Exchange and other principal trading markets in the United States and
the risk that a major drop in such markets would also have a significant
and potentially long term adverse effect on Company Shares; and
(h) the possibility that, after the expiration of the standstill
provisions described below, Parent might proceed with a tender offer on a
unilateral basis at a significantly lower price than the Offer price and
the Merger Consideration.
The Board did not assign relative weights to the factors or determine that
any factor was of particular importance. Rather, the Board viewed its position
and recommendation as based on the totality of the information presented to and
considered by it.
Buyer also believes that the Merger is fair to the public holders of
Shares. In making this determination, Buyer considered the following factors:
(a) the premium represented by the difference between the $19.45 and recent and
historical trading prices of the Shares; (b) the premium represented by the
difference between the $19.45 and the book value per Share of $8.28 as of
February 29, 1996; (c) the Merger will provide holders the opportunity to
convert their Shares into cash without the usual transaction costs associated
with open-market sales or the potential resulting depressing effect on the
market price of Shares due to the limited trading volume for Shares; and (d) the
business, results of operations and prospects of Company and the nature of the
industry in which it operates, and the risks associated therewith. Buyer did not
find it practicable to, and therefore did not, quantify or otherwise assign
relative weights to these factors.
Buyer is Unaware of Any Other Offers Made for the Shares.
Commencing August 26, 1995, Buyer retained the financial consulting
services of Mr. Thomas M. Foster, who provided financial and related advice to
Buyer in connection with the transactions contemplated by the Reorganization
Agreement. However, Buyer has not received any report, opinion or appraisal from
any outside financial advisor or appraiser with respect to the Offer and Merger,
including but not limited to, any report, opinion or appraisal relating to the
consideration or the fairness of the consideration to be offered to the holders
of the Shares or the fairness of the Offer and the Merger to Company or to any
security holder of Company. Buyer did not retain any financial advisor to
negotiate the terms of the Offer or the Merger or to prepare a report concerning
the fairness of the Offer or the Merger. Further, because Company is a
distribution Company without material assets, other than inventory, no
liquidation value analysis was made of Company by Buyer. Buyer made a going
concern valuation of Company which is more fully described in the section titled
"Background of the Merger -- Recent Discussions Between Company and Parent
Regarding a Potential Tender Offer."
Buyer and its affiliates are not aware of any firm offer made by any
unaffiliated person during the preceding 18 months for (a) the merger or
consolidation of Company into or with such person or of such person into or with
Company, (b) the sale or other transfer of all or any substantial part of the
assets of
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<PAGE> 14
Company, or (c) securities of Company which would enable the holder thereof to
exercise control of Company.
Opinion of Financial Advisor
As noted above, as part of its role as financial advisor to Company,
Schroder Wertheim was engaged to deliver to Company's Board of Directors its
opinion, as investment bankers, that as of May 31, 1996, the consideration to be
offered to the shareholders of Company, other than Parent, Buyer and their
affiliates in the Offer and the proposed Merger is fair to such shareholders
from a financial point of view. A copy of Schroder Wertheim's opinion is
included as Exhibit B to this Proxy Statement. Such opinion is subject to
certain limitations and is based on certain assumptions stated therein, and the
summary of such opinion set forth below is qualified in its entirety by
reference to the full text of such opinion. Holders of Shares are urged to read
Schroder Wertheim's opinion in its entirety.
No limitations were imposed by Company or the Board on the scope of
Schroder Wertheim's investigation or the procedures to be followed by Schroder
Wertheim in rendering its opinion, except that Schroder Wertheim was not
authorized to solicit, and did not solicit, any indications of interest from any
third party with respect to a purchase of all or a part of Company's business.
Schroder Wertheim was not requested to and did not make any recommendation to
the Board as to the form or amount of consideration to be offered to
shareholders in the Offer and the proposed Merger, which was determined through
negotiations between Company and Parent. In arriving at its opinion, Schroder
Wertheim did not ascribe a specific range of value to Company, but made its
determination as to the fairness, from a financial point of view of the
consideration to be offered to the shareholders of Company other than Parent,
Buyer and their affiliates on the basis of the financial and comparative
analyses described below. Schroder Wertheim's opinion was for the information of
the Board solely for its use in evaluating the fairness from a financial point
of view of the consideration to be offered to the shareholders of Company other
than Parent, Buyer and their affiliates in the Offer and the proposed Merger and
is not intended to be, and does not constitute, a recommendation to any
shareholder as to whether to accept the consideration to be offered to such
shareholder in the Merger. In rendering its opinion, Schroder Wertheim was not
engaged as an agent or fiduciary of Company's shareholders or any other third
party. Schroder Wertheim's opinion is not an opinion as to the structure, terms
or effect of any aspect of the Offer or the proposed Merger and does not in any
manner address Company's underlying business decision to enter into the
Reorganization Agreement.
In connection with its opinion, Schroder Wertheim, among other things (i)
reviewed a draft, dated May 30, 1996, of the Reorganization Agreement; (ii)
reviewed a draft, dated May 30, 1996, of the Schedule 14D-1 filed by Buyer with
the Commission in connection with the Offer, including a draft of the Offer to
Purchase incorporated therein by reference; (iii) reviewed a draft, dated May
30, 1996, of the Schedule 14D-9 filed by Company with the Commission in
connection with the Offer; (iv) reviewed Company's Annual Reports on Form 10-K
filed with the Commission for the fiscal years ended February 1992, 1993, 1994,
1995 and 1996, including the audited consolidated financial statements of
Company included therein; (v) reviewed historical financial results of Company
by operating division prepared by management; (vi) reviewed forecasts and
projections for Company prepared or supplied by Company management for the
fiscal years ending February 1997 through 2002; (vii) held discussions with
Company management regarding the business, operations and prospects of Company;
(viii) compared the results of operations and certain market valuation
statistics of Company with those of certain publicly traded companies which
Schroder Wertheim deemed to be reasonably comparable to Company; (ix) reviewed
the financial terms, to the extent publicly available, of certain comparable
transactions; (x) reviewed the historical trading prices and volumes of Shares;
and (xi) performed such other financial studies, analyses, inquiries and
investigations as it deemed appropriate.
In rendering its opinion, Schroder Wertheim assumed and relied upon,
without independent verification, the accuracy and completeness of all
information supplied or otherwise made available to it by Company or obtained by
it from other sources, and upon the assurances of Company's management that they
were unaware of any information or facts that would make the information
provided to Schroder Wertheim incomplete or misleading. Schroder Wertheim did
not conduct a physical inspection of the properties and facilities of Company
and did not undertake an independent appraisal of assets or liabilities
(contingent or otherwise) of
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<PAGE> 15
Company and was not furnished with any such appraisals. Schroder Wertheim also
assumed that the financial forecasts furnished by Company were reasonably
prepared and reflected the best current available estimates and judgment of the
senior management of Company as to the expected future financial performance of
Company. Schroder Wertheim's opinion was necessarily based upon economic, market
and other conditions as they existed on, and the information made available to
it as of, the date of its opinion, and Schroder Wertheim disclaimed any
undertaking or obligation to advise any person of any change in any fact or
matter affecting its opinion.
The following paragraphs summarize the financial and comparative analyses
performed by Schroder Wertheim and presented to the Board in connection with its
opinion. The summary does not represent a complete description of the analyses
performed by Schroder Wertheim.
Analysis of Comparable Publicly Traded Companies. Using publicly available
information, Schroder Wertheim compared selected historical and projected
financial and operating data, and selected stock market data, of Company to the
corresponding data of the following publicly traded chemical and industrial
distribution companies which Schroder Wertheim considered reasonably comparable
to Company (collectively, the "Comparable Companies"): Aceto Corporation;
Bearings, Inc.; Ellis & Everard plc; Hawkins Chemical, Inc.; McKesson
Corporation; National Sanitary Supply Co.; and W.W. Grainger, Inc.
Schroder Wertheim performed a market analysis of Company and the Comparable
Companies using closing market prices as of May 30, 1996. In connection with
such analysis, Schroder Wertheim noted, among other things, that (i) the
multiple of Company's market price to its earnings per Share for the last twelve
months ("LTM") ended April 30, 1996 was 32.4x compared to an average market
price to earnings per share multiple of 14.5x for the Comparable Companies
(using the most recent reported LTM period for each of the Comparable Companies
(collectively, the "Comparable LTM Periods")); (ii) Company's market price to
analyst projected 1997 earnings per Share (based on consensus analysts
estimates) multiple was 15.1x compared to an average analyst projected 1996
earnings per share multiple of 13.4x for the Comparable Companies; (iii)
Company's market value plus total debt minus total cash ("Enterprise Value") to
adjusted earnings before interest and taxes ("EBIT") multiple was 15.8x compared
to an average Enterprise Value to adjusted EBIT multiple of 9.0x for the
Comparable Companies; and (iv) Company's Enterprise Value to adjusted earnings
before interest, taxes, depreciation and amortization ("EBITDA") multiple was
8.0x compared to an average Enterprise Value to adjusted EBITDA multiple of 7.3x
for the Comparable Companies. Based on this analysis, Schroder Wertheim
calculated the implied equity value of Company's Shares on a fully diluted basis
to be between $7.45 and $13.13 per share. The offer price of $19.45 implies a
premium of 48.1% to 161.2% based on these implied values.
In addition, Schroder Wertheim compared Company's recent operating
performance to the recent operating performance of the Comparable Companies.
This analysis illustrated, among other things, that: (i) Company's growth rate
in revenues for the three years ended February 29, 1996 was 6.3% compared with
an average growth rate in revenues for the last three fiscal years of 10.2% for
the Comparable Companies; (ii) Company's LTM EBITDA as a percentage of revenues
("EBITDA Margin") was 2.8% compared with an average EBITDA Margin of 7.0% for
the Comparable Companies over the Comparable LTM Periods; (iii) Company's LTM
EBIT as a percentage of revenues ("EBIT Margin") was 1.4% compared with an
average EBIT Margin of 5.8% for the Comparable Companies over the Comparable LTM
Periods; (iv) Company's LTM net income as a percentage of revenues ("Net Income
Margin") was 0.4% compared to an average Net Income Margin of 3.5% for the
Comparable Companies over the Comparable LTM Periods; and (v) Company's LTM
return on equity was 8.6% compared to an average return on equity of 22.9% for
the Comparable Companies over the Comparable LTM Periods.
Discounted Cash Flow Analysis. Schroder Wertheim performed a discounted
cash flow analysis of Company based on the financial forecast of Company as a
whole and each of its major subsidiaries for the fiscal years ending 1997 to
2002 prepared and provided by the management of Company (the "Company Financial
Forecast"). A discounted cash flow analysis is a traditional valuation
methodology used to derive a valuation of a corporate entity by calculating the
estimated future free cash flows of such corporate entity and discounting such
cash flow results back to the present.
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<PAGE> 16
Schroder Wertheim analyzed Company's Financial Forecast and discounted the
stream of free cash flows provided in such forecast back to May 31, 1996. To
estimate the terminal value of Company at the end of Company's Financial
Forecast period, Schroder Wertheim applied terminal multiples ranging from 5.0x
to 7.0x to Company's projected fiscal 2002 adjusted EBITDA and discounted such
value estimates back to May 31, 1996. Schroder Wertheim then summed the present
values of the free cash flows and the present values of the terminal values to
derive a range of implied equity values for Company of $375.5 million to $651.3
million (after adjustments for total debt, cash and equivalents and cash
proceeds from the exercise of stock options). These values represent $16.82 to
$28.57 per Share on a fully-diluted basis.
Selected Merger and Acquisition Transaction Analysis. Schroder Wertheim
analyzed certain publicly available information relating to numerous selected
merger and acquisition transactions in the chemical and industrial distribution
industries since 1994. Although these transactions were reviewed for comparison
purposes, none of such transactions is directly comparable to the Offer or the
proposed Merger. Among the transactions analyzed by Schroder Wertheim were
(target/acquiror): Parts, Inc. (GKN plc)/APS Holding Corp.; Erith plc/Graham
Group; Industrial and Life Sciences Unit (Baxter)/VWR Scientific Products
Corporation; ADESA Corporation/Minnesota Power & Lighting Company; Lambert
Riviere S.A./Royal Pakhoed N.V.; Anthem Electronics, Inc./Arrow Electronics,
Inc.; Orchidis/Brenntag AG; Gates-FA Distributing Inc./Arrow Electronics, Inc.;
Bunzl Building Supply Inc./Rugby Group plc; and several acquisitions completed
by Airgas, Inc. of various regional distributors.
Schroder Wertheim computed the equity cost (offer per share multiplied by
total common shares outstanding (the "Equity Cost")) in each of the selected
transactions analyzed and divided such amount by the acquired company's LTM net
income immediately prior to the acquisition, which resulted in a range of
purchase price multiples. Schroder Wertheim also computed the adjusted price
(the Equity Cost plus latest reported total debt, capitalized leases, preferred
stock and minority interest minus total cash and cash equivalents, adjusted for
outstanding options (the "Adjusted Purchase Price")) paid in each of the
selected transactions analyzed and divided such amount by the acquired company's
LTM adjusted EBITDA and EBIT immediately prior to the acquisition, which
resulted in other ranges of purchase price multiples. Using such information and
Company's LTM operating results, Schroder Wertheim compared the implied purchase
price multiples of the Offer and the proposed Merger to the purchase price
multiple ranges calculated as aforesaid. Such analysis illustrated: (i) the
implied Adjusted Purchase Price to LTM adjusted EBITDA multiple of the Offer and
the proposed Merger is 11.0x compared with a multiple range of 5.4x to 15.6x for
the selected transactions analyzed; (ii) the implied Adjusted Purchase Price to
LTM adjusted EBIT multiple of the Offer and the proposed Merger is 21.6x
compared with a multiple range of 8.7x to 21.1x for the selected transactions
analyzed; and (iii) the implied Equity Cost to LTM net income multiple of the
Offer and the Proposed Merger is 50.9x compared with a multiple range of 11.6x
to 38.6x for the selected transactions analyzed. Based on this analysis,
Schroder Wertheim calculated the implied equity value of Company's Shares on a
fully diluted basis to be between $4.17 and $21.41 per share.
Other Analyses. Schroder Wertheim analyzed the feasibility of a leveraged
buyout of Company. This analysis implied that a leveraged buyout of Company was
marginally feasible at a price of $15.00 per Share based on current market
conditions.
Schroder Wertheim also analyzed the premium paid over the stock price of
the acquired company one day, one week and four weeks prior to the announcement
of the transaction in selected merger transactions since 1994. This analysis
demonstrated that, on average, the acquired company received a 34.6%, 39.1% and
45.0% premium over its stock price one day, one week and four weeks,
respectively, prior to announcement of a transaction. Schroder Wertheim then
compared these results with the premiums over Company's stock price implied by
the Offer and the proposed Merger. The Offer and the proposed Merger imply
premiums of 57.2%, 55.2% and 58.0% over Company's Share price one day, one week
and four weeks, respectively, prior to May 31, 1996.
The foregoing summary does not purport to be a complete description of
Schroder Wertheim's analyses or of the presentation by Schroder Wertheim to
Company's Board. Schroder Wertheim did not attribute any particular weight to
any analysis or factor considered by it, but rather made qualitative judgments
as to the
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<PAGE> 17
significance and relevance of each analysis or factor. Accordingly, Schroder
Wertheim believes that its analyses must be considered as a whole and that
selecting portions of its analyses or of the factors considered, without
considering all analyses and factors, could create an incomplete or misleading
view of the processes underlying the preparation of its opinion. The preparation
of a fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. In performing its analyses, Schroder
Wertheim made numerous assumptions with respect to general business and economic
conditions and other matters, many of which are beyond the control of Company.
The analyses performed by Schroder Wertheim are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Additionally, analyses relating to
the values of businesses do not purport to be appraisals or to reflect the
prices at which a business may actually be sold or at which a company's
securities may trade at any time.
Schroder Wertheim is a nationally recognized investment banking firm
engaged, among other things, in the valuation of businesses and their securities
in connection with mergers, and acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes.
A copy of the report submitted by Schroder Wertheim to Company's Board of
Directors has been filed as an exhibit to the Schedule 13E-3 filed by Parent,
Buyer and Company in connection with the Offer. Copies of said report are
available for inspection and copying at the principal executive offices of
Company during regular business hours by any shareholder of Company, or a
shareholder's representative who has been so designated in writing.
In April, 1995, Company engaged Schroder Wertheim as its exclusive
financial advisor in connection with the review of various options to maximize
the value of Company to its shareholders. Pursuant to this engagement, Company
paid to Schroder Wertheim a fee of $125,000 and agreed to pay customary and
reasonable advisory and financing fees to be negotiated in good faith if Company
were to proceed with a transaction or financing. In addition, Company agreed to
reimburse Schroder Wertheim for its reasonable out-of-pocket expenses in
connection with such engagement and to indemnify Schroder Wertheim against
certain liabilities, including liabilities under the federal securities laws.
Pursuant to an engagement letter, dated May 10, 1996, Company engaged
Schroder Wertheim, among other things, to render an opinion, as investment
bankers, as to the fairness, from a financial point of view, of the Offer and
the proposed Merger to the shareholders of Company other than Parent, Buyer and
their affiliates. Pursuant to said engagement letter, Company (i) paid to
Schroder Wertheim an initial cash fee of $300,000 upon execution of said
engagement letter, (ii) paid to Schroder Wertheim an additional cash fee of
$300,000 at the time Schroder Wertheim informed the Board of Directors that it
was ready to deliver its opinion, and (iii) paid Schroder Wertheim a cash fee of
$900,000 upon consummation of the Offer. Company has also agreed to reimburse
Schroder Wertheim for its reasonable-out-of-pocket expenses and to indemnify
Schroder Wertheim, its officers, directors, controlling persons, employees and
agents, against certain liabilities, including liabilities under the federal
securities laws, relating to, arising out of, or in connection with, the matters
contemplated by the engagement letter.
Schroder Wertheim, in the normal course of business, trades in the
securities of Company for its own account and for the account of its customers,
and, accordingly, may from time to time hold a long or short position in
Company's securities.
Financial Projections
As part of the information used by Schroder Wertheim in the fairness
analysis of the Offer and Merger, Company provided Schroder Wertheim with
certain non-public business and financial information about
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<PAGE> 18
Company. Included in the information Company provided Buyer were projections for
fiscal years 1997, 1998, 1999, 2000, 2001 and 2002, which can be summarized in
the following table:
CONSOLIDATED UNIVAR PROJECTIONS
FOR FISCAL YEARS ENDED FEBRUARY 28/29
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................. $2,213,512 $2,380,730 $2,533,284 $2,675,677 $2,810,310 $2,952,387
Gross Profit.............. $ 317,132 $ 346,135 $ 377,200 $ 399,757 $ 420,127 $ 441,643
EBITDA*................... $ 84,871 $ 101,512 $ 121,596 $ 133,736 $ 143,488 $ 156,694
EBIT**.................... $ 53,090 $ 69,159 $ 89,923 $ 102,265 $ 112,457 $ 125,563
</TABLE>
- ---------------
* EBITDA represents "earnings before interest, taxes, depreciation and
amortization."
** EBIT represents "earnings before interest and taxes."
The projections are based upon the subjective judgment of Company's
management of various economic circumstances expected to be applicable to each
of Company's separate entities that comprise the consolidated Univar group. This
includes Van Waters & Rogers Inc. in the United States, Van Waters & Rogers Ltd.
in Canada, and Univar Europe N.V. in Europe.
Company advised Schroder Wertheim that the above projections were not
prepared with a view to public disclosure and are included herein only because
such information was provided to Schroder Wertheim in connection with the
preparation of its fairness opinion. In addition, Company has informed Schroder
Wertheim that the projections were not prepared with a view toward compliance
with published guidelines of the SEC or the guidelines established by the
American Institute of Certified Public Accountants regarding projections and
forecasts, nor is the projected financial information intended to be presented
in a manner consistent with financial statements prepared in accordance with
generally accepted accounting principles. While presented with numerical
specificity, these projections are based upon a variety of assumptions with
respect to industry performance, general business and economic conditions,
taxes, and other matters, most of which are beyond the control of Company. The
presentation of such information should not be regarded as a representation or
warranty of such information or as a representation or warranty by Company or
Schroder Wertheim or any other person that these results will be achieved.
Because the estimates and assumptions underlying the projections are
inherently subject to significant economic and competitive uncertainties beyond
Company's control, there can be no assurance that the projected results could be
realized, or that the actual results would not be higher or lower than those
projected.
Certain Effects of the Merger
The Merger will have the effect of eliminating the Shares of Company
shareholders, other than Shares held by Buyer and its affiliates, by converting
such Shares into the right to receive cash equal to $19.45 per Share. Under
Washington law, however, shareholders who have filed timely notices of intent to
dissent and who exercise dissenters' rights pursuant to Sections 23B.11.020
through 23B.13.280 of the WBCA, will have certain rights under the WBCA to
dissent to the proposed Merger and receive payment of "fair value" of their
Shares. Such rights to dissent, if statutory procedures are complied with, could
result in a judicial determination of the fair value of the Shares required to
be paid to dissenting shareholders. A copy of the provisions of 23B.11.020
through 23B.13.280 of the WBCA is attached as Exhibit E to this Proxy Statement.
According to Company's 1996 10-K, as amended, Company's Shareholders'
Equity was $179,606,000 as of February 29, 1996, and Company had net income of
$5,900,000 for the twelve months ended February 29, 1996. A copy of Company's
1996 10-K, as amended, is attached to this Proxy Statement as Exhibit C. As a
result of the consummation of the Merger, Company shareholders other than Parent
and its affiliates, will not have the opportunity to participate in the future
earnings, profits and growth of Company and will not have a right to vote on
corporate matters. Parent and its affiliates, as Company shareholders after the
Merger, will
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own a 100% interest in the book value and earnings of Company and will benefit
from any increase in the value of Company following the Merger and will bear the
risk of any decrease in the value of Company after the Merger.
If the Merger is consummated, the Shares will cease to be registered under
the Exchange Act, transactions in Shares will not be made or reported on the New
York Stock Exchange ("NYSE") or any other national stock exchange or quotation
system, and the Shares will not be available for use as collateral for loans
made by brokers and others.
Certain Tax Consequences of the Merger
The receipt of cash pursuant to the Merger will be a taxable transaction
for federal income tax purposes under the Internal Revenue Code of 1986, as
amended (the "Code"), and may also be a taxable transaction under applicable
state, local or foreign income or other tax laws. Generally, for federal income
tax purposes, a shareholder will recognize gain or loss equal to the difference
between the amount of cash received by the shareholder pursuant to the Merger
and the aggregate tax basis in the Shares converted in the Merger. Gain or loss
will be calculated separately for each block of Shares converted in the Merger.
If Shares are held by a shareholder as capital assets, gain or loss
recognized by the shareholder will be capital gain or loss, which will be
long-term capital gain or loss if the shareholder's holding period for the
Shares exceeds one (1) year. Under present law, long-term capital gains
recognized by an individual shareholder will generally be taxed at a maximum
federal marginal tax rate of 28%, and long-term capital gains recognized by a
corporate shareholder will be taxed at a maximum federal marginal tax rate of
35%.
A shareholder (other than certain exempt shareholders including, among
others, all corporations and certain foreign individuals and entities) may be
subject to 31% backup withholding unless the shareholder provides its tax
identification number ("TIN") to the Paying Agent and certifies that such number
is correct or properly certifies that it is awaiting a TIN, or unless an
exemption applies. A shareholder that does not furnish its TIN may be subject to
a penalty imposed by the Internal Revenue Service ("IRS").
If backup withholding applies to a shareholder, the Paying Agent is
required to withhold 31% from payments to such shareholder. Backup withholding
is not an additional tax. Rather, the amount of the backup withholding can be
credited against the federal income tax liability of the person subject to the
backup withholding, provided that the required information is given to the IRS.
If backup withholding results in an overpayment of tax, a refund can be obtained
by the shareholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO HOLDERS OF
SHARES WHO ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S.
PERSONS, LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS AND FINANCIAL
INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF SHARES IN LIGHT OF INDIVIDUAL
CIRCUMSTANCES. THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND IS BASED ON EXISTING TAX LAW AS OF THE DATE OF THIS
PROXY STATEMENT. DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, SHAREHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE MERGER.
Interest of Certain Persons in the Merger
The Board of Directors of Company has unanimously approved change of
control agreements (the "Change of Control Agreements") between Company and
certain executive officers of Company. At May 1, 1996, Company had Change of
Control Agreements in place with each of seven (7) executive officers (the
"Executives"). These Change of Control Agreements generally provided that the
Executive would receive compensation for 30 months if his employment was
terminated (voluntarily or involuntarily) for any reason other than gross
misconduct, death, permanent and total disability, or reaching age 65, provided
such
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termination occurs within 24 months after certain defined events which might
lead to a change of control of Company. The compensation would be paid at a rate
equal to the Executive's then current salary and target incentive. The
compensation was subject to a minimum annual rate of not less than the
Executive's average compensation for the preceding three (3) calendar years, and
was subject to reduction if the aggregate present value of all payments would
exceed three (3) times the Executive's "annualized includible compensation", as
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), for the Executive's most recent five (5) taxable years. The Executive
would also continue to have "employee" status for the 30-month period and would
be entitled to retain most employee benefits and rights during this period.
Company had the right to cease payments in the event the Executive breached
certain non-competition or confidentiality covenants. Company also had the right
to terminate the Change of Control Agreements upon a one-year notice, except as
to rights already accrued as a result of an event which has triggered the change
of control provisions of the Change of Control Agreements. The Board of
Directors believes that the terms and conditions of the Change of Control
Agreements were in the best interest of Company because the Change of Control
Agreements enabled the Executives to continue to focus on activities providing
for the maximum long-term value to Company's shareholders, even when faced with
the possible change of control of Company.
On May 31, 1996, Parent agreed with the Executives to permit Company to
enter into letter amendments to the Change of Control Agreements to clarify and
make provisions for payments to be made in the event the Offer was consummated
(the "Letter Amendments"). The Letter Amendments: (i) clarified that the
consummation of the Offer is a "change in control," (ii) provided for payment of
the 30 months of base compensation plus target bonuses upon consummation of the
Offer rather than upon termination of the Executive, such payment to be made in
one lump sum in readily available funds within ten (10) business days after
Parent purchased shares satisfying the Minimum Condition, as defined in the
Reorganization Agreement, (iii) provided that if Executive continues as an
employee of Company after the Offer, he shall be entitled to receive benefits
comparable to those provided other management personnel and (iv) provided for a
"Gross-Up Payment" to cover the effect of excise and other taxes on the payments
made pursuant to these agreements, the conversion of outstanding stock options
and other payments likely to be treated as "parachute payments" for federal
income tax purposes recognizing that payments in excess of the "three times
annualized compensation" may be paid to these individuals. The Executives have
agreed that payments pursuant to these revised agreements shall be in lieu of
any other severance or termination benefit or plan which they presently are
entitled to in the event of a termination within 30 months after the
consummation of the Offer and by execution of the Letter Amendments have also
granted a release to the Surviving Corporation of any other right or cause of
action relating to their employment with Company prior to June 1, 1996. A copy
of the form of Letter Amendments executed with each Executive, along with a list
of the Executives and amount paid has been filed as an exhibit to the Schedule
14D-9 and Schedule 14D-1 and is incorporated herein by reference in its
entirety. The payments contemplated by the Letter Amendments have been made to
the Executives by Company.
The aggregate amounts paid to the Executives was approximately $5,600,000
in base compensation, target bonuses and other benefits payable pursuant to the
amended Change of Control Agreements. In addition, these Executives received an
aggregate amount of approximately $6,600,000 as cash payments for surrendering
outstanding stock options and deferred cash incentives, the vesting of which was
accelerated pursuant to Company stock option plans under provisions applicable
to other officers and employees of Company. The foregoing amounts do not include
the Gross-Up Payments to the Executives of approximately $4,800,000 which equal
the related excise and other estimated taxes attributable to amounts deemed to
be parachute payments.
Interest in Securities of Company
Except as described in this Proxy Statement, none of Buyer, Parent, Pakhoed
USA Inc., or Pakhoed Investeringen B.V., or any associate or majority owned
subsidiary of Buyer, Parent, Pakhoed USA Inc., or Pakhoed Investeringen B.V. or
any of the persons listed in the attached Exhibit F, beneficially owns any
equity security of Company, and none of Buyer, Parent, Pakhoed USA Inc., or
Pakhoed Investeringen B.V. or, to the
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best knowledge of Buyer, any of the other persons referred to above, or any of
the respective directors, executive officers or subsidiaries of any of the
foregoing, has effected any transaction in any equity security of Company during
the past 60 days.
Except as described in this Proxy Statement, including, but not limited to,
the information disclosed in the section entitled "Interest of Certain Persons
in the Merger" as of the date hereof: (i) there have not been any contacts,
transactions or negotiations between Buyer or Parent, any of their respective
subsidiaries or, to the best knowledge of Buyer, on the one hand, and Company or
any of its directors, officers or affiliates, on the other hand, that are
required to be disclosed pursuant to the rules and regulations of the
Commission, and (ii) neither Buyer nor Parent has any contract, arrangement,
understanding or relationship with any person with respect to any securities of
Company.
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions and which may be applicable
to the Offer and the Merger. Pursuant to the requirements of Section 13(e) of
the Exchange Act and Rule 13e-3 promulgated thereunder, Company, as issuer of
the class of equity securities that is the subject of the Offer, Parent and
Buyer have filed with the Commission a Schedule 13E-3 (the "Schedule 13E-3"), as
amended, relating to the transactions contemplated by the Offer and the Merger,
on the assumption that Section 13(e) and Rule 13e-3 are applicable to the Offer
and the Merger.
CERTAIN INFORMATION CONCERNING COMPANY
Company is a Washington corporation with its principal executive offices
located at 6100 Carillon Point, Kirkland, WA 98033. The telephone number of such
offices is (206) 889-3400.
Company's principal line of business is the distribution of industrial,
agricultural, and pest control chemicals and related products and services. As a
distributor of industrial, agricultural, and pest control chemicals and related
products, Company's role is to purchase chemicals from manufacturers in truck,
railcar, or tankcar quantities and sell them in smaller quantities to various
customers. Company adds value to its products through superior service,
selection, blending and packaging and delivery reliability, and Company provides
customers assistance with environmental and regulatory compliance. Company also
provides a hazardous waste management service in the United States called
ChemCare(R). Through ChemCare, Company provides its customers with logistics
management, temporary waste storage, and access to various treatment and
disposal technologies. Company is currently developing two ancillary services in
the U.S.: contract chemical management services, and third party logistics.
Set forth under "SELECTED FINANCIAL INFORMATION CONCERNING COMPANY" is
certain selected consolidated financial information with respect to Company and
Company Subsidiaries (defined as any corporation, partnership, limited liability
company, or other entity in which Company owns, directly or indirectly, any
equity interest and whose financial statements are consolidated with those of
Company for accounting purposes under GAAP) excerpted from the information
contained in Company's 1996 Annual Report on Form 10-K, as amended, which is
attached hereto as Exhibit C (the "1996 10-K"). More comprehensive financial
information is included in Company's 1996 10-K and other documents filed by
Company with the Commission. The summary contained in the section, "SELECTED
FINANCIAL INFORMATION CONCERNING COMPANY", is qualified in its entirety by
reference to Company's 1996 10-K and such other documents and all the financial
information (including any related notes) contained therein.
Additional non-financial information regarding Company is included in the
1996 10-K. Other documents filed by Company with the Commission are available
for inspection and copies thereof should be obtainable in the manner set forth
above in the section entitled "Available Information."
CERTAIN INFORMATION CONCERNING PARENT AND BUYER
Buyer, a Washington corporation that is a wholly owned subsidiary of
Pakhoed USA Inc. and an indirect subsidiary of Parent, was organized on May 24,
1996 to acquire Company and has not conducted any
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unrelated activities since its organization. The principal office of Buyer is
located at the principal office of Pakhoed USA Inc., which is 2000 West Loop
South, Suite 2200, Houston, TX 77027. All outstanding shares of capital stock of
Buyer are owned by Pakhoed USA Inc.
Parent is a publicly held limited liability company formed under the laws
of the Netherlands with a business address of 333 Blaak, 3011 GB Rotterdam, The
Netherlands. Parent is engaged in providing storage, logistics and distribution
services for companies in the oil and chemical industry on a worldwide basis.
Parent's business specializes in two primary areas, operation of tank storage
facilities in Europe, the United States, and in Southeast Asia, and shipping and
distribution of chemicals, mineral oils, and bitumen. Parent's tank storage
facilities provide storage for chemicals and oils, including heavy fuels,
gasolines, chemicals, lubricating oils and edible oils. Parent's shipping and
distribution operations are located primarily in Europe.
Parent and its affiliates employ over 5,000 people in North America,
Europe, and Southeast Asia. Parent operates and owns subsidiaries worldwide,
including, but not limited to, Pakhoed Investeringen B.V. and Pakhoed USA Inc.
BACKGROUND OF THE MERGER
Initial Investment by Pakhoed
On September 18, 1986, Pakhoed Investeringen B.V., a wholly owned
subsidiary of Parent, entered into an Agreement for Exchange of Capital Stock
(the "Exchange Agreement") with Company pursuant to which, among other things,
Parent transferred to Company all of the issued and outstanding shares of
capital stock of DSW, Inc., a Washington corporation engaged in the business of
chemical distribution, formerly conducted by the McKesson Chemical Company, and
Company issued to Pakhoed Investeringen B.V., a subsidiary of Parent, 6,106,000
Shares (giving effect to a subsequent 2 for 1 stock split), representing
approximately 35% of the total outstanding Shares as of that date. In connection
with the transactions effected pursuant to the Exchange Agreement, Company,
Parent and Pakhoed Investeringen B.V. entered into a standstill agreement of
even date which has been amended by the parties from time to time (the "1986
Standstill Agreement").
Univar Europe N.V.
Parent and Company jointly organized Univar Europe N.V. ("Univar Europe")
in 1991. At the time Univar Europe was organized, Company owned 51% of the
shares of Univar Europe and Parent owned 49%. In connection with the
organization of Univar Europe, Parent and Company entered into a Shareholder
Agreement (the "Shareholder Agreement") whereby Company agreed that Parent would
have the unilateral right to require Company to acquire Parent's 49% interest in
Univar Europe. In September, 1994, pursuant to the Shareholder Agreement,
Company purchased Parent's interest in Univar Europe for $25.8 million. Funding
for this aggregate purchase price was provided through the sale of 2,000,000
Shares to The Dow Chemical Company.
Recent Discussions Between Company and Parent Regarding a Potential Tender
Offer
During the last three years, there have been informal discussions between
James W. Bernard, a then director of Company and Company's President and Chief
Executive officer until October, 1995, and Nicolaas J. Westdijk, a director of
Company and Chairman of the Board of Management of Parent. Gary E. Pruitt,
Company's Chief Financial Officer, and Sjoerd J. Eikelboom, a director of
Company and a Senior Vice President of Parent, participated in some such
discussions. In particular, meetings were held on July 7 and August 9 and 10,
1995, to discuss means for cooperation between Company and Parent. Although
these meetings discussed possible business combinations and other possible
arrangements between the two companies, no proposals were made by Parent as a
result of these informal discussions.
During the week of October 9, 1995, Mr. Pruitt met with Dr. Eikelboom,
other management of Parent, and Mr. Thomas M. Foster, a financial advisor to
Parent, to discuss in greater detail the potential for cooperation between
Company and Parent and related matters. On October 30, 1995, Parent made a
request
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for certain financial, operational and other information concerning Company in
connection with the consideration by Parent of a possible transaction involving
Parent and/or one or more of its affiliates and Company.
On December 11, 1995, Mr. Westdijk contacted James H. Wiborg, the Chairman
of the Board of Company, indicating interest in initiating discussions
concerning an acquisition of Company. In connection with such discussions,
Parent requested a meeting to discuss an outline of possible environmental due
diligence and the price which Parent would pay for the Shares.
By letter dated January 11, 1996, from Mr. Pruitt to Dr. Eikelboom, Company
outlined its proposal concerning a procedure to move discussions of a possible
negotiated transaction forward. That letter addressed a proposed amendment to
the 1986 Standstill Agreement, requested that Parent indicate a conditional per
share range of values, and suggested a due diligence approach. By letter dated
January 23, 1996, Parent provided its response to the outline contained in the
January 11 letter, indicating an approach to valuation but without providing any
specific value. By letter dated February 2, 1996, from Mr. Pruitt to Dr.
Eikelboom, Company indicated that it was not prepared to initiate discussions
with Parent concerning a possible transaction at that time.
In late February, 1996, Mr. Westdijk met with Mr. Wiborg and Paul H. Hough,
a director and the Chief Executive Officer of Company, requesting that
reconsideration be given to initiating discussions. Mr. Westdijk, on behalf of
Parent, suggested to Mr. Wiborg and Mr. Hough that a price range could be
discussed based on expected earnings as well as on a current and historical
perspective.
By unanimous consent of the Board of Directors dated April 1, 1996, a
special committee relating to the transaction was created (the "Special
Committee") comprised of Messrs. James H. Wiborg, Andrew V. Smith, Richard E.
Engebrecht, and N. Stewart Rogers, none of whom are executive officers of
Company, for the express purpose of negotiating a definitive acquisition
agreement with Parent. Company also prepared a protocol for use in the
negotiations (the "Protocol"). Under the Protocol, terms for price negotiation
were described, and standstill provisions were included in a related
confidentiality agreement.
On March 15, 1996, Mr. Wiborg contacted Mr. Westdijk and a meeting was set
for April 10, 1996, in Seattle, Washington at which the Protocol would be
presented to Parent. Meetings were held from April 10-13, 1996, and Parent was
represented at all of the April meetings by Mr. Westdijk and Dr. Eikelboom. All
of the members of Company's Special Committee, Mr. Hough, and Mr. Pruitt were
present at the initial April 10 meeting. Thereafter, Messrs. Wiborg and Pruitt
represented Company.
At the April 10 meeting, Parent received the Protocol and was informed that
the Protocol was the exclusive basis on which Company would continue discussions
of a possible acquisition. After a review of the terms and conditions of the
Protocol, and negotiations on April 11 and 12, 1996, relating to certain
provisions within the Protocol, the parties agreed to a revised Protocol, and on
April 12, 1996, the Protocol was executed in connection with a confidentiality
agreement (the "Confidentiality Agreement").
The Confidentiality Agreement provided that Parent could not, without the
prior written consent of Company, disclose to any person other than Parent and
its representatives, the fact that Company and Parent were considering a
transaction. The Confidentiality Agreement further provided that Parent was to
keep confidential, subject to being legally compelled to disclose, certain
documents provided to Parent by Company in connection with the proposed
transaction (the "Evaluation Documents"). In the event that Parent was legally
compelled to disclose any of the Evaluation Documents, it was required to notify
Company so that Company could take measures to protect the confidentiality of
the Evaluation Documents.
In connection with the Protocol, the Confidentiality Agreement provided
that Parent, until October 30, 1996 (which was extended to April 30, 1998, as
discussed below), except with the written approval of Company, agreed not to:
(i) acquire any of the stock or other securities of Company other than as
permitted by the Standstill Agreement, but specifically excluding the right to
make a tender offer pursuant to Section 2.10 of the Standstill Agreement, (ii)
submit to Company or any other person any proposal for a transaction between
Parent and Company or involving any of its securities holders other than in
accordance with the Protocol, (iii) solicit proxies or shareholder consents with
respect to the securities of Company or become a
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"participant" in any "solicitation" or a member of a "group" (as such terms are
used in Regulation 14A and Section 13(d)(3) of the Exchange Act) in opposition
to the recommendation of the majority of the directors not affiliated with
Company, or (iv) otherwise assist, advise, encourage, or act alone or in concert
with any other person in acquiring or attempting to acquire, directly or
indirectly, control of Company or its assets.
Finally, the Confidentiality Agreement provided that if certain conditions
set forth in the Protocol were satisfied, the standstill provisions of the
Confidentiality Agreement would automatically extend to April 30, 1998. These
conditions were satisfied on April 26, 1996.
On April 13, 1996 Parent initially indicated a willingness to offer $17.00
per Share for all of the Shares. This offer was based on Parent's evaluation of
the value of Company based on Parent's analysis of, among other factors,
performance projections and discounted cash flows of Company. Company responded
with a counter-offer of $23.00 per Share. Company's price was based on recovery
timing, projected earnings, earnings multiples, and market reactions to earnings
improvements.
The negotiations continued and each party made several proposals and
counter-proposals. Parent had increased the price it was willing to offer to
$19.50 per Share and Company had countered with $20.50. This was determined to
be the agreed price range. The parties determined to proceed on the basis that,
if they could reach agreement on the other terms and provisions of a definitive
acquisition agreement, the final price, subject to the approval of Company's
Board of Directors, would be between $19.50 and $20.50 per Share with a
deduction equal to fifty percent of the after tax cost to Company of the
exercises of all previously granted employee stock options and full payment of
any amounts to be paid under previously authorized change of control agreements.
On April 20 and 21, 1996, counsel for Company met with counsel for Parent
to negotiate the terms of a definitive acquisition agreement, after previously
exchanging drafts of an agreement.
During the period from April 15-26, 1996, representatives of Company and
Parent analyzed the estimated after tax cost to Company of the option exercises
and change of control payments described above. On April 24, 1996, the
Supervisory Board of Parent authorized Parent's management to continue to pursue
the possible transaction, subject to agreement on price, due diligence and final
review and approval by the Supervisory Board. On April 26, 1996, Mr. Westdijk
met with Company's Special Committee and agreed upon a conditional tender offer
price of $19.45 per Share, based on a $20 per Share price, less $0.55
representing the price adjustment of fifty percent of the after tax cost of the
option exercises and change of control payments.
Beginning April 29, 1996, and ending May 24, 1996, subject to the terms of
the Confidentiality Agreement, and of an Environmental Due Diligence Agreement
dated April 22, 1996, Parent conducted a due diligence review focusing primarily
on environmental liabilities and litigation related to the business, properties
and assets of Company. Parent representatives met with Company representatives
on April 29-30 and May 6-8 and 14, 1996, as part of the environmental due
diligence procedure. Over this period and continuing through May 31, 1996,
representatives of and counsel for Company and Parent continued to negotiate
terms of a definitive acquisition agreement.
In April, 1995, Company retained Schroder Wertheim as its exclusive
financial advisor in connection with a review of various options to maximize the
value of Company to its shareholders. In April, 1996, Company advised Schroder
Wertheim about the on-going discussions with Parent concerning a possible
acquisition of Company by Parent. Company provided Schroder Wertheim with
certain information concerning Company and the proposed transaction so that
Schroder Wertheim could perform a preliminary analysis of the proposed
transaction. Schroder Wertheim was not authorized to and did not solicit any
indications of interest from any other third party with respect to all or a part
of Company's business, and was not requested to and did not make any
recommendation as to the form or amount of consideration to be offered to
shareholders of Company in the proposed transaction.
On May 2, 1996, an afternoon continuation of a regular meeting of the Board
of Directors of Company was held without the participation by the directors
nominated by Parent to discuss the proposed transaction. Representatives of
Schroder Wertheim were present at the meeting and offered their preliminary
analysis of
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the proposed transaction. Legal counsel reviewed issues relating to the
Protocol, the proposed Offer and proposed Merger.
On May 10, 1996, Company and Schroder Wertheim entered into an engagement
letter pursuant to which Company retained Schroder Wertheim as its financial
advisor in connection with the possible sale of Company and to render an opinion
to the Board of Directors, as investment bankers, as to the fairness, from a
financial point of view, of the proposed transaction with Parent.
On May 30, 1996, Parent's Supervisory Board and Board of Management
approved the Reorganization Agreement and Parent notified Company that it was
willing to execute the Reorganization Agreement and proceed with the Offer.
On May 31, 1996, the Board of Directors of Company held a special meeting
to consider the acquisition proposal submitted to Company. All of Company's
directors participated in the meeting. After initial discussion the directors
nominated by Parent indicated that they would vote in favor of the Offer,
proposed Merger and proposed Reorganization Agreement and then excused
themselves from further participation. During a continuation of the meeting, the
Board reviewed with certain of its executive officers, legal counsel, and
financial advisors the acquisition proposal submitted to Company. The
presentations included a review of the financial analysis and proposed fairness
opinion of Schroder Wertheim. Based on such discussions and presentations, the
Board unanimously approved the Reorganization Agreement and the transactions
contemplated thereby, including the Offer and the Proposed Merger.
On May 31, 1996, Parent, Buyer, and Company signed the Reorganization
Agreement.
Pursuant to the terms of the Reorganization Agreement, Buyer commenced the
Offer on June 7, 1996.
On June 21, 1996, a complaint (the "Complaint") was filed by Crandon
Capital Partners, a Florida partnership in the Superior Court of King County,
Washington, purporting to be a class action on behalf of all shareholders of
Company, except the defendants, for injunctive relief and damages in an
unspecified amount. On July 8, 1996 the Complaint was served on Company. The
Complaint named as defendants Company, Parent and Buyer, as well as eleven
current members and one former member of the Board of Directors of Company. The
Complaint alleged, among other things, that: (i) in negotiating the terms of the
Reorganization Agreement and arriving at the $19.45 per Share amount, the
defendants participated in unfair dealings toward the plaintiff and the other
members of the Class (as defined in the Complaint); (ii) the defendants violated
their fiduciary and other common law duties owed to plaintiff and to other
members of the Class; and (iii) the defendants had not exercised their
independent business judgment, had acted and were acting to the detriment of the
Class, and were using their control over Company to usurp for Parent the true
value of Company's shares at an unfair price.
Company believes the Complaint to be without merit and is defending the
action vigorously.
Although the Complaint stated that the plaintiff intended to seek to enjoin
the Offer, no motion for an injunction was filed prior to the consummation of
the Offer. See "CERTAIN LITIGATION."
In response to the requests of certain staff members at the Commission, on
July 8, 1996, Parent and Buyer circulated to the shareholders of Company a
Supplement to Buyer's Offer to Purchase. In addition, Parent, Buyer and Company
amended the filing on Schedule 13E-3, relating to certain "going private
transactions." Specifically, the amendment to the Schedule 13E-3 (i) clarified
certain language relating to Parent's relationship with Company, and (ii) added
Company as a signatory to the Schedule 13E-3.
The Offer expired on July 15, 1996, at 8:00 p.m., New York City time.
Pursuant to the Offer, Buyer accepted for payment and purchased 14,977,480
Shares held by shareholders who were not affiliated with Parent as well as
Shares from Pakhoed Investeringen B.V. at a price of $19.45 per Share in cash.
As a result of these purchases, Buyer owns of record approximately 97.15% of the
outstanding Shares, which includes all the Shares held by the directors and
executive officers of Company prior to the Offer, as well as all the Shares held
by Pakhoed Investeringen B.V. prior to the Offer.
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On August 7, 1996, following the acceptance for payment by Buyer of Shares
pursuant to the Offer, pursuant to the Reorganization Agreement, resignations
from Company's Board by Messrs. James H. Wiborg, James W. Bernard, Roger L.
Kesseler, Curtis P. Lindley, and John G. Scriven were accepted by Company,
effective as of the expiration of the Offer.
STRUCTURE OF THE MERGER
In the Merger, each outstanding Share not held, directly or indirectly, by
Buyer, Parent or any direct or indirect subsidiary of Parent or Company, will be
converted into the right to receive $19.45 in cash, without interest. Each share
of common stock of Buyer issued and outstanding immediately prior to the
Effective Time will be converted into and become one Company Share in the
Merger. Company will thereupon become an indirect subsidiary of Parent and
Parent will indirectly own the entire equity interest in Company.
The acquisition of the Shares is structured as a cash merger, with Company
as the Surviving Corporation, to ensure that Parent will acquire all outstanding
Shares from all public holders thereof without materially disrupting Company's
operations.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for under the "purchase" method of accounting,
whereby the purchase price for Company will be allocated to the identifiable
assets and liabilities of Company and its subsidiaries based on their respective
fair values.
FINANCING THE ACQUISITION
Buyer has estimated that the total amount of funds required by Buyer to
purchase Shares pursuant to the Offer and the Merger and to pay related fees and
expenses will be approximately $306 million, of which approximately $304 million
was paid to purchase Shares tendered pursuant to the Offer.
Parent has nine established committed credit facilities with six different
banks, with an aggregate maximum credit amount available of approximately $433
million (the "Lines of Credit"). The stated terms of the Lines of Credit range
from three (3) to ten (10) years. As of June 5, 1996, Parent and its affiliates
had approximately $47 million in cash available to contribute or loan to Buyer
and approximately $20 million was outstanding under the Lines of Credit, with a
weighted average interest rate of 3%. Available cash plus amounts available for
draw under the Lines of Credit aggregate approximately $460 million.
Borrowings can be made at any time or from time to time under each of the
Lines of Credit for general corporate purposes, including acquisitions, and are
unsecured. The precise terms for each borrowing, including interest rate, are
determined at the time of the borrowings. Generally, the interest rates provided
by these Lines of Credit range from the applicable LIBOR or AIBOR plus 0.20% to
0.325%. The agreements documenting the Lines of Credit also require Parent to
pay commitment fees, ranging from 0.10% to 0.175% per annum of the daily undrawn
portion of the Lines of Credit.
The Lines of Credit contain customary conditions to borrowing,
representations and warranties, covenants and events of defaults. These include,
among other things, covenants restricting the creation of any mortgage on
Parent's real estate or other immovable property rights in The Netherlands
without the bank's consent, and requirements that Parent maintain specified
consolidated financial ratios. As of June 4, 1996, Parent was in compliance with
the covenants contained in the Lines of Credit. Parent has also agreed, in some
instances, to pay the reasonable out-of-pocket expenses of the bank and to
indemnify the bank for reasonable costs incurred in preserving or enforcing its
rights under the Lines of Credit.
It is anticipated that borrowings incurred by Parent to make capital
contributions to Buyer will be replaced partly by other long-term financing,
sales of equity, or by other financing options. Parent has not made any
definitive arrangements for such refinancing. Lines of Credit with an aggregate
maximum credit amount available of $173 million require repayment of borrowings
thereunder from proceeds of any refinancing resulting from sales of equity in
Parent or other long-term financing.
25
<PAGE> 27
The foregoing description is qualified by reference to the Lines of Credit,
copies of which (or the English translation of which) have been filed with the
Commission as exhibits to the Schedule 14D-1. All U.S. dollar amounts provided
above assume an exchange ratio of one U.S. Dollar to 1.73 Dutch Guilders.
Buyer and Company also entered into a loan agreement, dated July 18, 1996,
("Loan Agreement") pursuant to which Buyer lent Company $35,000,000 (the "Loan
Amount"), the approximate amount payable by Company pursuant to the Change of
Control Agreements, the Letter Amendments and upon surrender of outstanding
stock options and deferred cash incentives (see "The Merger -- Interest of
Certain Persons in the Merger"). As a result of the Merger, the Loan Agreement
will no longer exist since Company will merge into Buyer and Buyer will thereby
hold the assets of Company directly.
Repayment of the Loan Amount is due January 18, 1997. If any of the Loan
Amount is not paid when due, the Loan Agreement provides that Company will pay
to Buyer interest on any overdue amount at a rate per annum equal to nine
percent (9%) per annum from the due date.
The Loan Agreement also provides that Buyer has agreed to subordinate its
rights or claims to receive repayment of the Loan Amount to the claims of all
present and future creditors of Company. The Loan Agreement contains customary
provisions for events of default.
THE REORGANIZATION AGREEMENT
Set forth below is a description of the principal terms of the
Reorganization Agreement which are of continuing applicability. This description
is qualified in its entirety by reference to the Reorganization Agreement, which
is attached as Exhibit A hereto and incorporated herein by this reference. The
Merger Agreement is also attached as Exhibit A to the Reorganization Agreement.
Capitalized terms used within this section and not defined herein shall have
that meaning as given in the Reorganization Agreement.
The Merger
General. The Reorganization Agreement provides that as promptly as
practicable after completion of the Offer, Buyer will be merged with and into
Company.
At the Effective Time, upon the filing with the Washington Secretary of
State of a duly executed Merger Agreement as prescribed by the WBCA (or at such
time thereafter as is provided in the Merger Agreement), Buyer will be merged
into Company in accordance with the applicable provisions of the WBCA. At the
Effective Time, (a) each then-remaining outstanding Share (other than Dissenting
Shares, and Shares held by Buyer and its affiliates) will be converted into the
right to receive $19.45 in cash, without interest; (b) all then-outstanding
common shares of Buyer will be converted into one fully paid and nonassessable
common share of Company; and (c) all outstanding Dissenting Shares will not be
converted into the right to receive $19.45 pursuant to the Merger, but will be
entitled to receive payment of the fair value of such Shares in accordance with
the provisions of the WBCA. From and after the Effective Time, all outstanding
Shares (other than Shares held by Parent, Buyer or their affiliates) shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and the holders of certificates formerly representing Shares
shall cease to have any rights with respect thereto other than to receive the
$19.45 or dissenter's rights they have perfected under the WBCA.
Board Representation
Pursuant to the Reorganization Agreement, Parent has received contingent
resignations from all directors who were not nominated by Parent. Such
resignations were contingent upon consummation of the Offer; provided, however,
that the Board (excluding directors nominated by Parent) had the right, but not
the obligation to designate up to four current members of the Special Committee
who may remain directors after the consummation of the Offer and until the
Effective Date of the Merger. Company has accepted the resignations of James H.
Wiborg, James W. Bernard, Roger L. Kesseler, Curtis P. Lindley, and John G.
Scriven. Parent expects that upon effectiveness of the Merger or shortly
thereafter, representatives of Parent
26
<PAGE> 28
will replace existing directors of Company and the Board of Directors of Company
will be composed exclusively of representatives of Parent.
Additional Provisions of the Reorganization Agreement
Conditions of the Merger. The Reorganization Agreement provides that the
obligations of Company, Parent and Buyer to consummate the Merger are, among
other things, subject to the satisfaction of the following conditions: (a) no
provision of any applicable law or regulation and no judgment, injunction, order
or decree shall prohibit or restrain the consummation of the Merger; (b) all
Governmental Approvals shall have been obtained, with such exceptions as would
not, individually or in the aggregate, have a material adverse effect on
Parent's or Company's business; and (c) Buyer shall have purchased Shares
pursuant to the Offer, sufficient to satisfy the Minimum Tender Condition.
Interim Operations of Company. The Reorganization Agreement provides that,
until the Effective Time, each of Company and Company Subsidiaries shall use
reasonable efforts to conduct its business and to maintain satisfactory
relationships with licensors, suppliers, distributors and customers, all in
accordance with its ordinary and usual course of business. Prior to the
Effective Time, neither Company nor Company Subsidiaries shall without the prior
written consent of Parent and Buyer, or except as specifically contemplated by
the Reorganization Agreement: (a) amend its Articles of Incorporation or Bylaws;
(b) authorize for issuance, issue, deliver or sell any additional Shares, or
securities convertible into Shares, or issue or grant any rights, options or
other commitments for the issuance of Shares or such convertible securities
(other than the issuance of Preferred Shares and the conversion thereof or
payment in lieu thereof pursuant to the Stock Purchase Agreement, or of Shares
pursuant to the exercise of outstanding options, and the grant of any new
options in accordance with budgets and plans previously approved by Company's
Compensation Committee); (c) split, combine or reclassify any of its capital
shares or declare, set aside or pay any dividend (whether in cash, stock or
property) in respect to its Shares or redeem or otherwise acquire any of its
Shares other than the repurchase, at cost, of Shares issued to employees
pursuant to the terms of employee restricted stock or share purchase agreements;
(d) dispose of or acquire any material properties or assets except in the
ordinary course of business; (e) engage in any activities or transactions that
are outside the ordinary course of Company's business other than certain
permitted activities under the Reorganization Agreement; (f) materially amend
any provision of the Stock Plans, Pension Plans or Employee Welfare Benefit
Plans; (g) incur any indebtedness for borrowed money, other than amounts
borrowed pursuant to and in accordance with the terms and conditions of its
existing lines of credit or amounts pledged or potentially owed in connection
with letters of credit which may be obtained naming as beneficiary the trustees
of the trusts for supplemental pension benefits plans as required under the
terms of such trusts and plans; (h) except in accordance with budgets previously
approved by Company's Compensation Committee and in connection with the
acceleration of stock options and payments under the Change of Control
Agreements (described above), make or approve any increase in the compensation
payable or to become payable to any of their directors, officers, employees or
agents with annual salaries in excess of $75,000 or the foreign equivalent at
the date hereof (including, but not limited to, compensation through any profit
sharing, pension, retirement, severance, incentive or other employee benefit
program or arrangement), (i) make any bonus payment or any agreement or
commitment to make a bonus payment; or (j) grant or issue any stock option,
warrant or other right to acquire capital shares or enter into any employment
agreement (other than any such employment agreement that may arise by operation
of law upon the hiring of any new employee) or consulting agreement with any
such directors, officers, employees, or agents.
In addition, Company has agreed that it shall not: (a) declare, set aside
or pay any dividend or other distribution in respect of the Shares (including,
without limitation, any stock dividend or distribution), except in the ordinary
course of business and not in amounts which materially exceed the amounts
previously paid by Company; and (b) change its methods of accounting in effect
at February 29, 1996, except as required by changes in GAAP as concurred in by
its independent auditors.
Indemnification and Insurance. With respect to events which occur prior to
the Effective Time, Parent has agreed that all rights to indemnification
existing in favor of the present or former directors, officers, employees,
fiduciaries and agents of (i) Company, (ii) any Company Subsidiary or (iii) any
"Pension Plans"
27
<PAGE> 29
(as defined in ERISA Section 3(2)) or "Employee Welfare Benefit Plans" (as
defined in ERISA Section 3(1)) which are sponsored by Company or Company
Subsidiaries, as provided in Company's Articles of Incorporation or pursuant to
any agreements previously disclosed by Company to Parent in writing or the
articles of incorporation, bylaws, Board resolutions or similar documents of
Company Subsidiaries as in effect as of the date hereof shall survive the Merger
and shall continue in full force and effect for a period of not less than the
statutes of limitations, if any, applicable to such matters. Without limiting
the foregoing, Company and, after the Effective Time, Parent shall cause the
Surviving Corporation to periodically advance expenses as incurred with respect
to the foregoing to the fullest extent permitted under the provisions of
Company's Articles of Incorporation or the articles of incorporation of Company
Subsidiaries. As of the Effective Time, Company shall, or in the event Company
is unable to do so, Parent shall cause the Surviving Corporation to convert the
current policies for directors' and officers' liability insurance and ERISA or
employee plan fiduciary liability insurance maintained by Company and Company
Subsidiaries to a policy or policies for a term of six (6) years after the
Effective Date which shall cover events which occur prior to the Effective Date,
provided that the incremental cost of such policy or policies, after applying
all related prepaid insurance premiums, shall not exceed two hundred thousand
dollars ($200,000). To the extent that the premium for such policy or policies
exceeds two hundred thousand dollars ($200,000), Company or the Surviving
Corporation shall obtain reasonably available policies for not less than such
amount. Buyer and the Surviving Corporation shall pay all expenses, including
attorneys' fees, that may be incurred by any present or former officer,
director, employee, fiduciary or agent of Company or Company Subsidiaries in
enforcing the indemnity and other obligations provided for in the Reorganization
Agreement.
Representations and Warranties. In the Merger Agreement, Company has made
customary representations and warranties to Parent and Buyer stating, or with
respect to, among other things: (a) that it and Company Subsidiaries are each
duly organized and validly existing corporations in good standing under the laws
of the state of their respective incorporation; (b) that subject to approval of
the Reorganization Agreement, it has the requisite corporate power to enter into
and carry out the terms of the Reorganization Agreement; (c) that it and Company
Subsidiaries are each qualified to do business as a foreign corporation in the
jurisdictions where failure to do so would have a material adverse affect on the
business; (d) that the execution and delivery of the Reorganization Agreement
has been duly authorized by Company; (e) that the Reorganization Agreement
constitutes the legal and binding obligation of Company; (f) that the execution
and delivery by Company of the Reorganization Agreement does not violate any
provision of Company's Articles of Incorporation or Bylaws, or any Governmental
Approvals obtained by Company, require the consent of any third party, or
violate any material contract, agreement or judgment to which either Company or
any of Company Subsidiaries is bound, including, but not limited to, the
Standstill Agreement; (g) its capitalization; (h) regarding the scope of its
employment contracts and benefits and the compliance of such contracts and
benefits with applicable laws; (i) that neither Company nor any of Company
Subsidiaries is a party to, nor threatened with, any legal action or other
proceeding or investigation before any court, any arbitrator of any kind or any
government agency, and to the best of Company's knowledge, neither Company nor
any of Company Subsidiaries is subject to any potential action, proceeding,
investigation or claim, which could impede the transactions contemplated by the
Reorganization Agreement or exceed $5,000,000; (j) that there is no labor
dispute, strike, slow-down or stoppage pending or, to the best of the knowledge
of Company, threatened against Company or any of Company Subsidiaries; (k) that
Company has complied with relevant rules and regulations promulgated pursuant to
ERISA; and (l) that Company has not retained any brokers or consultants entitled
to be paid commissions except for Schroder Wertheim.
WASHINGTON LAW
Parent, and Pakhoed Investeringen B.V. acquired more than ten percent (10%)
of Company's voting stock prior to March 23, 1988, which exempts the
transactions contemplated by the Reorganization Agreement from the Washington
Moratorium Statute. The Washington Moratorium Statute prohibits certain
"significant business transactions," such as the Merger of a target corporation,
with a greater-than-ten-percent shareholder, for a period of five (5) years,
subject to certain exceptions. Accordingly, the restrictions of the Washington
Moratorium Statute do not apply to the transactions contemplated by the Offer
and the Merger Agreement. See also "THE SPECIAL MEETING -- Vote Required."
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<PAGE> 30
REGULATORY AND OTHER APPROVALS
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")
provides that certain acquisition transactions may not be consummated until
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and to the Premerger
Notification Office of the Federal Trade Commission (the "FTC") and certain
waiting period requirements have been satisfied. On June 19, 1996, Company and
Parent received notice from the FTC that "Early Termination" had been granted
under the HSR Act, and that the waiting period requirements under the HSR Act
had therefore been satisfied.
The Canada Competition Act similarly requires filings for certain
acquisition transactions. On June 25, 1996, Parent made a short-form filing
under Section 121 of the Canada Competition Act in connection with the Offer. By
letter dated June 26, 1996, the Canada Prenotification Unit Mergers Branch
informed Parent that the seven-day waiting period imposed by the Canada
Competition Act commenced on June 26, 1996. On July 2, 1996, the seven-day
waiting period expired. On July 10, 1996, Parent also received an Advance Ruling
Certificate from the Acting Director of Investigation and Research in Canada,
indicating that the Canadian government had definitively concluded no further
investigations of the Offer and Merger would be warranted under the Competition
Act.
Parent is obligated to make a notice filing pursuant to the Investment
Canada Act thirty (30) days after Parent acquires a majority interest in
Company. On August 12, 1996, Parent made such a notice filing. On August 20,
1996, Parent received notice from the Investment Review Division of Industry
Canada informing it that the transaction to acquire control of Company was not
reviewable under the Investment Canada Act.
Under the Exon-Florio amendment to the Defense Production Act of 1950 and
the regulations promulgated thereunder ("Exon-Florio"), the President of the
United States is authorized to prohibit or suspend acquisitions, mergers or
takeovers by foreign persons of persons engaged in interstate commerce in the
United States if the President determines, after investigation, that such
foreign persons in exercising control of such acquired persons might take action
that threatens to impair the national security of the United States and that
other provisions of existing law do not provide adequate authority to protect
national security. Buyer and Company made a joint voluntary Exon-Florio notice
filing with respect to the Offer on June 10, 1996 with the Committee on Foreign
Investment in the United States ("CFIUS"). By letter dated July 11, 1996, Buyer
and Company were informed by CFIUS that CFIUS "has determined that there are no
issues of national security to warrant an investigation under section 721," and
that "action under section 721 is concluded with respect to this transaction."
The waiting period, by the terms prescribed under the Exon-Florio amendment,
expired July 10, 1996.
Except for the filing of the Merger Agreement with the Secretary of State
of the State of Washington, there are no federal or state regulatory
requirements which remain to be complied with in order for the Merger to be
consummated in accordance with the terms of the Reorganization and Merger
Agreements.
DISSENTERS' RIGHTS
Dissenting Shareholders who hold Dissenting Shares of record as of the
Effective Time of the Merger are entitled to appraisal rights under Section
23B.13.010 through 23B.13.280 of the WBCA ("Chapter 13"). A copy of the
provisions of Chapter 13 is reprinted in its entirety in Exhibit E to this Proxy
Statement. All references in Chapter 13 and in this discussion to a
"shareholder" are to the record holder of Dissenting Shares as to which
dissenters' rights are asserted. A person having a beneficial interest in
Dissenting Shares that are held of record in the name of another person, such as
a broker or nominee, must act promptly to cause the record holder to follow the
steps summarized below properly and in a timely manner to perfect whatever
appraisal rights the beneficial owner may have.
The following discussion is not a complete statement of the law relating to
dissenters' rights and is qualified in its entirety by reference to Exhibit E.
This discussion and Exhibit E should be reviewed carefully by any Dissenting
Shareholder who wishes to exercise statutory dissenters' rights or who wishes to
preserve the right to do so, since failure to comply with the procedures set
forth herein or therein will result in the loss of
29
<PAGE> 31
dissenters' rights. BECAUSE OF THE COMPLEXITY OF THE PROCEDURES FOR ENFORCING
THESE RIGHTS, SHAREHOLDERS WHO CONSIDER EXERCISING SUCH RIGHTS SHOULD SEEK THE
ADVICE OF COUNSEL.
Dissenting Shareholders of record who desire to exercise their dissenters'
rights must satisfy the following conditions. Dissenting Shareholders must: (i)
make written demand for such payment to Company before the taking of the vote on
the Merger, (such demand must be delivered to Company at 6100 Carillon Point,
Kirkland, WA 98033, Attention: Corporate Secretary), and (ii) not vote in favor
of the Merger. In order to constitute a valid exercise of rights to payment, the
written demand must be received by Company before the taking of the vote on the
Merger. The failure to vote for the Merger or a vote against the Merger by a
holder of Shares will not be deemed to satisfy such notice requirement. The
written demand for payment must specify: (i) the Dissenting Shareholder's name
and mailing address, (ii) the number of Dissenting Shares for which payment is
demanded, and (iii) that the Dissenting Shareholder is thereby demanding
appraisal of such Dissenting Shares. The demand for payment must be executed by
or for the Dissenting Shareholder of record, fully and correctly, as such
Dissenting Shareholder's name appears on the certificate or certificates
representing his Dissenting Shares. If the Dissenting Shares are owned of record
in a fiduciary capacity, such as by a trustee, guardian, or custodian, such
demand must be executed by the fiduciary. If the Dissenting Shares are owned of
record by more than one person, as in a joint tenancy or tenancy in common, such
demand must be executed by all record owners. An authorized agent, including an
agent for two or more record owners, may execute the demand for payment for a
shareholder of record; however, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, such person is
acting as agent for the record owner.
A record owner, such as a broker, who holds Dissenting Shares as a nominee
for others, may exercise dissenters' rights with respect to the Dissenting
Shares held for all or less than all beneficial owners of Dissenting Shares as
to which such person is the record owner. In such case, the written demand for
appraisal must set forth the number of Dissenting Shares covered by such demand.
Where the number of Dissenting Shares is not expressly stated, the demand will
be presumed to cover all Dissenting Shares outstanding in the name of such
record owner. Beneficial owners who are not record owners and who intend to
exercise appraisal rights should instruct their record owners to comply strictly
with the statutory requirements with respect to the exercise of appraisal
rights, before the taking of the vote on the Merger.
Within ten days after the Effective Time, Company will deliver a written
dissenters' notice (the "Dissenters' Notice") to all Dissenting Shareholders who
have satisfied the above described requirements. The Dissenters' Notice will:
(i) state where the payment demand must be sent and where and when certificates
for certificated Shares must be deposited; (b) inform holders of uncertificated
shares to what extent transfer of the Shares will be restricted after the
payment demand is received; (iii) include a form for demanding payment that
includes the date of the first announcement to news media or to shareholders of
the terms of the Merger and requires that the person asserting dissenters'
rights certify whether or not the person acquired beneficial ownership of the
Shares before that date; (iv) set a date by which Company must receive the
payment demand, which date may not be fewer than thirty nor more than sixty days
after the date the Dissenters' Notice was delivered; and (v) include a copy of
Chapter 13.
Within thirty days after either the Effective Time, or after the date the
Dissenters' Notice was delivered, whichever is later, Company will pay each
Dissenting Shareholder who properly delivered a Dissenters' Notice the amount
Company estimates to be the fair value of the Dissenting Shareholder's Shares,
plus accrued interest. Such a payment will be accompanied with: (i) Company's
balance sheet for fiscal year ended February 29, 1996; (ii) an explanation of
how Company estimated the fair value of the Shares; (iii) an explanation of how
interest was calculated; (iv) a statement of the dissenter's right to demand
payment under Section 23B.13.280 of the WBCA; and (v) a copy of Chapter 13.
In the event the Dissenting Shareholder is dissatisfied with the payment
paid for the Shares by Company, the Dissenting Shareholder may: (i) notify
Company in writing of the Dissenting Shareholder's own estimate of the fair
value of the Shares and accrued interest (the "Dissenting Shareholder's
Demand"), (ii) reject the payment by Company, and (iii) demand payment of the
Dissenting Shareholder's Demand. If Company does not satisfy the Dissenting
Shareholder's Demand, Company must commence a proceeding in the Superior
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<PAGE> 32
Court of King County, Washington, within sixty days after receiving the
Dissenting Shareholder's Demand and petition the court to determine the fair
value of the Shares and accrued interest.
Dissenting Shareholders owning Shares considering seeking payment should
consider that the fair value of their Dissenting Shares determined under Chapter
13 could be more than, the same as, or less than the consideration they are to
receive pursuant to the terms of the Reorganization and Merger Agreements, and
that opinions of independent experts as to fairness, from a financial point of
view, are not deemed determinative as to fair market value under Chapter 13.
Moreover, Company may argue in an appraisal proceeding that, for purposes of
such a proceeding, the fair value of the Shares is less than the price paid in
the Offer and the Merger. See Exhibit E to this Proxy Statement for further
information regarding the procedures required for perfecting appraisal rights in
connection with the Merger.
The costs of the appraisal proceeding shall be paid by Company, except that
the court may assess the costs against all or some of the Dissenting
Shareholders, in the amount the court finds equitable, to the extent the court
finds dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment. The court may also assess the fees and expenses of counsel
and experts for the respective parties, in amounts the court finds equitable.
CERTAIN LITIGATION
The Complaint, which seeks to be certified as a class action, was filed by
Crandon Capital Partners, a Florida partnership, on June 21, 1996 in the
Superior Court for King County, Washington on behalf of all persons who own
Shares against Company, except the defendants, against certain of Company's
directors, Buyer and Parent. The Complaint was served on Company July 8, 1996.
Service of process has also been affected on eight of the individual directors
and one former director. In the Complaint, the plaintiff has alleged, among
other things: (i) in negotiating the terms of the Reorganization Agreement and
arriving at the $19.45 per Share amount, the defendants participated in unfair
dealings toward the plaintiff and the other members of the Class (as defined in
the Complaint); (ii) the defendants violated their fiduciary and other common
law duties owed to plaintiff and to other members of the Class; and (iii) the
defendants have not exercised their independent business judgment, have acted
and are acting to the detriment of the Class, and are using their control over
Company to usurp for Parent the true value of Company's shares at an unfair
price.
Company believes the Complaint to be without merit and is defending the
action vigorously.
Although the Complaint stated that the plaintiff intended to seek to enjoin
the Offer, no motion for an injunction was filed prior to the consummation of
the Offer.
The plaintiff has served the Complaint on Buyer and has stated that it is
in the process of attempting to serve the Complaint on Parent and the remaining
unserved defendants. Plaintiff filed a Confirmation of Service dated July 19,
1996 reporting on the status of service on defendants, in which plaintiff also
states its plans to serve Parent and certain Netherlands resident defendants
pursuant to the terms of the Hague Convention. Plaintiff has stated that it
plans to accomplish service of the Complaint on these parties by October 2,
1996.
Plaintiff has propounded its first request for production of documents.
Company, Buyer and certain directors have obtained an agreement from the
plaintiff to extend the deadline for their response to the Complaint and the
document request until September 23, 1996.
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<PAGE> 33
MARKET PRICES OF AND DIVIDENDS ON STOCK
The Shares are traded on the NYSE and prices are quoted under the symbol
UVX. The following table sets forth, for each of the periods indicated, the high
and low sales prices per Share as reported on the NYSE.
UNIVAR CORPORATION
SALES QUOTATION
FISCAL YEAR ENDED FEBRUARY 28(29)
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1994 First Quarter......................................... $11.38 $ 9.50
Second Quarter........................................ 13.38 10.88
Third Quarter......................................... 14.25 10.00
Fourth Quarter........................................ 12.88 10.88
1995 First Quarter......................................... 11.50 9.75
Second Quarter........................................ 12.00 9.75
Third Quarter......................................... 14.50 11.75
Fourth Quarter........................................ 13.75 11.63
1996 First Quarter......................................... 12.75 10.38
Second Quarter........................................ 15.88 11.75
Third Quarter......................................... 16.25 12.25
Fourth Quarter........................................ 13.75 9.88
1997 First Quarter......................................... 12.75 10.13
Second Quarter........................................ 19.63 19.13
Third Quarter*........................................ 19.63 19.00
</TABLE>
- ---------------
* Through September 6, 1996.
Company has declared cash dividends of $0.075 per Share during each of the
last eight (8) quarters.
On May 31, 1996, the last full trading day before the first public
announcement of the intention to commence the Offer, the last reported sale
quotation of the Shares on the NYSE was $12.375 per Share. On June 3, 1996,
prior to the commencement of trading, Buyer announced the intention to commence
the Offer. On June 6, 1996, the last full trading day before the commencement of
the Offer, the closing sale price per Share on the NYSE was $19.25 per Share,
and on September 6, 1996, the last trading day prior to the printing of this
Proxy Statement, the closing sale price per Share on the NYSE was $19.375 per
Share.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Record Date, Parent, Buyer and their affiliates, beneficially own
21,083,480 Shares, or 97.15% of the Shares. Nicolaas J. Westdijk, Chairman of
Parent's Board of Management may be deemed to beneficially own such Shares. He
disclaims beneficial ownership of such Shares.
According to information available to Company as of the Record Date, all
other current executive officers and directors of Company tendered their Shares
in the Offer.
SELECTED FINANCIAL INFORMATION CONCERNING COMPANY
The following selected financial data relating to Company and Company
Subsidiaries have been taken or derived from the audited financial statements
and other records of Company. Such selected consolidated financial data are
qualified in their entirety by, and should be read in conjunction with, the
consolidated financial statements of Company as set forth in Company's 1996 10-K
and other reports filed by Company under the Exchange Act. See "INCORPORATION BY
REFERENCE."
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<PAGE> 34
UNIVAR CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
YEAR ENDED FEBRUARY 29, 1996
(THOUSANDS OF DOLLARS EXCEPT FOR SHARE DATA)
<TABLE>
<S> <C>
Sales............................................................................ $2,037,674
Cost of sales.................................................................... 1,756,840
----------
Gross margin..................................................................... 280,834
Operating expenses............................................................... 254,138
Reengineering and restructuring charges.......................................... 160
----------
Income (loss) from operations.................................................... 26,536
Interest expense................................................................. (15,226)
Other -- net..................................................................... 896
----------
Income (loss) before provision for (benefit of) taxes on income and minority
interest....................................................................... 12,206
Provision for (benefit of) taxes on income (loss)................................ 6,306
----------
Income (loss) before minority interest........................................... 5,900
Minority interest's share in income (loss)....................................... --
----------
Net income (loss)................................................................ $ 5,900
==========
Weighted average common shares outstanding....................................... 21,701
Net income (loss) per share...................................................... $ 0.27
Cash dividends declared per share................................................ $ 0.30
Total assets..................................................................... 740,605
Total interest bearing debt...................................................... 188,703
Long-term debt................................................................... 132,812
Working capital.................................................................. 75,443
Shareholders' equity............................................................. 179,606
Book value per share............................................................. $ 8.28
Return on beginning equity....................................................... 3.3%
</TABLE>
INCORPORATION BY REFERENCE
Company's Annual Report on Form 10-K for the fiscal year ended February 29,
1996, as amended, is hereby incorporated by reference as if set forth herein,
and attached as Exhibit C to this Proxy Statement.
Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1996,
is hereby incorporated by reference as if set forth herein, and attached as
Exhibit D to this Proxy Statement.
All documents subsequently filed by Company pursuant to sections 13(a),
13(c), 14, or 15(d) of the Exchange Act, prior to the date on which the Special
Meeting is held, shall be deemed incorporated herein by reference.
Company will provide by first class mail, without charge, within one
business day following receipt of a written or oral request by any person to
whom this Proxy Statement is delivered, a copy of any and all of the documents
that have been incorporated herein by reference and have not been included
herein (other than the exhibits thereto). Any such request should be directed
to: Univar Corporation, Corporate Secretary, 6100 Carillon Point, Kirkland, WA
98033.
INDEPENDENT PUBLIC ACCOUNTANTS
It is not expected that representatives of Arthur Andersen LLP will be
present at the Meeting.
33
<PAGE> 35
SHAREHOLDERS' PROPOSALS
If the Merger is not consummated, any proposals of holders of Shares
intended to be presented at the Annual Meeting of Shareholders of Company to be
held in 1997 must be received by Company, addressed to the Corporate Secretary,
6100 Carillon Point, Kirkland, WA 98033, no later than November 1, 1996, to be
considered for inclusion in the proxy statement and form of proxy relating to
that meeting. If the Merger is approved at the Special Meeting, no Annual
Meeting will be held in 1997.
34
<PAGE> 36
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
KONINKLIJKE PAKHOED N.V.
(ALSO KNOWN AS ROYAL PAKHOED N.V.),
UC ACQUISITION CORP.
AND
UNIVAR CORPORATION
DATED: MAY 31, 1996
A-i
<PAGE> 37
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C> <C>
1. THE TENDER OFFER................................................................ 1
1.1 The Tender Offer......................................................... 1
1.2 Buyer's Filings.......................................................... 2
1.3 Company Action........................................................... 2
1.4 Company Filings.......................................................... 2
1.5 Stock Plans.............................................................. 3
2. THE MERGER...................................................................... 4
2.1 Effective Time........................................................... 4
2.2 Closing.................................................................. 4
2.3 Effect of the Merger..................................................... 4
3. CONVERSION AND CANCELLATION OF SHARES........................................... 4
3.1 Conversion of Shares..................................................... 4
3.2 Surrender of Shares...................................................... 4
3.3 No Further Transfers of Shares........................................... 4
4. COVENANTS OF THE PARTIES........................................................ 4
4.1 Covenants of Parent and Buyer............................................ 4
(a) Government Approvals................................................ 4
(b) Notification of Breach of Representations, Warranties and
Covenants................................................................ 5
(c) Press Releases...................................................... 5
(d) Offer to Purchase Shares............................................ 5
(e) Litigation Developments............................................. 5
(f) Indemnification and Insurance....................................... 5
(g) Company Agreements and Plans........................................ 6
4.2 Covenants of Company..................................................... 6
(a) Approval by Company Shareholders.................................... 6
(b) Acceptance of Tender Offer.......................................... 6
(c) Agreements of Officers and Directors, and Major Shareholder......... 6
(d) Government Approvals................................................ 7
(e) Notification of Breach of Representations, Warranties and
Covenants................................................................ 7
(f) Compensation........................................................ 7
(g) Conduct of Business in the Ordinary Course.......................... 7
(h) Press Releases...................................................... 8
(i) No Merger or Solicitation.......................................... 9
(j) Dividends.......................................................... 9
(k) Accounting Methods.................................................. 9
(l) Additional Agreements.............................................. 10
(m) Litigation Developments.............................................. 10
(n) Employment Agreements............................................... 10
(o) Access to Properties, Books and Records; Confidentiality............ 10
(p) Resignation and Appointment of Directors............................ 10
(q) Approval of Merger.................................................. 10
(r) Deregistration...................................................... 10
4.3 Covenants of the Parties................................................. 10
</TABLE>
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<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C> <C>
5. REPRESENTATIONS AND WARRANTIES OF COMPANY....................................... 11
5.1 Corporate Status and Power to Enter into Agreements...................... 11
5.2 Execution and Delivery of the Agreement.................................. 11
5.3 Capitalization........................................................... 12
5.4 Employment Contracts and Benefits........................................ 12
5.5 Legal Actions and Proceedings............................................ 13
5.6 Retention of Broker or Consultant........................................ 13
5.7 Accuracy of Representations and Warranties............................... 13
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER.............................. 13
6.1 Corporate Status and Power to Enter into Agreements...................... 13
6.2 Execution and Delivery of the Agreement.................................. 14
6.3 Retention of Broker or Consultant........................................ 14
6.4 Financing................................................................ 14
6.5 Accuracy of Representations and Warranties............................... 14
7. CONDITIONS TO THE MERGER........................................................ 14
7.1 Conditions to the Obligations of Each Party.............................. 14
8. EXPENSES........................................................................ 15
9. AMENDMENT; TERMINATION.......................................................... 15
9.1 Amendment................................................................ 15
9.2 Termination.............................................................. 15
9.3 Notice................................................................... 15
9.4 Breach of Obligations.................................................... 15
9.5 Termination and Expenses................................................. 15
10. MISCELLANEOUS................................................................... 16
10.1 Notices.................................................................. 16
10.2 Binding Agreement........................................................ 17
10.3 Governing Law............................................................ 17
10.4 Attorneys' Fees.......................................................... 17
10.5 Entire Agreement; Severability........................................... 17
10.6 Counterparts............................................................. 17
10.7 Waivers.................................................................. 17
10.8 Survival of Representations and Warranties............................... 17
</TABLE>
<TABLE>
<CAPTION>
INITIAL
SECTION
EXHIBITS REFERENCE
-------------------------------------------------------------------------------- ---------
<C> <C> <S> <C>
A. Merger Agreement............................................................. 2.1
B. Director Agreements (Intentionally Omitted).................................. 4.2(c)
C. Shareholder Agreement (Intentionally Omitted)................................ 4.2(c)
</TABLE>
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<PAGE> 39
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated as of May 31, 1996
("Agreement"), is among KONINKLIJKE PAKHOED N.V. (also known as Royal Pakhoed
N.V.), a limited liability company formed and existing under the laws of The
Netherlands ("Parent"), UC ACQUISITION CORP., a Washington corporation and an
indirect wholly owned subsidiary of Parent ("Buyer"), and UNIVAR CORPORATION, a
Washington corporation ("Company").
WITNESSETH:
The Boards of Directors of Buyer and Company and the Supervisory and
Management Boards of Parent deem it advisable and in the best interests of
Parent, Buyer and Company and their respective shareholders to consummate the
business combination provided for herein whereby Parent would acquire Company
and the goodwill associated therewith through a two step transaction. First,
Buyer will commence a tender offer for Company's Common Stock, no par value
("Share" or "Shares"), in conformity with the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the applicable regulations thereunder (the
"Tender Offer"), and, second, following the consummation of the Tender Offer,
Buyer will be merged into Company (the "Merger"), with Company as the surviving
corporation. Alternatively, at Parent's option, Company may be merged into Buyer
pursuant to Section 2.3 hereof. Pursuant to the Merger and subject to the terms
and conditions herein, each holder of Shares will receive, in exchange for each
Share, an amount in cash, as specified in Section 3.1 of this Agreement and each
holder of options to purchase Shares will receive, in cancellation of such
options, an amount in cash as specified in Section 1.5 of this Agreement.
This Agreement and the Merger Agreement, as defined herein, have been
approved by the Supervisory and Management Boards of Parent and the Boards of
Directors of Buyer and Company and will be submitted for approval by the
shareholders of Company at a special meeting of its shareholders, if required
pursuant to applicable law or the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements provided for or contained
herein, the parties hereto agree as follows:
1. THE TENDER OFFER
1.1 The Tender Offer. Provided that nothing shall have occurred that would
result in a failure to satisfy any of the conditions set forth in Annex I
hereto, Buyer shall, as promptly as practicable after the date hereof, but in no
event later than five (5) business days following the public announcement of the
terms of this Agreement, commence the Tender Offer to purchase all of the
outstanding Shares pursuant to the terms thereof, at a price of Nineteen Dollars
and Forty-Five Cents ($19.45) per Share, in cash, as it may be adjusted pursuant
to the terms hereof (the "Price"). The Tender Offer shall be subject to the
condition that there shall be validly tendered in accordance with the terms of
the Tender Offer and not withdrawn prior to the expiration date of the Tender
Offer a number of Shares which, together with all Shares beneficially owned by
Parent and its "affiliates" and "associates" (as such terms are defined in Rule
12b-2 of the Exchange Act) (collectively, "Affiliates") represents at least a
majority of the Shares outstanding on a fully diluted basis (the "Minimum
Condition") and to the other conditions set forth in Annex I hereto. Unissued
Shares reserved for options which are cancelled pursuant to Section 1.5 shall
not be considered as outstanding Shares. Buyer will not, without the prior
written consent of Company, (a) decrease the Price; (b) decrease the number of
Shares sought pursuant to the Tender Offer; (c) impose additional conditions to
the Tender Offer; (d) change the expiration date of the Tender Offer so that the
Tender Offer ends less than thirty (30) "business days" (as defined in Rule
14d-1(c)(6) of the Exchange Act) from the date on which the Tender Offer is
first publicly announced or extend the expiration date beyond July 31, 1996,
provided that the expiration date of the Tender Offer may be extended by Buyer
to a date not later than August 31, 1996 if (i) any Government Approvals (as
defined in Section 4.1 hereof) shall not have been obtained by July 31, 1996, or
(ii) by July 26, 1996, less than eighty percent (80%) of the outstanding Shares
have been tendered for purchase pursuant to the Tender Offer, and Buyer
reasonably believes that eighty percent (80%) or more of the Shares will be
tendered, if the expiration date of the Tender Offer is extended; (e) waive or
modify the Minimum Condition; or (f) change
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<PAGE> 40
the conditions to the Tender Offer in any material respect, except that Buyer in
its sole discretion may waive any of the other conditions to the Tender Offer.
In the event the Tender Offer is extended beyond July 31, 1996 the Price shall
be increased by an amount equal to the product of the Price multiplied by the
prime interest rate as announced by Bank of America NW, N.A. (doing business as
Seafirst Bank) in Seattle, Washington as in effect on August 1, 1996, multiplied
by the quotient of the number of days that the Tender Offer is extended after
July 31, 1996, divided by three hundred and sixty-five (365). The foregoing
limitations shall not be applicable in the event this Agreement is terminated
pursuant to Section 9.2(d), in which event Buyer may modify its Tender Offer
subject only to the limitations of that certain Standstill Agreement among
Parent, Pakhoed Investeringen, B.V., Pakhoed USA, Inc. and Company dated
September 19, 1986 and amended June 3, 1992 (the "1986 Standstill Agreement").
1.2 Buyer's Filings. On or prior to the date the Tender Offer is
commenced, Buyer shall file with the Securities and Exchange Commission ("SEC")
a Tender Offer Statement on Schedule 14D-1 ("Schedule 14D-1") with respect to
the Tender Offer which will contain the offer to purchase and form of the
related letter of transmittal (which, together with any supplements or
amendments thereto, are collectively referred to herein as the "Tender Offer
Documents"), all in accordance with the requirements of the Exchange Act and
will disseminate the Tender Offer Documents to the holder of Shares. Buyer,
Parent, and Company each agrees promptly to correct any information provided by
it for use in the Tender Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect. Buyer
and Parent agree to take all steps necessary to cause the Tender Offer Documents
as so corrected to be filed with the SEC and to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Company and its counsel shall be given an opportunity to review
and comment on the Schedule 14D-1 and any amendments thereto prior to their
being filed with the SEC. Buyer and Parent each agrees to provide Company and
its counsel in writing with any comments Buyer, Parent or their counsel may
receive from the SEC or its staff with respect to the Tender Offer Documents
promptly after the receipt thereof.
1.3 Company Action. In accordance with Section 2.8 of the 1986 Standstill
Agreement, Company hereby consents to the Tender Offer and represents and
warrants that its Board of Directors, at a meeting duly called and held, has (a)
unanimously determined that this Agreement and the transactions contemplated
hereby, including the Tender Offer and the Merger, are fair to and in the best
interest of Company and its shareholders, and (b) unanimously approved this
Agreement and the transactions contemplated hereby, including the Tender Offer
and the Merger. Company further represents that Schroder Wertheim & Co.
Incorporated ("Schroder") has rendered to Company's Board of Directors its
opinion to be included in the Schedule 14D-9 (as defined in Section 1.4 hereof),
to the effect that the consideration to be received by the holders of the Shares
other than Parent and its affiliates pursuant to each of the Tender Offer and
the Merger is fair to such holders of Shares from a financial point of view.
Company will promptly furnish Parent with a list of its shareholders, mailing
labels and all available listings and computer files containing the names and
addresses of all record holders of Shares and lists of securities positions of
Shares held in stock depositories, in each case true and correct as of the most
recent practicable date (which shall not be more than ten (10) business days of
the date of this Agreement), and will promptly provide to Parent such additional
information (including, without limitation, updated lists of shareholders,
indicating the name and address of each record holder not previously furnished,
mailing labels and lists of securities positions) and such other assistance as
Parent may reasonably request in connection with the Tender Offer.
1.4 Company Filings. On or prior to the date that the Tender Offer is
commenced, Company will, in accordance with the requirements of the Exchange
Act, file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") which shall reflect the recommendations of Company's
Board of Directors referred to in Section 1.3 above. Company, Buyer and Parent
each agree promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect. Company agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws. Parent, Buyer and their counsel
shall be given an opportunity to review and comment on the Schedule 14D-9 and
any
A-2
<PAGE> 41
amendments thereto prior to their being filed with the SEC. Company agrees to
provide Parent, Buyer and their counsel in writing with any comments Company or
its counsel may receive from the SEC or its staff with respect to the Schedule
14D-9 and any amendments thereto promptly after the receipt of such comments.
1.5 Stock Plans.
(a) Each outstanding employee or non-employee director stock option to
purchase Shares or restricted stock award granted under the Stock Plans
described in Section 4.2(g)(vi) may be surrendered by the holder thereof to
Company after the commencement of the Tender Offer and prior to the Effective
Time for the right to receive in exchange therefor an amount determined by
multiplying (i) the excess of the Price per Share paid pursuant to the Tender
Offer over the applicable exercise price, if any, of such option or award by
(ii) the sum of (x) the number of Shares the holder of such option(s) may
purchase (taking into account Shares the holder may conditionally purchase under
the Stock Plans in the event of a "Change of Control" as defined in such Stock
Plans) had such holder exercised such option in full immediately prior to the
Effective Time plus (y) the number of Shares owned by the holder under
restricted stock awards. Any "Deferred Cash Incentive" or other award of cash or
other property which becomes available to the holder from Company upon the
exercise of an option, pursuant to the terms of the Stock Plans, shall also
become payable. All such amounts shall be payable by Company at the time the
Shares are accepted for payment by Buyer if the Minimum Condition has been
satisfied (or at such later time as the option or award is surrendered to
Company, but not later than the Effective Time).
(b) Prior to the Effective Time, Company shall either (i) obtain any
consents from holders of options to purchase Shares granted under the Stock
Plans, or (ii) make any amendments to the terms of such Stock Plans that are
necessary to give effect to the transactions contemplated by Section 1.5(a).
Notwithstanding any other provision of this Section, payment may be withheld in
respect of any employee or non-employee director stock option or award until all
necessary consents in respect of such stock options or awards are obtained.
(c) The Stock Plans shall terminate as of the Effective Time, and the
provisions in any other plan or arrangement of Company or the Company
Subsidiaries (as defined in Section 4.1(f)) providing for the offering,
issuance, purchase, transfer or grant of any capital shares of Company or any
interest in respect of any capital shares of Company shall be terminated as of
the Effective Time, and Company shall ensure that following the Effective Time
no holder of an employee or non-employee director stock option or any
participant in any Stock Plan or other plan or arrangement of Company or the
Company Subsidiaries shall have any right thereunder to acquire any capital
shares or any other interest in capital shares of Company or the Surviving
Corporation (as defined in Section 2.3). Any option which remains unexercised as
of the Effective Time shall be terminated, cancelled and converted into the
right to receive the cash payments provided for in Section 1.5(a).
(d) Company and the Surviving Corporation shall have the right to withhold
from amounts payable pursuant to this Section any foreign, federal, state or
local income or other payroll related taxes required to be withheld under
applicable laws. The Surviving Corporation and Parent shall indemnify holders of
options and awards against any "Excise Tax" and shall also make a "Gross-Up
Payment" as those terms are defined in the Change of Control Agreements, as
amended, referenced in Section 5.4(a). The obligation to indemnify against
Excise Taxes and make a Gross-Up Payment shall apply to all holders of options
or awards who are subject to an Excise Tax or against whom an Excise Tax is
subsequently asserted regardless of whether an individual Change of Control
Agreement is executed in favor of the option or award holder provided that such
holder enters into an agreement with Company or the Surviving Corporation
regarding the terms of such indemnity substantially identical to the form of the
amendments to the Change of Control Agreements with certain executive officers
as of May 31, 1996. The Surviving Corporation shall properly record, pay, and
report all withheld taxes to the proper tax authorities and furnish the employee
with all required information reports. The Surviving Corporation or Company
shall have the right to condition any payments made to holders of options and
awards on the execution and delivery by such holders of a mutually acceptable
release of claims.
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<PAGE> 42
2. THE MERGER
2.1 Effective Time. Subject to the terms and conditions of this Agreement,
upon the filing with the Washington Secretary of State of duly executed Articles
of Merger (including a Plan of Merger) as prescribed by the Washington Business
Corporation Act ("WBCA") substantially in the form attached hereto as Exhibit A
(the "Merger Agreement"), or at such time thereafter as is provided in the
Merger Agreement (the "Effective Time") on the date of such filing or other date
specified in the Merger Agreement (the "Effective Date") the Merger shall become
effective.
2.2 Closing. The closing of the Merger (the "Closing") will take place as
soon as practicable on the first (1st) business day after satisfaction of the
conditions set forth in Section 7 of this Agreement (the "Closing Date"), at the
offices of Graham & James LLP, 1001 Fourth Avenue Plaza, Suite 4500, Seattle,
Washington 98154-1065, unless another date or place is agreed to in writing by
the parties hereto.
2.3 Effect of the Merger. Subject to the terms and conditions of this
Agreement and the Merger Agreement, at the Effective Time on the Effective Date,
Buyer shall be merged into Company, and Company shall be the surviving
corporation (the "Surviving Corporation") in the Merger. All assets, rights,
goodwill, privileges, immunities, powers, franchises and interests of Company
and Buyer in and to every type of property (real, personal and mixed) and choses
in action, as they exist as of the Effective Date, shall pass and be transferred
to and vest in the Surviving Corporation by virtue of the Merger at the
Effective Time without any deed, conveyance or other transfer. The separate
existence of Buyer shall cease and the corporate existence of Company as the
Surviving Corporation shall continue unaffected and unimpaired by the Merger;
and the Surviving Corporation shall be deemed to be the same entity as each of
Company and Buyer and shall be subject to all of their duties and liabilities of
every kind and description. At the sole election of Parent, the Merger may be
structured so that Company shall be merged with and into Buyer with the result
that Buyer shall be the "Surviving Corporation." The 1986 Standstill Agreement
and the Confidentiality and Standstill Agreement, dated April 12, 1996, by and
among Company, Parent and subsidiaries of Parent (the "Confidentiality
Agreement") shall be terminated at the Effective Time on the Effective Date.
3. CONVERSION AND CANCELLATION OF SHARES
3.1 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any Shares, each of the
issued and outstanding Shares or fractional interests thereof (other than any
Shares owned by Buyer and its Affiliates and Shares as to which dissenters'
rights have been perfected) shall be converted into the right to receive an
amount in cash which shall be equal to the highest Price paid to holders of
Shares who tender their Shares in the Tender Offer. From and after the Effective
Time, all outstanding Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and the holders
of certificates formerly representing Shares (other than Shares held by Buyer
and its Affiliates) shall cease to have any rights with respect thereto other
than to receive the Price or any dissenters' rights they have perfected pursuant
to Section 23B.13.020 of the WBCA.
3.2 Surrender of Shares. Prior to the Effective Date, Buyer shall appoint
First Interstate Bank of Washington N.A. or Company's successor transfer agent,
or any other bank or trust company mutually acceptable to Buyer, Parent, and
Company, as exchange agent (the "Exchange Agent") for the purpose of exchanging
each certificate representing the Shares for the Price. As soon as practicable
after the Effective Date, each holder of Shares, upon surrender to the Exchange
Agent of one or more certificates for such Shares for cancellation, will be
entitled to receive a payment in cash of the Price for each Share or fraction
thereof.
3.3 No Further Transfers of Shares. At the Effective Date, the stock
transfer books of Company shall be closed and no transfer of Shares theretofore
outstanding shall thereafter be made.
4. COVENANTS OF THE PARTIES.
4.1 Covenants of Parent and Buyer.
(a) Government Approvals. Prior to the Effective Date, Parent and Buyer,
with the cooperation of Company, shall take or cause to be taken as promptly as
practicable all such steps as shall be necessary to
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<PAGE> 43
obtain all authorizations, consents, orders or approvals of, or declarations or
filings with, or terminations or expirations of waiting periods imposed by any
government agencies, as are required by law or otherwise, necessary or required
to consummate the Tender Offer and the Merger (collectively, the "Government
Approvals"), including but not limited to the filing of the notification and
report form required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended ("HSR Act"), the Exon-Florio Amendment to the Defense
Production Act of 1950 ("Exon-Florio"), the Competition Act (Canada) and the
Investment Canada Act and shall do any and all acts deemed by Company to be
reasonably necessary or appropriate in order to cause the Merger to be
consummated on the terms provided in this Agreement as promptly as practicable.
(b) Notification of Breach of Representations, Warranties and
Covenants. Parent and Buyer shall promptly give written notice to Company upon
becoming aware of the occurrence or impending or threatened occurrence of any
event which would cause or constitute a breach of any of the representations,
warranties, or covenants of Parent or Buyer contained or referred to in the
Merger Agreement or this Agreement and shall use its best efforts to prevent the
same or remedy the same promptly.
(c) Press Releases. Parent and Buyer shall not issue any press release or
written statement for general circulation to the public relating to the Merger,
this Agreement, or the Merger Agreement unless previously provided to Company
for review and approval (which approval will not be unreasonably withheld or
delayed) and shall cooperate with Company in the development and distribution of
all news releases and other public information disclosures with respect to this
Agreement, the Merger Agreement, and the Merger. Notwithstanding the foregoing,
Parent and Buyer may, without the consent of Company, issue any press release or
written statement for general circulation with regard to this Agreement, the
Merger Agreement, and the Merger that either Parent or Buyer determines is
required under any applicable law or regulation, provided that, prior to such
issuance, Parent and Buyer shall inform Company of their intent to make such
releases or statements, shall provide a copy thereof to Company and shall
provide Company with an opportunity to review and comment on the content of such
releases or statements.
(d) Offer to Purchase Shares. Parent and Buyer shall use their best
efforts in good faith to take or cause to be taken as promptly as practicable
all such steps as shall be necessary or appropriate in order to complete the
Tender Offer on the terms provided in the Tender Offer Documents prior to the
expiration thereof.
(e) Litigation Developments. Parent and Buyer agree to promptly advise
Company with respect to any and all material legal actions or other proceedings
or investigations that could impede the transactions contemplated hereby and to
promptly advise Company with respect to any significant developments arising in
connection with said actions, proceedings, or investigations. In the event that
any action, suit, proceeding or investigation relating hereto or to the
transactions contemplated hereby is commenced, whether before or after the
Effective Time, the parties hereto agree to cooperate and use their best efforts
to defend vigorously against and respond thereto.
(f) Indemnification and Insurance. With respect to events which occur
prior to the Effective Time, Parent agrees that all rights to indemnification
existing in favor of the present or former directors, officers, employees,
fiduciaries and agents of (i) Company, (ii) any corporation, partnership,
limited liability company, or other entity in which Company owns, directly or
indirectly, any equity interest and whose financial statements are consolidated
for accounting purposes under generally accepted accounting principles ("GAAP")
(the "Company Subsidiaries") or (iii) any "Pension Plans" (as defined in ERISA
Section 3(2)) or "Employee Welfare Benefit Plans" (as defined in ERISA Section
3(1)) which are sponsored by Company or the Company Subsidiaries, as provided in
Company's Articles of Incorporation or pursuant to any agreements previously
disclosed by Company to Parent in writing with specific reference to this
Section, or the articles of incorporation, bylaws, Board resolutions or similar
documents of the Company Subsidiaries as in effect as of the date hereof shall
survive the Merger and shall continue in full force and effect for a period of
not less than the statutes of limitations, if any, applicable to such matters.
Without limiting the foregoing, Company and, after the Effective Time, Parent
shall cause the Surviving Corporation to periodically advance expenses as
incurred with respect to the foregoing to the fullest extent permitted under the
provisions of
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<PAGE> 44
Company's Articles of Incorporation or the articles of incorporation of the
Company Subsidiaries. As of the Effective Time, Company shall, or in the event
Company is unable to do so, Parent shall cause the Surviving Corporation to
convert the current policies for directors' and officers' liability insurance
and ERISA or employee plan fiduciary liability insurance maintained by Company
and the Company Subsidiaries to a policy or policies for a term of six (6) years
after the Effective Date which shall cover events which occur prior to the
Effective Date, provided that the incremental cost of such policy or policies,
after applying all related prepaid insurance premiums, shall not exceed two
hundred thousand dollars ($200,000). To the extent that the premium for such
policy or policies exceeds two hundred thousand dollars ($200,000), Company or
the Surviving Corporation shall obtain reasonably available policies for not
less than such amount. Buyer and the Surviving Corporation shall pay all
expenses, including attorneys' fees, that may be incurred by any present or
former officer, director, employee, fiduciary or agent of Company or the Company
Subsidiaries in enforcing the indemnity and other obligations provided for in
this Section 4.1(f).
(g) Company Agreements and Plans. Parent, Buyer, and their affiliates,
shall cause the Surviving Corporation to honor and fully perform all agreements
and plans for the benefit of employees or non-employee directors which are not
terminated by the terms thereof or the terms hereof and continue after the
Effective Date, and which are disclosed to Parent and Buyer pursuant to Section
5.4(a).
4.2 Covenants of Company.
(a) Approval by Company Shareholders. As soon as practicable after the
expiration date of the Tender Offer, (i) if Buyer and its affiliates own or have
the right to acquire less than ninety percent (90%) of Company Shares, but more
than fifty percent (50%), Company shall cause the Merger, this Agreement, and
the Merger Agreement to be submitted promptly for the approval of its
shareholders at a special meeting to be called and held in accordance with
applicable laws and Company bylaws; or (ii) if, as a result of the Tender Offer,
Buyer owns or has the right to acquire ninety percent (90%) or more of Company
Shares, then at Buyer's sole election, Company shall comply with all applicable
procedures, deliver all required disclosure documents, and cooperate with Buyer
to consummate a merger between Buyer and Company pursuant to Section 23B.11.040
of the WBCA (a "short form merger"). The Board of Directors of Company, in
authorizing the execution and delivery of this Agreement by Company, shall at
all times prior to the Effective Date, subject to the discharge of their
fiduciary duty, recommend to Company shareholders that this Agreement, the
Merger Agreement, and the Merger be approved. If a special meeting of Company
shareholders is necessary or required, Company shall use its best efforts to
cause such meeting of its shareholders to take place as soon as practicable. In
connection with the call of such meeting, Company shall cause such proxy
materials or information statements, with any amendments thereto that may in the
judgment of its counsel be necessary or desirable, to be mailed to its
shareholders (the proxy materials or information statements, together with any
amendments or supplements thereto, being herein referred to as the "Proxy
Statement"). In connection with the procedures to complete a short form merger,
Company shall cause such information statements, with any amendments thereto
that may in the judgment of its counsel be necessary or desirable, to be mailed
to its shareholders (the information statement, together with any supplements
thereto, being herein referred to as the "Information Statement"). Prior to
mailing to its shareholders, Company shall give Parent and Buyer and their
counsel reasonable opportunity to review and comment on the Proxy Statement and
the Information Statement. Subject to the discharge of their fiduciary duty, the
Board of Directors of Company shall at all times prior to and during such
meeting of Company shareholders recommend that the transactions contemplated
hereby be adopted and approved and use its best efforts to cause such adoption
and approval.
(b) Acceptance of Tender Offer. Subject to the discharge of their
fiduciary duty, the Board of Directors of Company shall at all times prior to
the delivery of the Tender Offer Documents, and prior to the expiration of the
Tender Offer, recommend that the holders of Shares tender their Shares to Buyer
pursuant to the terms of the Tender Offer Documents and consent to and use their
best efforts to encourage the execution of agreements by a sufficient number of
Company shareholders to assure satisfaction of the Minimum Condition.
(c) Agreements of Officers and Directors, and Major Shareholder. Company
acknowledges and consents to the execution and delivery to Buyer and Parent by
(i) certain officers and members of its Board of
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Directors of agreements in the form attached hereto as Exhibit B (the "Officer
and Director Agreements"), and (ii) The Dow Chemical Company ("Dow") of an
agreement in the form attached hereto as Exhibit C (the "Shareholder
Agreement"). Subject to the exercise of its fiduciary duties, Company covenants
and agrees not to take any action which would interfere with or prevent the
performance of the Officer and Director Agreements and the Shareholder
Agreement.
(d) Government Approvals. Company shall cooperate in all reasonable
respects with Parent and Buyer in the performance of their undertaking pursuant
to Section 4.1(a) to obtain the Government Approvals. Prior to the Effective
Date, Company, with the cooperation of Parent and Buyer, shall take or cause to
be taken as promptly as practicable all such steps as shall be necessary to
obtain all Government Approvals and shall do any and all acts deemed by Parent
and Buyer to be reasonably necessary or appropriate in order to cause the Merger
to be consummated on the terms provided in this Agreement as promptly as
practicable.
(e) Notification of Breach of Representations, Warranties and
Covenants. Company shall promptly give written notice to Parent and Buyer upon
becoming aware of the occurrence or impending or threatened occurrence of any
event which would cause or constitute a breach of any of the representations,
warranties or covenants of Company contained or referred to in this Agreement
and shall use its best efforts to prevent the same or remedy the same promptly.
(f) Compensation. Except in accordance with budgets and plans previously
approved by Company's Compensation Committee, which have been disclosed to
Parent and Buyer, and in connection with the acceleration of stock options as
provided for in Section 1.5, and payments made under the Change of Control
Agreements (as amended) referred to in Section 5.4(a), neither Company nor any
of the Company Subsidiaries shall, prior to the Effective Date, make or approve
any increase in the compensation payable or to become payable to any of their
directors, officers, employees or agents with annual salaries in excess of
$75,000 (or the foreign equivalent) at the date hereof (including but not
limited to compensation through any profit sharing, pension, retirement,
severance, incentive or other employee benefit program or arrangement), nor
shall any bonus payment or any agreement or commitment to make a bonus payment
be made nor shall any stock option, warrant or other right to acquire capital
shares be granted, nor employment agreement (other than any such employment
agreement that may arise by operation of law upon the hiring of any new
employee) nor consulting agreement be entered into by Company with any such
directors, officers, employees or agents unless Parent or Buyer have given its
prior written consent.
(g) Conduct of Business in the Ordinary Course. Prior to the Effective
Time, Company and the Company Subsidiaries shall use reasonable efforts to
conduct their businesses and to maintain satisfactory relationships with
licensers, suppliers, distributors, and customers, all in accordance with their
ordinary and usual course of business. Prior to the Effective Time, neither
Company nor any of the Company Subsidiaries shall without the prior written
consent of Parent or Buyer or except as specifically contemplated by this
Agreement:
(i) amend its Articles of Incorporation or Bylaws;
(ii) authorize for issuance, issue, deliver, grant or sell any
additional capital shares, or securities convertible into such shares, or
issue or grant any rights, options or other commitments for the issuance of
such shares or convertible securities (other than the issuance of capital
shares and the conversion thereof or payment in lieu thereof pursuant to
that certain Agreement of Purchase and Sale of Stock between Company and
Dow dated as of June 4, 1991 and amended as of May 13, 1994 (the "Dow
Put/Call"), or of Shares pursuant to the exercise of outstanding options,
and the grant of any new options in accordance with budgets and plans
previously approved by Company's Compensation Committee); and
(iii) split, combine, or reclassify any of its capital shares or
declare, set aside or pay any dividend (whether in cash, stock, or
property) in respect to its Shares or redeem or otherwise acquire any of
its Shares other than the repurchase, at cost, of Shares issued to
employees pursuant to the terms of employee restricted stock or share
purchase agreements;
(iv) dispose of or acquire any material properties or assets except in
the ordinary course of business;
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(v) engage in any activities or transactions that are outside the
ordinary course of Company's business, other than funding with cash or
letters of credit the supplemental pension benefits plans as required under
the terms of such plans and the trusts for such plans;
(vi) materially amend any provision of Company's 1986 Long Term
Incentive Stock Plan, as amended and restated, 1992 Long Term Incentive
Plan, amended and restated as of April 23, 1996, 1993 Non-Employee Director
Stock Option Plan, and 1995 Incentive Stock Plan (collectively, the "Stock
Plans"), Pension Plans, or Employee Welfare Benefit Plans; or
(vii) incur any indebtedness for borrowed money, other than: (1)
amounts borrowed pursuant to and in accordance with the terms and
conditions of its existing lines of credit, or (2) amounts pledged or
potentially owed in connection with letters of credit which may be obtained
naming as beneficiaries the trustees of the trusts for supplemental pension
benefits plans as required under the terms of such trusts and plans.
Notwithstanding anything in this Agreement to the contrary, Company and the
Company Subsidiaries may take any or all of the following actions with respect
to their Pension Plans prior to the Effective Time without prior consent of
Parent or Buyer:
(1) amend the Pension Plans or the trusts funding such plans to the
extent necessary or desirable to (a) obtain favorable determination letters
from the Internal Revenue Service as to the Pension Plans' tax-qualified
status, (b) maintain the Pension Plans' tax-qualified status, (c) make
administrative changes to the operations of the Pension Plans provided such
changes do not significantly increase the cost of such plans, (d) clarify
the procedures for the funding of supplemental pension benefits through
contributions to trusts of cash or letters of credit, or (e) permit
Company, pursuant to a prohibitive transaction exemption obtained from the
U.S. Department of Labor, to guaranty and provide loans to Company's Univar
Corporation Uni$aver Tax Savings Investment Plan ("Uni$aver Plan") with
respect to a guaranteed investment contract which was issued by
Confederation Life Insurance Company and is held by that plan ("GIC");
(2) obtain letters of credit which name as beneficiary the trustees of
trusts which fund supplemental pension benefits as required or permitted by
the terms of the supplemental benefits plans and trusts, and secure such
letters of credit with assets of Company or the Company Subsidiaries as
required by the bank(s) issuing the letters of credit;
(3) take whatever steps are necessary to obtain the approval of the
U.S. Department of Labor and the Internal Revenue Service for Company's
guarantee of the book value of the GIC and Company's promise to make loans
to the Uni$aver Plan with respect to the GIC to the extent such action does
not have a material adverse effect on Company and the Company Subsidiaries
taken as a whole;
(4) make guarantee payments and loans to the Uni$aver Plan with
respect to the GIC; and
(5) establish a new supplemental benefits plan for Van Waters & Rogers
Ltd. which is similar to the existing supplemental benefits plan for Van
Waters & Rogers Ltd., except that it would be for those employees of Van
Waters & Rogers Ltd. who would participate in the Van Waters & Rogers Ltd.
Supplemental Benefits Plan but for the fact that they are U.S. citizens or
residents, establish a rabbi trust for such mirror plan which is similar to
the rabbi trust for Company, and take the actions described in (1) and (2)
above with respect to such mirror plan and rabbi trust.
(h) Press Releases. Company shall not issue any press release or written
statement for general circulation relating to this Agreement, the Merger
Agreement, or the Merger unless previously provided to Parent and Buyer for
review and approval (which approval will not be unreasonably withheld or
delayed) and shall cooperate with Parent and Buyer in the development and
distribution of all news releases and other public information disclosures with
respect to this Agreement, the Merger Agreement and the Merger. Notwithstanding
the foregoing, Company may, without the consent of Parent and Buyer, issue any
press release or written statement for general circulation with regard to this
Agreement, the Merger Agreement and the Merger that Company determines is
required under any applicable law or regulation, provided that, prior
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to such issuance, Company shall inform Parent and Buyer of its intent to make
such releases or statements, shall provide a copy thereof to Parent and Buyer,
and shall provide Parent and Buyer with an opportunity to review and comment on
the content of such releases or statements.
(i) No Merger or Solicitation.
(i) Except as contemplated by this Agreement and subject to the
continuing fiduciary duties of the Board of Directors of Company, prior to
the Effective Time, Company and the Company Subsidiaries shall not effect
or agree to effect any Business Combination; except for (x) any Business
Combination unanimously approved by Company's Board of Directors, (y) any
Business Combination which does not require approval by Company's Board of
Directors, or (z) any Business Combination approved by a majority of the
disinterested directors of Company (i.e., unaffiliated with Parent) in
accordance with Section 4.2(i)(iii) below. As used in this Agreement,
"Business Combination" shall mean (except as explicitly contemplated in
this Agreement) any tender or exchange offer, proposal for a merger,
consolidation, acquisition of assets or other takeover proposal or any
offer or proposal to acquire in any manner a ten percent (10%) or greater
interest in, or a substantial portion of outstanding capital shares of any
party or any proceedings for winding up and dissolution of Company or of
any of the Company Subsidiaries.
(ii) Prior to the Effective Date, neither Company nor any officer,
director or affiliate of Company, nor any investment banker, attorney,
accountant or other agent, advisor or representative retained by Company
shall solicit or encourage, directly or indirectly, any inquiries,
discussions or proposals for, nor propose any discussions or negotiations
looking toward, or enter into any agreement or understanding providing for,
any Business Combination.
(iii) In the event that the Board of Directors of Company receives a
bona fide unsolicited offer for a Business Combination or a bona fide
unsolicited indication of interest from any person, corporation, firm,
association, entity or group to engage in a Business Combination, and
reasonably determines, upon advice of counsel, that any duty to act or to
refrain from doing any act pursuant to this Agreement is inconsistent with
the continuing fiduciary duties of Company Board of Directors to the
shareholders of Company, Company shall within two (2) business days of
receipt of such indication or offer inform Parent of such interest or the
terms of such offer and may: (a) disclose the same nonpublic information as
provided to Parent to such corporation, firm, association, person or other
entity or group concerning the business and properties of Company and/or
afford any such party the same access as provided to Parent to the
properties, books or records of Company and the Company Subsidiaries or
otherwise assist or encourage any such party in connection with the
foregoing, all on no more favorable terms and conditions as set forth in
the Confidentiality Agreement, provided that if requested, Company Board of
Directors may provide nonpublic information not provided to Parent and/or
agree to more favorable terms and conditions so long as it promptly
provides the same information to Parent and/or modifies the Confidentiality
Agreement so as to make available the same terms and conditions for Parent,
or (b) if Company Board of Directors determines that their continuing
fiduciary duties would require their approval of any such unsolicited bona
fide offer for a Business Combination with another entity because the terms
of such offer are more favorable to Company's shareholders than the terms
set forth in this Agreement, then Company may accept such offer, provided
that prior to taking any such actions Company shall provide Parent with not
less than two (2) business days to modify the terms of its Tender Offer and
Tender Offer Documents and to propose to Company any corresponding
modifications to this Agreement.
(j) Dividends. Company shall not declare, set aside or pay any dividend or
other distribution in respect of the Shares (including, without limitation, any
stock dividend or distribution), except in the ordinary course of business and
not in amounts which materially exceed the amounts previously paid by Company.
(k) Accounting Methods. Company shall not change its methods of accounting
in effect at February 29, 1996, except as required by changes in GAAP as
concurred in by its independent auditors.
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(l) Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of Company, the
proper officers and directors of each party to this Agreement shall take all
such necessary or appropriate action.
(m) Litigation Developments. Company agrees to promptly advise Parent and
Buyer with respect to any and all legal actions or other proceedings or
investigations that either seeks to enjoin the transactions contemplated hereby
or collect damages or impose a monetary payment which could reasonably be
expected to exceed $5,000,000, and to promptly advise Parent and Buyer with
respect to any significant developments arising in connection with said actions,
proceedings or investigations.
(n) Employment Agreements. Company agrees to permit and shall give Parent
and Buyer the opportunity to negotiate employment agreements with Company
executives, provided that any such agreement shall be subject to the
consummation of the Tender Offer.
(o) Access to Properties, Books and Records; Confidentiality. Following
the consummation of the Tender Offer, Company shall give Parent and Buyer and
their counsel and accountants reasonable access, during normal business hours
and upon reasonable request, to all of its properties, books, contracts,
commitments and records including, but not limited to, the corporate, financial
and operational records, papers, reports, instructions, procedures, tax returns
and filings, tax settlement letters, material contracts or commitments,
regulatory examinations and correspondence and shall allow Parent and Buyer to
make copies of such materials (to the extent not legally prohibited) and shall
furnish Parent and Buyer with all such information concerning its affairs as
Parent and Buyer may reasonably request. Company shall also use its best efforts
to cause Company's accountants to make available to Parent and Buyer, their
accountants, counsel and other agents, to the extent reasonably requested in
connection with such review, Company's accountants' work papers and
documentation relating to its work papers and its audits of the books and
records of Company. Any information requested by Parent and Buyer shall be
subject to the provisions of the Confidentiality Agreement.
(p) Resignation and Appointment of Directors. Upon the execution of this
Agreement, Company shall deliver to Parent and Buyer contingent resignations of
all directors of Company who were not nominated by Parent. Such resignations
shall be contingent on the consummation of the Tender Offer. Upon the
consummation of the Tender Offer, Company shall accept the resignations of a
sufficient number of such directors as determined by Parent and Buyer to result
in Parent having representation on the Board of Directors of Company
proportionate to the percentage shareholding of Parent and its affiliated
companies, provided that the Board of Directors (excluding directors nominated
by Parent) shall have the right but not the obligation to designate up to four
current members of the Special Committee of the Board of Directors who shall
remain directors after the consummation of the Tender Offer until the Effective
Date. On the Effective Date, Company shall accept the resignations of any such
directors determined by Parent and Buyer who have not previously resigned.
(q) Approval of Merger. Subject to the discharge of their fiduciary duty,
the Board of Directors of Company shall at all times prior to the Effective
Date, recommend that the holders of Shares approve and consent to this
Agreement, the Merger and the Merger Agreement.
(r) Deregistration. Following the consummation of the Tender Offer and if
permitted by applicable rules and regulations, including the Exchange Act, at
the request of Parent or Buyer, Company shall take or cause to be taken as
promptly as practical any and all such steps as shall be necessary to terminate
the registration of the Shares under the Exchange Act and the listing of the
Shares on any stock exchange, including the New York Stock Exchange.
4.3 Covenants of the Parties. Parent and Buyer acknowledge the provisions
of the Confidentiality Agreement and confirm that the provisions thereof
continue to apply. Company agrees to treat as confidential all information
provided by Parent and Buyer, which is designated as, or from the content
clearly intended as, confidential information in the same manner as Company
treats similar confidential information of its own, and if this Agreement is
terminated, Company shall continue to treat all such information as confidential
and to cause its employees to keep all such information confidential and shall
return such documents theretofore
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delivered by Parent and Buyer as either of them shall request, and shall use
such information, or cause it to be used, solely for the purposes of evaluating
and completing the transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY.
Company represents and warrants to Parent and Buyer that except as
disclosed to Parent and Buyer in writing on a separate disclosure statement
previously provided by Company (the "Company Disclosure Statement"):
5.1 Corporate Status and Power to Enter into Agreements. Company (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Washington, and (ii) subject to the approval of this Agreement
and the Merger Agreement and the transaction contemplated hereby and thereby by
the shareholders of Company, it has all necessary corporate power to enter into
this Agreement and the Merger Agreement and to carry out all of the terms and
provisions hereof and thereof to be carried out by it. Company is duly qualified
to do business as a foreign corporation under the laws of each jurisdiction in
which the conduct of its business requires such qualification, except for
jurisdictions where failure to so qualify would not have a material adverse
effect on Company's business.
The Company Subsidiaries are each a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each of the Company Subsidiaries is duly qualified to do business
as a foreign corporation under the laws of such jurisdiction in which the
conduct of its business requires such qualification, except for jurisdictions
where failure to so qualify would not have a material adverse effect on its
business.
5.2 Execution and Delivery of the Agreement.
(a) The execution and delivery of this Agreement has been duly authorized
by the Board of Directors of Company and, when this Agreement, the Merger
Agreement, and the Merger have been duly approved by the affirmative vote of the
holders of a majority of the outstanding Shares, this Agreement, the Merger
Agreement and the Merger will be duly and validly authorized by all necessary
corporate action on the part of Company.
(b) This Agreement has been duly executed and delivered by Company and
(assuming due execution and delivery by and enforceability against Parent and
Buyer) constitutes the legal and binding obligations of Company, except as
enforcement may be limited by applicable bankruptcy laws or other similar laws
affecting creditors' rights generally, and except that the availability of
equitable remedies may be limited.
(c) The execution and delivery by Company of this Agreement and the
consummation of the transactions contemplated hereby, including the Tender Offer
(i) do not violate any provision of the Articles of Incorporation or Bylaws of
Company, any provision of federal or state law, or any governmental rule or
regulation (assuming (x) receipt of the Government Approvals, (y) receipt of the
requisite Company shareholder approval referred to in this Section 5.2, and (z)
the accuracy of the representations of Parent and Buyer set forth herein), and
(ii) do not require any consent of any person under, conflict with or result in
a breach of, or accelerate the performance required by any of the terms of any
material debt instrument, lease, license, covenant, agreement, or understanding
to which Company or any of the Company Subsidiaries is a party or by which it is
bound which are required to be disclosed by Company in filings made by it
pursuant to the Exchange Act or any order, ruling, decree, judgment, arbitration
award or stipulation to which Company or any of the Company Subsidiaries is
subject, or constitute a material default thereunder or result in the creation
of any lien, claim, security interest, encumbrance, charge, restriction, or
similar right of any third party upon any of the properties or assets of Company
or of any of the Company Subsidiaries. Without limiting the generality of the
foregoing, Company represents and warrants that:
(i) All of the actions necessary or required pursuant to the terms of
the 1986 Standstill Agreement to permit the transactions contemplated
hereby, the Tender Offer Documents, and the Merger Agreement have been
taken, including but not limited to, advance approval of the Agreement, the
Tender Offer, the Officer and Director Agreements, and the Shareholder
Agreement, from five-eighths ( 5/8) of the Unaffiliated Directors (as
defined in the 1986 Standstill Agreement) as required by Section 2.8 of the
1986 Standstill Agreement;
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(ii) the execution and delivery of this Agreement and the Merger
Agreement and the consummation of the transactions contemplated hereby and
thereby, including the Tender Offer, do not violate or breach any of the
terms of the 1986 Standstill Agreement; and
(iii) approval from only the majority of Company shareholders entitled
to vote is required in order to approve this Agreement, the Merger
Agreement and the Merger pursuant to Article IX of the Articles of
Incorporation of Company and to WBCA, and that the provisions of Article
VII of such Articles do not apply to this Agreement, the Merger Agreement
and the Merger.
5.3 Capitalization. The authorized capital shares of Company consists of
105,000,000 shares, of which 100,000,000 are authorized as common stock, no par
value, 21,735,415 of which are validly issued, fully paid and nonassessable and
currently outstanding, and 5,000,000 preferred shares, 105,000 of which are
designated and authorized as Series A Junior Participating Convertible Preferred
Shares ("Series A Shares") and of which none are issued and currently
outstanding; provided that Dow has the right to require Company to sell and
Company has the right to require Dow to purchase up to 107,874 Series A Shares
pursuant to the Dow Put/Call. Said shares have been issued in compliance with
all applicable registration or qualification provisions of state and federal
securities laws. No other equity securities of Company have been authorized,
issued or are outstanding. There are currently outstanding options to purchase
1,741,072 Shares, at a weighted average exercise price of $11.1485 per Share,
issued pursuant to the Stock Plans. Said options were issued and, upon issuance
in accordance with the terms of the outstanding options, said Shares shall be
issued, in compliance with all applicable securities laws. Other than as set
forth in this Section 5.3, there are no outstanding options, agreements, calls
or commitments of any character which would obligate Company to issue, sell,
pledge, assign, or otherwise encumber or dispose of, or to purchase, redeem, or
otherwise acquire, any Shares or any other equity security of Company, or
warrants or options relating to, rights to acquire, or debt or equity securities
convertible into, Shares or any other equity security of Company. Company has
delivered to Parent a true and correct copy of its options outstanding report,
which summarizes options issued pursuant to the Stock Plans as of May 30, 1996.
5.4 Employment Contracts and Benefits.
(a) Company has delivered to Parent and Buyer an accurate list setting
forth all bonus, incentive compensation, profit-sharing, pension, retirement,
stock purchase, stock option, deferred compensation, severance, retiree medical
plan and other fringe benefit plans, trust agreements, arrangements and
commitments of Company and of each of the Company Subsidiaries which is
incorporated in one of the United States, and will deliver within fifteen (15)
business days of the date of this Agreement a list of such plans, agreements,
arrangements and commitments for those Company Subsidiaries which are not
incorporated in one of the United States, together with copies of all such
plans, agreements, arrangements and commitments requiring any payments or
acceleration of any rights to acquire any Shares or any other equity security of
Company upon a change of control (the "Change of Control Agreements").
(b) With respect to each employee benefit plan (as defined in Section 3(3)
of ERISA) which is listed pursuant to Section 5.4(a) and which is subject to the
reporting, disclosure, and record retention requirements set forth in the
Internal Revenue Code of 1986, as amended (the "IRC"), and Part I of Subtitle B
of Title I of ERISA and the regulations thereunder, each of such requirements
has been fully met on a timely basis.
(c) With respect to each "Employee Benefit Plan" (as defined in Section
3(3) of ERISA) which is listed in Section 5.4(a) and which is subject to Part 4
of Subtitle B of Title I of ERISA, to the best of Company's knowledge, none of
the following now exists or has existed within the six-year period ending on the
date hereof:
(i) Any act or omission constituting a material violation of Section
402 of ERISA;
(ii) Any act or omission constituting a violation of Section 403 of
ERISA;
(iii) Any act or omission by Company or any of the Company
Subsidiaries, or by any director, officer or employee thereof, constituting
a violation of Sections 404 and 405 of ERISA;
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(iv) Any act or omission by any other person constituting a violation
of Sections 404 or 405 of ERISA;
(v) Any act or omission which constitutes a material violation of
Sections 406 or 407 of ERISA and is not exempted by Section 408 of ERISA or
which constitutes a violation of Section 4975(c) of the IRC and is not
exempted by Sections 4975(c) or (d) of the IRC; or
(vi) Any act or omission constituting a violation of Sections 503, 510
or 511 of ERISA.
(d) All contributions, premiums or other payments due from Company and the
Company Subsidiaries to (or under) any plan listed in Section 5.4(a) have been
fully paid or adequately provided for on the audited financial statements of
Company for the year ended February 29, 1996. All accruals thereon (including,
where appropriate, proportional accruals for partial periods) have been made in
accordance with GAAP consistently applied on a reasonable basis.
(e) Each plan listed pursuant to Section 5.4(a) complies in all material
respects with all applicable requirements of (i) the Age Discrimination in
Employment Act of 1967, as amended, and the regulations thereunder, (ii) Title
VII of the Civil Rights Act of 1964, as amended, and the regulations thereunder,
(iii) Titles I and IV of ERISA, and (iv) Section 401(a) of the IRC.
(f) Each plan listed pursuant to Section 5.4(a) complies in all material
respects with all applicable requirements of the health care continuation
coverage provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, and the regulations thereunder.
5.5 Legal Actions and Proceedings. Neither Company nor any of the Company
Subsidiaries is a party to, nor threatened with, any legal action or other
proceeding or investigation before any court, any arbitrator of any kind, or any
government agency, which have not been disclosed to Parent and Buyer and, which
to the best of Company's knowledge, (i) could result in damages or impose a
monetary payment which could reasonably be expected to exceed $5,000,000, or
(ii) could impede the transactions contemplated hereby. There is no labor
dispute, strike, slow-down, or stoppage pending or, to the best of the knowledge
of Company, threatened against Company or any of the Company Subsidiaries which
would have a material adverse effect on Company and any of the Company
Subsidiaries taken as a whole.
5.6 Retention of Broker or Consultant. No broker, agent, finder,
consultant, or other party (other than legal, auditing, tax and accounting
advisors) has been retained by Company or is entitled to be paid based upon any
agreements, arrangements, or understandings made by Company in connection with
any of the transactions contemplated by this Agreement, except that Company has
engaged Schroder to act as its financial advisor and to render an opinion
regarding the fairness of the Price and the Merger from a financial point of
view. Company has provided Parent and Buyer with a true and accurate copy of its
agreement with Schroder.
5.7 Accuracy of Representations and Warranties. No representation or
warranty by Company, and no statement by Company in the Company Disclosure
Statement or any certificate, agreement, schedule, the Tender Offer Documents,
the Proxy Statement, the Information Statement, or Schedule 14D-9 furnished in
connection with the transactions contemplated by this Agreement or the Merger
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make such
representation, warranty, or statement not misleading; provided, however, that
information as of a later date shall automatically modify information as of an
earlier date.
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer jointly and severally represent and warrant to Company
that:
6.1 Corporate Status and Power to Enter into Agreements. Parent is a
limited liability company duly organized, validly existing and in good standing
under the laws of The Netherlands and has all necessary corporate power to enter
into this Agreement and the Merger Agreement and to carry out all of the terms
and provisions hereof and thereof to be carried out by it. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington and has all necessary corporate power to enter into
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this Agreement and the Merger Agreement and to carry out all of the terms and
provisions hereof and thereof to be carried out by it.
6.2 Execution and Delivery of the Agreement.
(a) The execution and delivery of this Agreement and the Merger Agreement
has been duly and validly authorized by the Supervisory and Management Boards of
Parent and the Board of Directors of Buyer.
(b) This Agreement has been duly executed and delivered by each of Parent
and Buyer and (assuming due execution and delivery by and enforceability against
Company) constitutes a legal and binding obligation of each of Parent and Buyer
except as enforcement may be limited by applicable bankruptcy laws or other
similar laws affecting creditors' rights generally, and except that the
availability of equitable remedies may be limited.
(c) The execution and delivery by each of Parent and Buyer of this
Agreement and the Merger Agreement and the consummation of transactions
contemplated hereby, including the Tender Offer (i) do not violate any provision
of the applicable articles, bylaws, or other charter documents of Parent or
Buyer, any provision of foreign, federal, or state law or any governmental rule
or regulation (assuming (x) receipt of the Government Approvals, and (y)
accuracy of the representations of Company set forth herein), and (ii) do not
require any consent of any person under, conflict with, or result in a breach
of, or accelerate the performance required by any of the terms of, any material
debt instrument, lease, license, covenant, agreement, or understanding to which
either Parent or Buyer is a party or by which it is bound or any order, ruling,
decree, judgment, arbitration, award, or stipulation to which Parent or Buyer is
subject, or constitute a material default thereunder or result in the creation
of any lien, claim, security interest, encumbrance, charge, restriction, or
similar right of any third party upon any of the properties or assets of Parent
or Buyer.
6.3 Retention of Broker or Consultant. No broker, agent, finder,
consultant or other party (other than legal, auditing, tax and accounting
advisers and consultants disclosed to Company) has been retained by Parent or
Buyer or is entitled to be paid based upon any agreements, arrangements or
understandings made by Parent or Buyer in connection with any of the
transactions contemplated by this Agreement.
6.4 Financing. Parent has, or will have, sufficient funds available to
enable Buyer to purchase all of the Shares outstanding and to pay all related
contractual obligations, fees and expenses pursuant to, or becoming payable by
the Surviving Corporation as a result of, this Agreement, the Tender Offer, and
the Merger and shall make such funds available to Buyer or the Surviving
Corporation to consummate the Tender Offer, the Merger, and related transactions
as promptly as practicable following Buyer's becoming obligated to purchase
Shares pursuant to the Tender Offer or Merger.
6.5 Accuracy of Representations and Warranties. No representation or
warranty by Parent or Buyer and no statement by Parent or Buyer in the Tender
Offer Documents or any certificate, agreement or schedule furnished in
connection with the transactions contemplated by this Agreement or the Merger
Agreement, contains or will contain any untrue statement of material fact or
omits or will omit to state any material fact necessary to make such
representation, warranty, or statement not misleading to Company; provided,
however, that information as of a later date shall be deemed to modify
information as of an earlier date.
7. CONDITIONS TO THE MERGER
7.1 Conditions to the Obligations of Each Party. The obligations of
Company, Parent and Buyer to consummate the Merger are subject to the
satisfaction of the following conditions:
(a) no provision of any applicable law or regulation and no judgment,
injunction, order, or decree shall prohibit or restrain the consummation of
the Merger;
(b) all Governmental Approvals shall have been obtained, with such
exceptions as would not, individually or in the aggregate, have a material
adverse effect on Parent's or Company's business; and
(c) Buyer shall have purchased Shares pursuant to the Tender Offer
which satisfies the Minimum Condition.
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<PAGE> 53
8. EXPENSES
Parent, Buyer, and Company each agree to pay, without right of
reimbursement from the other party and whether or not the transactions
contemplated by this Agreement or the Merger Agreement shall be consummated, the
costs incurred by each such party incident to the performance of its obligations
under this Agreement and the Merger Agreement, including without limitation,
costs incident to the preparation of this Agreement, the Merger Agreement, the
Tender Offer Documents, the Schedule 14D-9, the Proxy or the Information
Statement (as the case may be) and incident to the consummation of the Merger
and of the other transactions contemplated herein and in the Merger Agreement,
including the fees and disbursements of counsel, accountants, consultants, and
financial advisers employed by such party in connection therewith. Without
limiting the foregoing, Company shall bear its own costs of preparing and
distributing (including postage) the Proxy Statement or the Information
Statement to its shareholders and other information relating to these
transactions.
9. AMENDMENT; TERMINATION
9.1 Amendment. This Agreement and the Merger Agreement may be amended in
writing by Parent, Buyer and Company at any time prior to the purchase of Shares
pursuant to the Tender Offer.
9.2 Termination. This Agreement and the Merger Agreement may be terminated
as follows:
(a) By the mutual consent of Parent, Buyer, and Company at any time
prior to the purchase of Shares pursuant to the Tender Offer.
(b) By either Company or Parent, if (i) as a result of the occurrence
of any of the conditions set forth in Annex I hereto, (a) Buyer shall have
failed to commence the Tender Offer within ten (10) days following the date
hereof or (b) the Tender Offer shall have terminated or expired in
accordance with its terms without Buyer having purchased Shares satisfying
the Minimum Condition, or (ii) the Tender Offer has not been consummated by
August 31, 1996, or such other mutually agreed to date.
(c) By Parent, if any person, entity, or 'group' (as defined in
Section 13(d)(3) of the Exchange Act) other than Parent and Buyer or Dow
acquires beneficial ownership of ten percent (10%) (except in bona fide
arbitrage transactions) or more of the outstanding Shares.
(d) By Parent, Buyer or Company, if prior to the Effective Time,
except for the transactions contemplated by this Agreement, Company and the
Company Subsidiaries shall have, pursuant to Section 4.2(i)(iii), effected
or agreed to effect any Business Combination, and the two (2) business days
provided for in Section 4.2(i)(iii)(b) shall have expired without a
modification to this Agreement which is approved by Company Board of
Directors.
(e) By Parent, if prior to the Effective Time, the Board of Directors
of Company shall have withdrawn or materially modified its approval or
recommendation of the Tender Offer, this Agreement, or the Merger.
9.3 Notice. The power of termination hereunder may be exercised by Parent,
Buyer, or Company, as the case may be, only by giving written notice, signed on
behalf of Company by its Chairman of the Board or President, or on behalf of
Parent and Buyer signed by Parent's Chairman of either its Supervisory or
Management Boards.
9.4 Breach of Obligations. If there has been a material breach by either
party in the performance of any of the obligations herein which shall not have
been cured within ten (10) business days after written notice thereof has been
given to the defaulting party, the nondefaulting party shall have the right to
terminate this Agreement upon written notice to the other party. In any event,
the nondefaulting party shall have no obligation to consummate any transaction
or take any further steps toward such consummation contemplated hereunder until
such breach is cured.
9.5 Termination and Expenses. If this Agreement is terminated pursuant to
Section 9.2, this Agreement shall become void and of no effect with no liability
on the part of any party hereto (unless such
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<PAGE> 54
termination is the result of a breach of this Agreement by such party). The
termination of this Agreement shall have no effect on the 1986 Standstill
Agreement or the Confidentiality Agreement (including without limitation the
Tender Offer Protocol attached as Exhibit B thereto). Termination of this
Agreement shall not terminate or affect the obligations of the parties to pay
expenses as provided in Section 8, to maintain the confidentiality of the other
party's information pursuant to Section 4.3 or the Confidentiality Agreement, or
the provisions of this Section 9.5 or of Sections 10.1, 10.3 or 10.4 or the
second sentence of Section 10.2 below and shall not affect any agreement after
such termination. If this Agreement shall be terminated by Parent pursuant to
Section 9.2(d), or if any of the events specified in Section 9.2(d) occurs
within twelve (12) months following termination of this Agreement pursuant to
Section 9.2, Company shall pay to Parent and Buyer, on demand, the aggregate sum
of $4,000,000. Any payment required pursuant to the preceding sentence shall be
paid no more than two (2) business days after demand by wire transfer of
immediately available funds. Company, Parent and Buyer agrees that any
termination of this Agreement or any payment made pursuant to this Section 9.5
shall not in any manner release or be construed as so releasing the
nonterminating party or parties from any liability or damage to the other party
or parties arising out of, in connection with or otherwise relating to, directly
or indirectly, such parties' failure in performance of any of its covenants or
agreements hereunder.
10. MISCELLANEOUS
10.1 Notices. Any notice or other communication required or permitted
under this Agreement shall be effective only if it is in writing and delivered
personally, or by overnight express or by facsimile or sent by internationally
recognized courier, shipping charges prepaid, addressed as follows:
To Parent and Buyer:
Koninklijke Pakhoed, N.V.
333 Blaak
3011 GB Rotterdam
The Netherlands
Attn: N.J. Westdijk, Chairman, Board of Management
Facsimile No.: 011-31-10-213-0512
With a copy to:
Nicholas C. Unkovic, Esq.
Graham & James LLP
One Maritime Plaza, Suite 300
San Francisco, California 94111-3492
Facsimile No.: (415) 391-2493
To Company:
Univar Corporation
6100 Carillon Point
Kirkland, Washington 98033
Attn: Paul H. Hough, President and Chief Executive Officer
Facsimile No.: (206) 889-4100
With a copy to:
Richard B. Dodd, Esq.
Preston Gates & Ellis
5000 Columbia Center
701 Fifth Avenue
Seattle, WA 98104-7078
Facsimile No.: (206) 623-7022
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<PAGE> 55
or to such other address as either party may designate by notice to the other,
and shall be deemed to have been given upon receipt.
10.2 Binding Agreement. This Agreement is binding upon and is for the
benefit of Parent, Buyer, Company, and the shareholders, officers, directors,
and employees of Company and their respective successors and permitted assigns.
This Agreement is not made for the benefit of any person, firm, corporation, or
association not a party hereto, and no other person, firm, corporation or
association shall acquire or have any right under or by virtue of this
Agreement. No party may assign this Agreement or any of its rights, privileges,
duties, or obligations hereunder without the prior written consent of the other
parties to this Agreement.
10.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Washington, without giving
effect to such State's choice-of-law principles.
10.4 Attorneys' Fees. In any action at law or suit in equity in relation
to this Agreement, the Merger Agreement, or the Merger, the prevailing party in
such action or suit shall be entitled to receive a reasonable sum for its
attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
10.5 Entire Agreement; Severability. This Agreement, the Confidentiality
Agreement (other than the Tender Offer Protocol attached as Exhibit B thereto),
the 1986 Standstill Agreement and the documents, certificates, agreements,
letters, schedules, and exhibits attached or required to be delivered pursuant
hereto set forth the entire agreement and understanding of the parties in
respect of the transactions contemplated hereby, and supersede all other prior
agreements, arrangements, and understandings relating to the subject matter
hereof. Each provision of this Agreement shall be interpreted in a manner to be
effective and valid under applicable law, but if any provision hereof shall be
prohibited or ruled invalid under applicable law, the validity, legality, and
enforceability of the remaining provisions shall not, except as otherwise
required by law, be affected or impaired as a result of such prohibition or
ruling.
10.6 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10.7 Waivers. Prior to or at the Effective Time, each of Parent, Buyer,
and Company shall have the right to waive any default in the performance of any
term of this Agreement by the other, to waive or extend the time for the
compliance or fulfillment by the other of any and all of the other's obligations
under this Agreement and to waive any or all of the conditions precedent to its
obligations under this Agreement, except any condition which, if not satisfied,
would result in the violation of any law or applicable governmental regulation.
No failure to exercise and no delay in exercising any right, remedy, or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, or power hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, or power provided
herein or by law or in equity. The waiver by any party of the time for
performance of any act or condition hereunder does not constitute a waiver of
the act or condition itself.
10.8 Survival of Representations and Warranties. The representations and
warranties contained herein and in any certificate or other writings delivered
pursuant hereto shall survive the purchase of Shares pursuant to the Tender
Offer but shall not survive the consummation of the Merger or the termination of
this Agreement. This Section 10.8 shall not limit any covenant or agreement of
the parties hereto which by its terms contemplates performance after the
Effective Time.
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[Remainder of page intentionally left blank]
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<PAGE> 57
IN WITNESS WHEREOF, Parent, Buyer, and Company have each caused this
Agreement and Plan of Reorganization to be signed, effective as of the date
written above.
KONINKLIJKE PAKHOED N.V.
By: /s/ N. J. WESTDIJK
--------------------------------------
N. J. Westdijk, Chairman, Board
of Management
UNIVAR CORPORATION
By: /s/ JAMES H. WIBORG
--------------------------------------
James H. Wiborg
Chairman of the Board of Directors
UC ACQUISITION CORP.
By: /s/ N. J. WESTDIJK
--------------------------------------
N. J. Westdijk, Chairman and
President
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<PAGE> 58
EXHIBIT A
ARTICLES OF MERGER
OF
UC ACQUISITION CORP.
AND
UNIVAR CORPORATION
To the Secretary of State
State of Washington
Pursuant to the provisions of the Washington Business Corporation Act
("WBCA"), the domestic business corporations herein named do hereby submit the
following Articles of Merger.
1. Annexed hereto and made a part hereof is the Plan of Merger for merging
UC Acquisition Corp. with and into Univar Corporation as adopted by resolution
at a meeting by the Board of Directors of UC Acquisition Corp. on ,
1996 and by resolution adopted at a meeting by the Board of Directors of Univar
Corporation on , 1996.
2. The merger was duly approved by the shareholders of UC Acquisition Corp.
and of Univar Corporation pursuant to WBCA 23B.11.030.
3. The effective time and date of the merger herein provided for shall be
the date that the Articles of Merger are filed with the Washington Secretary of
State.
Executed on , 1996.
UNIVAR CORPORATION
By:
------------------------------------
Name:
Capacity:
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<PAGE> 59
PLAN OF MERGER
PLAN OF MERGER adopted by UC Acquisition Corp., a business corporation
organized under the laws of the State of Washington, by resolution of its Board
of Directors on , 1996, and adopted by Univar Corporation, a
business corporation organized under the laws of the State of Washington, by
resolution of its Board of Directors on , 1996.
1. UC Acquisition Corp. and Univar Corporation shall, pursuant to the
provisions of the Washington Business Corporation Act, be merged with and into a
single corporation, to wit, Univar Corporation. Univar Corporation shall be the
surviving corporation at the effective time and date of the merger and is
sometimes hereinafter referred to as the "surviving corporation," and shall
continue to exist as said surviving corporation under its present name pursuant
to the provisions of the Washington Business Corporation Act. The separate
existence of UC Acquisition Corp., which is sometimes hereinafter referred to as
the "non-surviving corporation," shall cease at the effective time and date of
the merger in accordance with the provisions of the Washington Business
Corporation Act.
2. The articles of incorporation of the surviving corporation shall be the
Amended and Restated Articles of Incorporation of said surviving corporation at
the effective time and date of the merger, a copy of which is attached hereto as
Exhibit A.
3. The bylaws of the surviving corporation shall be the Amended and
Restated Bylaws of said surviving corporation at the effective time and date of
the merger and will continue in full force and effect until changed, altered, or
amended as therein provided and in the manner prescribed by the provisions of
the Washington Business Corporation Act.
4. The effective date of merger shall be the date upon which the Articles
of Merger are filed with the Secretary of State. Upon the effective date of the
merger: the separate corporate existence of UC Acquisition Corp. shall cease;
title to all real estate and other property owned by UC Acquisition Corp. or
Univar Corporation shall be vested in Univar Corporation without reversion or
impairment; and the surviving corporation shall have all liabilities of UC
Acquisition Corp. and Univar Corporation. Any proceeding pending by or against
UC Acquisition Corp. or Univar Corporation may be continued as if such merger
did not occur, or the surviving corporation may be substituted in the proceeding
for UC Acquisition Corp.
5. Each issued share of the non-surviving corporation shall, at the
effective time and date of the merger, be converted into one share of the
surviving corporation. The issued shares of the surviving corporation existing
prior to the merger shall be cancelled and retired and shall cease to exist, and
holders of certificates formerly representing shares of the surviving
corporation, other than those shares held by UC Acquisition Corp. and its
affiliates, shall cease to have any rights with respect thereto other than a
right to receive [$ ] per share or any dissenters' rights they have
perfected pursuant to Section 23B.13.210 of the Washington Business Corporations
Act. Any shares of Univar Corporation in the treasury of Univar Corporation on
the effective date of the merger shall be surrendered to the surviving
corporation for cancellation,and no shares of the surviving corporation shall be
issued in respect thereof.
6. Any shareholder of Univar Corporation who has the right to dissent from
this merger as provided in Section 23B.13.020 of the Washington Business
Corporation Act and who so dissents in accordance with the requirements of
Sections 23B.11.020 through 23B.13.280 of the Washington Business Corporation
Act, shall be entitled, upon surrender of the certificate or certificates
representing certificated shares or upon imposition of restrictions of transfer
of uncertificated shares, to receive payment of the fair value of such
shareholder's shares as provided pursuant to Section 23B.13.250 of the
Washington Business Corporation Act.
7. Unless the conditions of Section 23B.11.040 of the Washington Business
Corporation Act are satisfied, the Plan of Merger herein made and approved shall
be submitted to the shareholders of the non-surviving corporation and the
shareholders of the surviving corporation for their approval or rejection in the
manner prescribed by the provisions of the Washington Business Corporation Act.
8. In the event that the Plan of Merger shall have been approved by the
shareholders entitled to vote of the non-surviving corporation and by the
shareholders entitled to vote of the surviving corporation in the
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<PAGE> 60
manner prescribed by the provisions of the Washington Business Corporation Act,
the non-surviving corporation and the surviving corporation hereby stipulate
that they will cause to be executed and filed and/or recorded any document or
documents prescribed by the laws of the State of Washington, and that they will
cause to be performed all necessary acts therein and elsewhere to effectuate the
merger.
9. The Board of Directors and the proper officers of the non-surviving
corporation and of the surviving corporation, respectively, are hereby
authorized, empowered, and directed to do any and all acts and things, and to
make, execute, deliver, file, and/or record any and all instruments, papers, and
documents which shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Plan of Merger or of the merger
herein provided for.
10. The address of the registered office of the surviving corporation shall
be .
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<PAGE> 61
EXHIBIT B
(intentionally omitted)
EXHIBIT C
(intentionally omitted)
ANNEX I
(intentionally omitted)
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<PAGE> 62
EXHIBIT B
ANNEX A
LOGO
PERSONAL AND CONFIDENTIAL
May 31, 1996
Board of Directors
Univar Corporation
6100 Carillon Point
Kirkland, WA 98033
Members of the Board of Directors:
We understand that Royal Pakhoed N.V. ("Pakhoed") is contemplating the
acquisition of all of the outstanding shares of Common Stock of Univar
Corporation ("Univar" or the "Company") (the "Transaction"). The Transaction
will be effected in two steps, the first of which would be a tender offer (the
"Tender Offer") by UC Acquisition Corp. ("UC"), an indirect wholly-owned
subsidiary of Pakhoed, for all of the outstanding shares of Common Stock of the
Company (the "Shares") not currently owned by Pakhoed, UC or their affiliates,
pursuant to which shareholders of the Company other than Pakhoed, UC and their
affiliates would receive $19.45 net in cash in exchange for each Share tendered.
The Tender Offer must remain open for a period of at least 30 business days from
the date upon which the Tender Offer is first publicly announced. UC may extend
the expiration date of the Tender Offer to a date not later than July 31, 1996,
provided that UC may extend the expiration date of the Tender Offer to a date
not later than August 31, 1996 if (i) necessary Government Approvals (as defined
in the proposed Agreement and Plan of Reorganization among Pakhoed, UC and the
Company (the "Reorganization Agreement")) have not been obtained by July 31,
1996, or (ii) by July 26, 1996, less than 80% of the outstanding Shares have
been tendered pursuant to the Tender Offer. In the event the Tender Offer is
extended beyond July 31, 1996, the price per Share to be paid to shareholders of
the Company in the Tender Offer and the Merger (as defined below) shall be
increased by an amount equal to the product of (i) $19.45; (ii) the prime
interest rate as announced by Bank of America NW, N.A. (doing business as
Seafirst Bank) in Seattle, Washington as in effect on August 1, 1996; and (iii)
the quotient obtained by dividing (x) the number of days the Tender Offer is
extended through July 31, 1996 by (y) 365. The terms and conditions of the
Tender Offer are more fully described in the Reorganization Agreement.
Concurrent with the closing of the Tender Offer, the holder of each
outstanding option to purchase Shares which was not previously exercised would
receive in cash the positive difference, if any, between the highest price paid
to shareholders of the Company who tendered their Shares in the Tender Offer and
the exercise price per share of such option. Subsequent to the Tender Offer,
among other things, (i) the Company and UC would be merged and the surviving
corporation would be an indirectly wholly-owned subsidiary of Pakhoed (the
"Merger") and (ii) each remaining Share not owned by Pakhoed, UC or their
affiliates would be converted into the right to receive an amount in cash equal
to the highest price paid to shareholders of the Company who tendered their
Shares in the Tender Offer. The terms and conditions of the Merger are more
fully described in the Reorganization Agreement.
You have requested that Schroder, Wertheim & Co. Incorporated ("Schroder
Wertheim") render an opinion (the "Opinion"), as investment bankers, as to the
fairness, from a financial point of view, of the
TELEPHONE 212-492-6000 EQUITABLE CENTER, 787 SEVENTH AVENUE
NEW YORK, NY 10019-6016
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<PAGE> 63
consideration to be received by the shareholders of the Company other than
Pakhoed, UC and their affiliates in the Transaction (the "Transaction
Consideration").
Schroder Wertheim, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Schroder Wertheim has acted
as financial advisor to Univar with respect to the Transaction for which we have
received fees and will receive additional fees, a portion of which is contingent
upon consummation of the Transaction.
In connection with the Opinion set forth herein, we have, among other
things:
i. reviewed a draft, dated May 30, 1996, of the Reorganization
Agreement;
ii. reviewed a draft, dated May 30, 1996, of the Schedule 14D-1 to be
filed by UC with the Securities and Exchange Commission in connection with
the Tender Offer, including a draft of the Offer to Purchase incorporated
therein by reference (the "Offer to Purchase");
iii. reviewed a draft, dated May 30, 1996, of the Schedule 14D-9 to be
filed by the Company with the Securities and Exchange Commission in
connection with the Tender Offer;
iv. reviewed the Company's Annual Reports on Form 10-K filed with the
Securities and Exchange Commission for the fiscal years ended February
1992, 1993, 1994, 1995 and 1996, including the audited consolidated
financial statements of Univar included therein;
v. reviewed historical financial results of Univar by operating
division prepared by management;
vi. reviewed forecasts and projections for Univar prepared or supplied
by Univar management for the fiscal years ending February 1997 through
2002;
vii. held discussions with Univar management regarding the business,
operations and prospects of the Company;
viii. performed various valuation analyses, as we deemed appropriate,
of Univar using generally accepted analytical methodologies, including: (i)
the application to the financial results of Univar of the public trading
multiples of companies which we deemed comparable; (ii) the application to
the financial results of Univar of the multiples reflected in recent
mergers and acquisitions for businesses which we deemed comparable; and
(iii) discounted cash flow and leveraged buyout analyses of Univar's
operations;
ix. reviewed the historical trading prices and volumes of Univar
Common Stock; and
x. performed such other financial studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering the Opinion, we have assumed and relied upon the accuracy and
completeness of all information supplied or otherwise made available to us by
Univar or obtained by us from other sources, and upon the assurance of Univar's
management that they are not aware of any information or facts that would make
the information provided to us incomplete or misleading. We have not
independently verified such information, undertaken an independent appraisal of
the assets or liabilities (contingent or otherwise) of Univar, or been furnished
with any such appraisals. With respect to financial forecasts for Univar, we
have been advised by Univar, and we have assumed, without independent
investigation, that they have been reasonably prepared and reflect the best
currently available estimates and judgment as to the expected future financial
performance of Univar.
The Opinion is necessarily based upon financial, economic, market and other
conditions as they exist, and the information made available to us, as of the
date hereof. We disclaim any undertaking or obligation to advise any person of
any change in any fact or matter affecting the Opinion which may come or be
brought to our attention after the date of the Opinion unless specifically
requested to do so.
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<PAGE> 64
The Opinion does not constitute a recommendation as to any action the Board
of Directors of the Company or any shareholder of the Company should take in
connection with the Transaction or any aspect thereof. In rendering the Opinion,
we have not been engaged as an agent or fiduciary of the Company's shareholders
or of any other third party. The Opinion relates solely to the fairness from a
financial point of view of the Transaction Consideration to the shareholders of
Univar other than Pakhoed, UC and their affiliates. We express no opinion herein
as to the structure, terms or effect of any other aspect of the Transaction.
This letter is for the information of the Board of Directors of the Company
solely for its use in evaluating the fairness from a financial point of view of
the Transaction Consideration to the shareholders of the Company other than
Pakhoed, UC and their affiliates and may not be used for any other purpose or
referred to without our prior written consent.
Based upon and subject to all the foregoing, we are of the opinion, as
investment bankers, that as of the date hereof, the Transaction Consideration is
fair, from a financial point of view, to the shareholders of Univar other than
Pakhoed, UC and their affiliates.
Very truly yours
SCHRODER WERTHEIM & CO.
INCORPORATED
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<PAGE> 65
EXHIBIT C
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended February 29, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 1-5858
UNIVAR CORPORATION
<TABLE>
<S> <C> <C>
A WASHINGTON 91-0816142
CORPORATION I.R.S. EMPLOYER NO.
</TABLE>
6100 CARILLON POINT
KIRKLAND, WASHINGTON 98033
TELEPHONE NO. (206) 889-3400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
<S> <C>
Common Stock, No Par Value New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant at May 9, 1996 was approximately $123,719,000. As of such date,
21,681,447 shares of the registrant's no par common stock, which is the
registrant's only class of common stock, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
On June 3, 1996, the corporation announced that Royal Pakhoed N.V.
("Pakhoed"), a major shareholder of the Corporation, was initiating a tender
offer for all of the Common Shares (the "Shares") of the corporation. Pursuant
to the terms of an agreement and plan of reorganization (the "Reorganization
Agreement") dated as of May 31, 1996, among Pakhoed, the Corporation, and UC
Acquisition Corp., an indirect subsidiary of Pakhoed ("Buyer"), Buyer has
initiated a tender offer at a price of $19.45 per share (the "Tender Offer").
The Tender Offer began June 7, 1996, and will terminate July 15, 1996 unless
extended by Pakhoed.
On June 7, 1996, Pakhoed filed with The Securities and Exchange Commission
(the "Commission") a Tender Offer Statement on Schedule 14D-1, which includes an
Offer to Purchase ("Schedule 14D-1"). On June 7, 1996, the corporation filed
with the Commission a Solicitation/Recommendation Statement on Schedule 14D-9
("Schedule 14D-9"). Both of these filings are incorporated by reference. Copies
of these filings are available for copying at the offices of the Commission or
by calling D.F. King & Co., Inc., information agent for the Tender Offer, at
1-800-735-3591.
===============================================================================
<PAGE> 66
PART I
ITEM 1. BUSINESS
THE COMPANY
Univar Corporation (Univar, the Registrant, or the Corporation) was
incorporated in October, 1995. As of February 29, 1996, Univar changed its state
of incorporation from Delaware to Washington by means of a migratory merger. The
Delaware predecessor of the Corporation was incorporated in September, 1966 to
become the successor corporation in the merger of Van Waters & Rogers Inc. and
United Pacific Corporation, both long established companies then doing business
in the western United States and western Canada. For the fiscal year ended
February 29, 1996, Univar Corporation and its three wholly owned subsidiaries
were involved in the distribution of industrial, agricultural and pest control
chemicals and related products and services. In the United States, the
Corporation conducts its operations through Van Waters & Rogers Inc.; in Canada,
through Van Waters & Rogers Ltd.; and through Univar Europe N.V. (Univar Europe)
in the United Kingdom, Scandinavia, Switzerland, and northern Italy.
Distribution is the process by which manufacturers, both large and small,
move their products in the most economical way to many end users. As a
distributor of industrial, pest control, and agricultural chemicals and related
products, the Corporation's role is to purchase chemicals from manufacturers in
truck, railcar, or tankcar quantities and sell them in smaller quantities to
various customers. Univar adds value to its products through superior service,
selection, blending and packaging, delivery reliability, and provides customers
assistance with environmental and regulatory compliance.
The Corporation provides a hazardous waste management service in the U.S.
called ChemCare(R). ChemCare is a service providing its customers with logistics
management, temporary waste storage, and access to various treatment and
disposal technologies. ChemCare allows the Corporation to maximize existing
equipment, facilities and chemical handling knowledge to assist customers in
responsibly collecting and disposing of their chemical waste streams. It is, in
essence, a reverse distribution process, developed in response to customer
demand for help in coping with increasingly complex environmental regulations at
the federal, state, and local levels.
The Corporation does not, under ChemCare or any other program, actually
dispose of chemical waste streams. Rather, it contracts with Environmental
Protection Agency (EPA) permitted hazardous waste disposal sites to do so,
through incineration, recycling, or other means.
The Corporation is developing additional ancillary services in the U.S.,
including contract chemical management services, and third party logistics. The
Corporation provides contract management services through its VIMS(TM) services.
(Van Waters & Rogers Integrated Management Services). VIMS takes full advantage
of the Corporation's UVX2000(R) networked computer system combined with
expertise in sourcing, procuring, warehousing, and transporting to reduce
customers' costs of acquiring and managing products and materials. With its
Third Party Logistics business, the Corporation is making existing warehousing
capacities available to customers, along with services such as packaging and
terminaling of bulk liquids, for manufactured products.
Financial Information About Industry Segments The Corporation operates in
only one market segment, chemical distribution, through its wholly owned
subsidiaries, Van Waters & Rogers Inc. in the United States, Van Waters & Rogers
Ltd. in Canada, and Univar Europe N.V. in Europe. The ancillary services
described above are not material in relation to the Corporation's chemical
distribution business.
Operations in Canada and Europe for each of the last three years are
reported in the Univar Corporation financial statements on page 36 of this
filing, under the caption of Note 11. Such Industry Segment Information is
incorporated herein by reference.
RAW MATERIALS
Numerous sources of supply generally exist for nearly all raw materials
essential to the business.
C-1
<PAGE> 67
PATENTS, TRADEMARKS AND TRADENAMES
Univar and its subsidiaries own certain trademarks, servicemarks, and
tradenames which are subject to renewal at various dates beginning in 1997
through 2010. These marks and names are important in the Corporation's current
operations but not indispensable.
SEASONAL BUSINESS
Approximately 27% of annual sales occur in the first quarter of the year,
followed by approximately 26% in the second quarter, 24% in the third quarter
and 23% in the fourth quarter. While quarterly sales volumes do not vary
significantly, the mix of business during the year is subject to seasonal
variation. The Corporation markets pest control and agricultural products, which
together represented 13%, 12%, and 11% of sales, respectively, in fiscal 1996,
1995, and 1994. While sales of these products occur throughout the year,
approximately 69% of these annual sales occur during the first two quarters of
the fiscal year. Complimentary seasonal fluctuations of certain industrial
chemical sales, such as aircraft de-icing fluid, offset lower sales volumes of
agricultural and pest control products in the third and fourth quarters of the
fiscal year. This seasonal change in product mix results in expected fluctuation
of gross margin percentage from quarter to quarter during the year.
PRINCIPAL CUSTOMERS
No portion of the continuing operations of the Corporation is dependent
upon a single customer or a few customers, the loss of any one or more of which
would have a material adverse effect on the Corporation.
COMPETITIVE CONDITIONS
In the distribution of chemicals and related products, Van Waters & Rogers
Inc., Van Waters & Rogers Ltd., and Univar Europe N.V. compete with local,
regional, and national distributors, as well as with manufacturers who sell
directly to end users. Although Univar is one of the largest industrial chemical
distributors in North America and has expanded its operations to western Europe,
the Corporation faces significant competition from distributors who have a
larger market share within local and regional markets as well as from other
national distributors.
The Corporation competes on a variety of factors such as price, product
quality, customer service, selection of available products, reliability,
technical support, and delivery.
RESEARCH AND DEVELOPMENT
As a distributor, Univar and its subsidiaries do not engage in research
activities relating to the development of new products or the improvement of
existing products.
ENVIRONMENTAL MATTERS
See "The Environment" section of Management's Discussion and Analysis of
Financial Condition and Results of Operations on page 17 of this filing.
EMPLOYEES
As of February 29, 1996, Univar and its subsidiaries had 3,237 full-time
employees, of which 579 employees are members of various labor unions. At year
end, the Corporation was in negotiations with three labor unions in connection
with renewal of labor contracts. The Corporation generally enjoys good relations
with its employees.
BACKLOG
The Corporation records revenues as orders are shipped. Due to the nature
of the Corporation's business, no record of the backlog of orders is maintained.
C-2
<PAGE> 68
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE PAST FIVE YEARS POSITION HELD
- ------------------------------ --- -------------------------------------------- -------------
<S> <C> <C> <C>
James H. Wiborg (1)........... 71 Chairman of Registrant 1990-
Chairman Director
Paul Hough.................... 57 President and Chief Executive Officer of 1995-
President and CEO Registrant
Vice President of Registrant 1992-1995
President, Van Waters & Rogers Ltd. 1991-1995
Vice President, Van Waters & Rogers Ltd. 1988-1991
(Distribution of chemicals and related
products)
Jeffrey Ellwood............... 50 Vice President of the Registrant 1995-
Vice President Managing Director of Univar Europe 1991-
William A. Butler............. 45 Vice President, General Counsel, 1990-
Vice President, General and Corporate Secretary of Registrant
Counsel and Corporate
Secretary
Gary E. Pruitt................ 46 Chief Financial Officer 1995-
Chief Financial Officer Vice President -- Finance, Treasurer and 1992-1995
Assistant Corporate Secretary of the
Registrant
Vice President, Treasurer and Assistant 1989-1992
Corporate Secretary of Registrant
James L. Fletcher............. 52 Vice President of Registrant 1989-
Vice President
H. Drew MacAfee............... 46 Vice President -- Human Resources of 1995-
Vice President, Human Registrant
Resources Vice President -- Human Resources 1992-
Van Waters & Rogers Inc.
Vice President -- Human Resources 1985-1992
Spacelabs, Inc. (Medical Electronics)
</TABLE>
- ---------------
(1) Family Relationships: James H. Wiborg and N. Stewart Rogers, directors of
the Registrant, are brothers-in-law.
No arrangement or understanding exists between any officer and any other
person pursuant to which he or she was elected as an officer.
C-3
<PAGE> 69
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 29/28
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Sales.................................................. $2,037,674 $1,912,728 $1,802,464
Cost of Sales.......................................... 1,756,840 1,639,055 1,532,931
---------- ---------- ----------
Gross Margin........................................... 280,834 273,673 269,533
Operating Expenses..................................... 254,138 248,767 242,388
Reengineering Charges.................................. 160 37,361 4,507
---------- ---------- ----------
Income (Loss) from Operations.......................... 26,536 (12,455) 22,638
Other Income (Expense):
Interest expense..................................... (15,226) (11,973) (12,921)
Other -- net......................................... 896 709 525
---------- ---------- ----------
Income (Loss) Before Provision for (Benefit of)
Taxes on Income and Minority Interest................ 12,206 (23,719) 10,242
Provision for (Benefit of) Taxes on Income (Loss)...... 6,306 (8,066) 4,403
---------- ---------- ----------
Income (Loss) Before Minority Interest................. 5,900 (15,653) 5,839
Interest's Share in Income of Foreign Subsidiary....... -- 604 379
---------- ---------- ----------
Net Income (Loss)...................................... $ 5,900 $ (16,257) $ 5,460
========== ========== ==========
Net Income (Loss) Per Share............................ $ 0.27 $ (0.76) $ 0.28
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 70
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 29/28
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Cash Flows Provided by Operating Activities
Net income (loss)....................................... $ 5,900 $(16,257) $ 5,460
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................ 29,135 27,020 27,449
Loss on sale of fixed assets......................... 1,306
Deferred taxes on income............................. (4,430) (4,463) (2,452)
Other liabilities and deferred credits............... (2,024) 836 (1,483)
Non-cash portion of reengineering charges............ -- 16,389 --
Other -- net......................................... (707) 53 (294)
Change in assets and liabilities, net of effect of
businesses acquired:
Accounts receivable................................ (12,889) (11,656) (4,804)
Inventories........................................ (20,628) (5,864) 6,212
Accounts payable................................... 16,002 16,463 (3,991)
Other current assets............................... 1,221 (2,734) 5,226
Other current liabilities.......................... 6,212 (3,841) 4,063
------- ------- -------
Net Cash Provided by Operating Activities............ 19,098 15,946 35,386
------- ------- -------
Cash Flows Used by Investing Activities
(Increase in) proceeds from investments................. (208) 1,790 1,132
Additions to property, plant, and equipment............. (22,536) (21,437) (14,121)
Acquisition of businesses and investments............... (16,004) (32,065) (4,383)
Sale of business........................................ -- -- 2,812
Change in other assets.................................. 457 305 (106)
------- ------- -------
Net Cash Used by Investing Activities................ (38,291) (51,407) (14,666)
------- ------- -------
Cash Flows Provided (Used) by Financing Activities
Short-term borrowing -- net............................. 9,638 7,685 (6,813)
Common stock activity................................... 241 37,770 286
Long-term debt proceeds................................. 119,851 50,000 20,000
Reduction in long-term debt............................. (105,494) (50,704) (40,739)
Payment of dividends.................................... (6,477) (6,215) (5,895)
------- ------- -------
Net Cash Provided (Used) by Financing Activities..... 17,759 38,536 (33,161)
------- ------- -------
Effect of Exchange Rate Changes on Cash................... 971 911 (1,545)
------- ------- -------
Net Cash Provided (Used).................................. (463) 3,986 (13,986)
Cash and Equivalents at Beginning of Year................. 19,516 15,530 29,516
------- ------- -------
Cash and Equivalents at End of Year....................... $ 19,053 $ 19,516 $ 15,530
======= ======= =======
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest (net of capitalized interest)............... $ 15,212 $ 13,309 $ 13,325
Taxes on income...................................... 9,939 3,259 6,008
</TABLE>
The accompanying notes are an integral part of these statements.
C-5
<PAGE> 71
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 29/28
-----------------------
1996 1995
--------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents........................................................ $ 19,053 $ 19,516
Receivables --
Trade accounts (less allowance for losses of $1,924 in 1996 and $1,695 in
1995)................................................................... 261,272 233,844
Other.................................................................... 10,621 10,055
Inventories................................................................. 162,469 133,282
Prepaid expenses and other.................................................. 11,301 10,551
--------- ---------
Total current assets................................................ 464,716 407,248
Real Properties Held for Sale and Long-Term Receivables....................... 24,193 28,780
Property, Plant, and Equipment Land........................................... 23,950 24,052
Buildings................................................................... 117,410 112,267
Equipment................................................................... 230,129 222,448
Leased property under capital leases........................................ 6,716 5,213
Construction in progress.................................................... 3,763 7,251
--------- ---------
381,968 371,231
Accumulated depreciation and amortization................................... (167,957) (162,876)
--------- ---------
Net property, plant, and equipment....................................... 214,011 208,355
Other Assets.................................................................. 37,685 28,820
--------- ---------
$ 740,605 $ 673,203
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank overdrafts............................................................. $ 21,217 $ 19,584
Notes payable............................................................... 49,502 36,284
Current portion of long-term debt........................................... 6,389 3,978
Accounts payable............................................................ 253,500 222,675
Other accrued liabilities................................................... 58,665 48,119
--------- ---------
Total current liabilities................................................ 389,273 330,640
Long-Term Debt, less Current Portion.......................................... 132,812 122,086
Other Long-Term Liabilities
Deferred taxes on income.................................................... 8,903 12,408
Other liabilities and deferred credits...................................... 30,011 31,906
--------- ---------
Total other long-term liabilities........................................ 38,914 44,314
Commitments and Contingencies................................................. -- --
Shareholders' Equity
Preferred stock, no par value
Authorized 5,000,000 shares in 1996 and 750,000 shares in 1995........... -- --
Common stock, no par in 1996 and par value $.33 1/3 per share in 1995
Authorized -- 100,000,000 shares in 1996 and 40,000,000 shares in 1995
Issued -- 21,681,624 shares in 1996 and 24,018,502 shares in 1995........ 105,505 8,006
Additional paid-in capital.................................................. -- 107,799
Retained earnings........................................................... 73,859 74,428
Cumulative translation adjustment........................................... 246 (4,909)
Treasury stock, at cost, 2,222,539 shares in 1995........................... -- (9,087)
Deferred stock compensation expense......................................... (4) (74)
--------- ---------
Total shareholders' equity............................................... 179,606 176,163
--------- ---------
$ 740,605 $ 673,203
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 72
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE YEARS ENDED FEBRUARY 29, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DEFERRED
ADDITIONAL CUMULATIVE STOCK TOTAL
COMMON PAID-IN RETAINED TRANSLATION TREASURY COMPENSATION SHAREHOLDERS'
STOCK CAPITAL EARNINGS ADJUSTMENT STOCK EXPENSE EQUITY
-------- --------- -------- ----------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 28, 1993.... $ 7,339 $ 69,555 $ 97,495 $(1,041) $ (9,633) $ (425) $ 163,290
Net income.................. -- -- 5,460 -- -- -- 5,460
Exercise of stock options... -- 58 -- -- 85 -- 143
Cash dividends at $.30
per share................ -- -- (5,895) -- -- -- (5,895)
Foreign currency translation
adjustment............... -- -- -- (5,920) -- -- (5,920)
Purchase of treasury
stock.................... -- -- -- -- (44) -- (44)
Stock compensation
expense.................. -- -- -- -- (18) 205 187
Other....................... -- 185 -- -- -- -- 185
-------- --------- -------- ------- ----- -------- ---------
Balance, February 28, 1994.... 7,339 69,798 97,060 (6,961) (9,610) (220) 157,406
Net loss.................... -- -- (16,257) -- -- -- (16,257)
Sale of stock (2.0 million
shares).................. 667 36,813 -- -- -- -- 37,480
Exercise of stock options... -- 63 -- -- 62 -- 125
Stock awards (144,345
shares).................. -- 887 -- -- 587 (1,474) --
Cash dividends at $.30
per share................ -- -- (6,375) -- -- -- (6,375)
Foreign currency translation
adjustment............... -- -- -- 2,052 -- -- 2,052
Purchase of treasury
stock.................... -- -- -- -- (73) -- (73)
Stock compensation
expense.................. -- -- -- -- (53) 1,620 1,567
Other....................... -- 238 -- -- -- -- 238
-------- --------- -------- ------- ----- -------- ---------
Balance, February 28, 1995.... 8,006 107,799 74,428 (4,909) (9,087) (74) 176,163
Net income.................. 5,900 5,900
Exercise of stock options... 176 164 340
Cash dividends at $.30
per share................ (6,469) (6,469)
Foreign currency translation
adjustment............... 5,155 5,155
Purchase of treasury
stock.................... (1,559) (1,559)
Stock compensation
expense.................. 70 70
Reincorporation in
Washington State......... 97,493 (107,975) 10,482 --
Other....................... 6
-------- --------- -------- ------- ----- -------- ---------
Balance, February 29, 1996.... $105,505 $ -- $ 73,859 $ 246 $ -- $ (4) $ 179,606
======== ========= ======== ======= ===== ======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 73
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Corporation and all of its majority-owned domestic and foreign subsidiaries,
after elimination of significant intercompany accounts and transactions.
The Corporation's 100% owned subsidiary, Univar Europe N.V. (Univar
Europe), is consolidated using its financial year-end, December 31.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results are likely to differ from those estimates and
it is possible the difference may be significant.
REVENUE RECOGNITION
The Corporation records revenues as orders are shipped.
INVENTORIES
Inventories consist primarily of finished goods. The methods of valuation
of inventories at the balance sheet dates were as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
At Cost (last-in, first-out method).................... $ 81,781 $ 66,571
At Lower of Cost or Market (average-cost method)....... 80,688 66,711
-------- --------
$162,469 $133,282
======== ========
</TABLE>
If the inventories valued on the last-in, first-out (LIFO) method had been
valued at average costs, they would have been $34.4 million and $32.0 million
higher than reported at year-end 1996 and 1995, respectively.
During fiscal 1995, the Corporation experienced decreases in certain LIFO
inventories that were carried at lower costs prevailing in prior years. The
effect of these decreases was to increase earnings before income taxes by
approximately $1.4 million in fiscal year 1995.
PROPERTY, PLANT, & EQUIPMENT
Expenditures for property, plant, and equipment and for renewals and
betterments that extend the originally estimated economic lives of assets are
capitalized at the related cost. Expenditures for maintenance, repairs, and
other renewals are charged to expense. Gain or loss is recognized for
dispositions. For financial reporting purposes, depreciation has been provided
using the straight-line method over the estimated useful lives of the related
assets which range from three to forty years. For income tax purposes,
depreciation on certain assets is computed using accelerated methods. Interest
cost of approximately $0.4 million for fiscal year 1995 was capitalized to the
cost of new assets.
Costs incurred in developing or purchasing management information systems
are capitalized and included in property, plant, and equipment. These costs are
depreciated over their estimated useful lives from the date the systems become
operational.
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<PAGE> 74
INTANGIBLE ASSETS
Intangible assets, which consist of goodwill and covenants not to compete,
are amortized using the straight-line method over their estimated useful lives,
typically not more than twenty and ten years, respectively.
ENVIRONMENT
Accruals for contamination removal costs are recorded when it is probable
that a liability has been incurred and the amount of the liability can be
reasonably estimated. Accruals for such environmental liabilities are included
in the balance sheet caption "Other Liabilities and Deferred Credits." Accruals
for insurance or other third-party recoveries for environmental costs are
recorded when it is probable that recoveries on the claim will be realized.
Environmental costs are capitalized if the costs extend the life of the
property, increase its capacity, and/or mitigate or prevent contamination from
future operations. Costs related to investigation of potential environmental
matters are expensed as incurred.
SELF-INSURANCE RESERVES
The Corporation retains certain exposures in its insurance plan under
various deductible or self-insured programs. Reserves for claims made are
recorded at estimated costs as current liabilities. Reserves for estimated
claims incurred but not yet reported are recorded as other long-term
liabilities.
INCOME TAXES
Taxes on income are calculated using the asset and liability method which
results in recognition of deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts
and tax basis of assets and liabilities, using enacted rates. The principal
differences between financial and tax reporting arise from depreciation,
self-insurance, reengineering, restructuring and other accruals and reserves,
pension accruals, alternative minimum tax credits, foreign tax credits, and net
operating loss carryforwards. Accumulated undistributed earnings after taxes for
the Canadian subsidiary amounted to approximately $74 million at February 29,
1996. The European subsidiaries have accumulated undistributed earnings of
approximately $9 million at February 29, 1996. No provision for foreign
withholding or United States federal income taxes is necessary, as it is
management's intention that dividends will be paid only under circumstances
which will not generate additional net tax cost.
MINORITY INTEREST
The Corporation acquired the minority shareholder's 49% interest in Univar
Europe during fiscal 1995, as described in Note 8.
FAIR VALUE
The carrying value of financial instruments approximates fair value, unless
otherwise disclosed. Fair values have been estimated using available market
prices for similar issues and maturities.
TRANSLATION OF FOREIGN CURRENCY
Local currencies have been used as the functional currency throughout the
world. The balance sheet accounts of foreign subsidiaries are translated using
the exchange rates in effect at their respective years-end. Results of
operations are translated using the average exchange rates prevailing throughout
the periods. The effects of unrealized exchange rate fluctuations on translating
foreign currency assets and liabilities into U.S. dollars are accumulated as the
cumulative translation adjustment in shareholders' equity. Realized gains and
losses from foreign currency transactions are included in net income for the
period.
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<PAGE> 75
DERIVATIVES
The Corporation has limited involvement with derivative financial
instruments and does not use them for trading purposes. Derivatives are used to
manage well-defined interest rate and foreign exchange risks. Interest rate
swaps are entered into with major banks in which the Corporation pays a floating
rate and receives a fixed rate with interest payments being calculated on a
notional amount, as described in Note 3. Amounts received or paid by the
Corporation at the settlement dates under the swap agreements are included in
interest expense. Forward foreign exchange contracts are used to hedge
fluctuations in prices on inventory purchases caused by changes in exchange
rates and as hedges for foreign denominated accounts receivable and payable.
Foreign exchange contracts have gains and losses recognized at the settlement
date. The use of derivatives does not have a significant effect on the
Corporation's results of operations or its financial position.
EARNINGS PER SHARE
Net income (loss) per common share is based on the weighted average number
of shares outstanding during each year (21,700,672 for 1996, 21,345,622 for
1995, and 19,703,273 for 1994 ). There is no material dilution due to
outstanding stock options.
STATEMENTS OF CASH FLOWS
The Corporation considers cash on hand, certificates of deposit, and
short-term marketable securities with maturities of less than 90 days, as cash
and equivalents for purposes of the statements of cash flows.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1995, the Financial Accounting Standards Board issued FASB Statement
No. 123, "Accounting for Stock-Based Compensation." The Company plans to
continue to measure compensation cost of employee stock option plans using the
intrinsic value method prescribed by APB Opinion No. 25, and starting in fiscal
1997, to make pro forma disclosures of net income and earnings per share as if
the fair value method prescribed by FASB No. 123 had been applied.
During the fourth quarter of fiscal 1996, the Corporation adopted FASB No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This Statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the sum of the expected
future cash flows is less than the carrying amount of the asset, an impairment
loss is recognized. This Statement also requires that long-lived assets and
certain identifiable intangibles to be disposed of be reported at the lower of
carrying amount or fair value less cost to sell. Adoption of FASB No. 121 had no
impact on the Corporation's results of operations or financial position.
NOTE 2 -- NOTES PAYABLE
As of February 29, 1996, the Corporation has domestic and foreign
short-term lines of credit totaling $105.9 million, with loans against these
bank lines of $49.5 million. The approximate average aggregate short-term
borrowing and weighted average short-term interest rates were $57.6 million and
6.6% in 1996, and $50.6 million and 5.8% in 1995. The maximum amount of
short-term borrowing during the year was $71.0 million in 1996 and $75.4 million
in 1995.
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<PAGE> 76
NOTE 3 -- LONG-TERM DEBT AND REVOLVING CREDIT
Long-term debt consists of the following at February 29/28:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Senior Debt:
Revolving credit agreement................................... $115,000 $100,000
Multi-currency revolving credit agreement.................... 13,133 --
Term credit agreements, 5.26% and 9.84%, unsecured........... -- 13,333
Industrial revenue bonds, 7.25%, secured by certain real
property, payable in installments to 1999................. 750 1,000
Non-U.S. mortgage loans, 5.75%, payable in installments to
fiscal 1997............................................... 2,167 1,949
Other........................................................ 4,818 6,117
Capitalized Lease Obligations:
8.51% to 11.75%, secured by certain real property, payable in
monthly installments to 2020.............................. 3,333 3,665
------- -------
139,201 126,064
Current portion................................................ (6,389) (3,978)
------- -------
$132,812 $122,086
======= =======
</TABLE>
Maturities of long-term debt for the fiscal years ending 1998-2001 are as
follows:
<TABLE>
<S> <C>
1998.............................................. $1,001
1999.............................................. 688
2000.............................................. 476
2001.............................................. 470
</TABLE>
The Corporation and its domestic subsidiary are parties to a revolving
credit agreement with a group of banks. Under the terms of the agreement, the
borrowers may borrow up to $195 million at the prime rate, certificate of
deposit rate plus 7/8%, or LIBOR (London Interbank Offering Rate) plus 7/8%,
at the Corporation's option. The interest rates in effect were 6.59% and 7.04%
as of year-end 1996 and 1995, respectively. The credit commitment extends for
three years, with annual one year renewals, thereafter.
In addition, the agreement requires fees of 1/4% on unused commitments.
During the year, the foreign subsidiaries of the Corporation entered into a
multi-currency revolving credit agreement with a group of banks. Under the terms
of the agreement, which is guaranteed by the Corporation and its U.S.
subsidiary, the borrowers may borrow up to the U.S. dollar equivalent of $90
million at the U.S. prime rate or the Canadian B/A rate plus 5/8%, for Canadian
dollar loans, or LIBOR plus 5/8% for loans in all other authorized currencies,
at the borrower's option. The weighted average interest rate in effect as of
year-end 1996 was 5.4%. The credit commitment extends for three years, with
annual one year renewals. In addition, the agreement requires fees of 1/4% per
annum on the total commitment amount.
The long-term debt instruments include provisions specifying current ratio,
interest bearing debt to equity ratios, and a minimum equity level, among other
restrictions. Under the most restrictive of the financial covenants, the
Corporation's current ratio, as defined, may not fall below 1.20:1; the ratio of
total interest bearing debt, as defined, to equity may not exceed 1.40:1; and
the Corporation's shareholders' equity may not be less than $156.4 million. At
year end, the Corporation was in compliance with all loan covenants.
The Corporation has entered into certain interest rate swap agreements to
manage its exposure to interest rate fluctuations. At February 29, 1996, the
aggregate notional amount of these agreements totaled $50 million, with a
weighted average remaining life of approximately 5 years. These agreements
effectively convert a portion of the Corporation's floating rate debt to fixed
rate debt with rates ranging from 6.77% to 7.25%. The
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<PAGE> 77
estimated aggregate fair value of the contracts, as measured by the amount the
Corporation would have paid if the agreements were terminated at the balance
sheet date, was approximately $1.9 million. The Corporation is exposed to, but
does not anticipate, credit loss in the event of counterparty nonperformance.
NOTE 4 -- LEASES
Rental expense was $25.2 million, $24.1 million, and $23.2 million, for
1996, 1995, and 1994, respectively. The Corporation and its subsidiaries occupy
certain leased premises and lease certain other equipment. Leases that qualify
as capital leases have been capitalized. The amount of such capitalized leases
included in property, plant, and equipment and the related accumulated
amortization was $6.7 million and $2.4 million in 1996, and $5.2 million and
$2.3 million in 1995. Lease amortization is included in depreciation expense.
Future minimum lease payments as of year-end under capital leases and
non-cancelable operating leases, having initial lease terms of more than one
year, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
THOUSANDS OF DOLLARS
<S> <C> <C>
1997............................................................ $ 707 $25,042
1998............................................................ 707 19,010
1999............................................................ 707 13,017
2000............................................................ 707 9,259
2001............................................................ 616 6,548
Thereafter...................................................... 1,452 13,213
------- -------
Total minimum lease payments.................................... 4,896 $86,089
=======
Amounts representing interest................................... (1,563)
-------
Present value of net minimum lease payments..................... $ 3,333
=======
</TABLE>
The present value of the capital lease payments is presented in the 1996
balance sheet as long-term debt.
NOTE 5 -- REENGINEERING CHARGES
In the second quarter of fiscal 1994, the Corporation began work on a
strategic business transformation of its U.S. operating company. As a result of
this effort, at the end of the second quarter of fiscal 1995, the Corporation
announced its plans to reorganize the U.S. operating company, redesign its
distribution network, develop a national procurement and materials management
strategy, increase sales force efficiency, improve gross margins, and reduce the
amount of capital required to conduct ongoing operations. In support of this
effort, during fiscal 1995 the Corporation recorded pretax reengineering charges
of $37.4 million, which included severance and other employee benefits, facility
closure costs, consultant fees, project travel costs and write-down to fair
value of certain facilities.
At year end 1995, the remaining accruals relating to reengineering charges
totaled $20.4 million. For that year, cash expenditures and non-cash accrual
reductions totaled $14.6 million and $2.4 million, respectively.
During the third and fourth quarters of fiscal 1996, the Corporation
revised certain of its reengineering estimates. The revisions stem from
mid-course corrections in the Corporation's strategic direction, following
appointment of a new Chief Executive Officer and President of the Corporation
and its U.S. subsidiary. Estimate revisions include changes in the number and
location of planned facility closures, equipment to be abandoned or liquidated,
revised severance accruals, relocation costs, and other costs related to
decentralization of the company's organizational structure. Costs arising in
connection with estimate revisions were offset, in part, by reversal of a
portion of reengineering accruals established in 1995.
At year end 1996, the remaining accruals pertaining to the revised
estimates totaled $7.9 million. For the year, cash expenditures and non-cash
accrual reductions totaled $4.9 million and $7.6 million, respectively.
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<PAGE> 78
NOTE 6 -- TAXES ON INCOME
The components of income (loss) before income taxes and minority interest
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Domestic............................................ $(14,163) $ (6,971) $ 4,261
Foreign............................................. 26,369 20,612 10,488
Reengineering charge................................ -- (37,360) (4,507)
-------- -------- -------
$ 12,206 $(23,719) $10,242
======== ======== =======
</TABLE>
The provision for (benefit of) taxes on income (loss) consisted of the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current
Federal............................................ $ 85 $ (1,115) $ 889
State and Local.................................... 70 (88) 140
Foreign............................................ 10,061 7,123 5,261
------- -------- -------
10,216 5,920 6,290
------- -------- -------
Deferred
Federal............................................ (4,021) (13,067) (1,770)
State and Local.................................... (387) (1,696) 291
Foreign............................................ 498 777 (408)
------- -------- -------
(3,910) (13,986) (1,887)
------- -------- -------
$ 6,306 $ (8,066) $ 4,403
======= ======== =======
</TABLE>
Deferred tax balances consisted of the following temporary differences at
February 29/28:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
DEFERRED DEFERRED DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX TAX TAX
ASSETS LIABILITIES ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- -------- ----------- -------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Alternative minimum tax................. $ 6,474 $ -- $ 6,476 $ -- $ 7,500 $ --
Tax loss and credit carryforward........ 6,231 -- 4,758 -- 480 --
Foreign tax credit carryforward......... 1,835 -- 2,444 -- -- --
Self-insurance loss reserves............ 4,402 -- 3,731 -- 2,410 --
Pension and other compensation
accruals.............................. 218 -- -- 795 1,266 --
State income tax accrual................ 115 -- 260 -- 1,268 --
Vacation accrual........................ 1,552 -- 1,459 -- 1,268 --
Property................................ -- 35,433 -- 36,369 -- 37,233
Reengineering charges................... 5,741 -- 8,139 -- -- --
Environmental reserve................... 2,063 -- -- -- -- --
Other................................... 3,898 2,863 3,259 3,039 4,162 4,784
------- ------- ------- ------- ------- -------
$32,529 $38,296 $30,526 $40,203 $18,354 $42,017
======= ======= ======= ======= ======= =======
</TABLE>
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<PAGE> 79
The accompanying financial statements reflect effective tax (benefit) rates
of 51.7% in 1996, (34.0%) in 1995, and 43.0% in 1994. An analysis of the
differences between these rates and the Federal statutory rate is set forth
below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------- ------- ------ -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Federal tax at statutory rates... $4,272 35.0% $(8,302) (35.0)% $3,483 34.0%
State taxes, net of federal tax
benefit........................ (206) (1.7) (1,160) (4.9) 285 2.8
Foreign income tax rate
differetial.................... 1,384 11.4 1,248 5.2 1,099 10.7
Travel and entertainment
limitation..................... 605 5.0 561 2.4 210 2.1
Research and experimentation
credit......................... -- -- -- -- (787) (7.7)
Non-deductible amortization...... 265 2.2 492 2.1 226 2.2
Settlement gain.................. -- -- (1,029) (4.3) -- --
Other -- net..................... (14) (0.2) 124 0.5 (113) (1.1)
------ ---- ------- ----- ------ ----
$6,306 51.7% $(8,066) (34.0)% $4,403 43.0%
====== ==== ======= ===== ====== ====
</TABLE>
The Corporation's federal income tax returns are closed for all years up to
1988. The Corporation has U.S. federal tax net operating loss carry-overs
totaling $11.2 million, which expire in 2011. In addition, the Corporation has
alternative minimum tax credit carry-overs totaling $6.5 million, which have no
carry-over limitation period. Research and experimentation credit carry-overs
total $0.5 million and expire through 2007. Charitable contribution carry-overs
total $1.8 million and expire through the year 2001.
NOTE 7 -- PENSION AND OTHER POSTRETIREMENT BENEFITS
PENSION BENEFITS
The Corporation and its subsidiaries have defined benefit pension plans
covering substantially all employees in the U.S., Canada, and the United
Kingdom, excluding those employees covered by unions that operate plans
independent of the Corporation or its subsidiaries. The Corporation's funding
policy is to contribute annually amounts that provide for benefits attributed to
service to date and benefits expected to be earned during the plan year, based
on the projected final average compensation and where pension laws or economics
either require or encourage funding.
The U.S. funded plan is the largest plan. Its benefits are based on length
of service and the employee's highest five-year average compensation. The rate
of increase in future compensation levels used in determining the actuarial
present value of the projected benefit obligations was 5% and 6%, respectively
for 1996 and 1995. The expected long-term rate of return on plan assets was 10%
for both 1996 and 1995. The weighted average discount rate used was 7.8% and
8.8%, for 1996 and 1995, respectively. The market value of assets, consisting
primarily of cash equivalents and equity securities is as reported by the
trustee bank serving the pension plan.
Employees of non-U.S. subsidiaries generally receive pension benefits from
corporate sponsored plans or from statutory plans administered by governmental
agencies in their countries. Corporate sponsored foreign plans have applied the
provisions of Statement of Financial Accounting Standards No. 87 using
assumptions that are similar to those utilized for the U.S. plans.
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<PAGE> 80
The status of the Corporation's funded defined benefit plans is as follows:
<TABLE>
<CAPTION>
1996 1995
--------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of benefit obligations
Vested...................................................... $ 98,638 $ 80,427
Non-vested.................................................. 2,873 1,978
--------- --------
Accumulated benefit obligation................................ 101,511 82,405
Projected benefit obligation.................................. 123,660 102,209
Plan assets at fair value..................................... (106,871) (83,417)
--------- --------
Projected benefit obligation in excess of plan assets......... 16,789 18,792
Unrecognized net transition obligation........................ 265 283
Unrecognized prior service cost............................... 1,059 1,204
Unrecognized net loss (plan changes and actuarial losses)..... (18,115) (17,832)
--------- --------
(Prepaid) Accrued pension cost, included in current and
long-term liabilities....................................... ($ 2) $ 2,447
========= ========
</TABLE>
The status of the Corporation's unfunded defined benefit plans is as
follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Accumulated benefit obligation, all of which is vested........... $ 6,328 $ 3,994
======= =======
Projected benefit obligation..................................... $ 7,989 $ 5,259
Unrecognized prior service cost.................................. (2,223) (2,282)
Unrecognized net loss (plan changes and actuarial losses)........ (293) (102)
------- -------
Accrued pension cost, included in long-term liabilities.......... $ 5,473 $ 2,875
======= =======
</TABLE>
Net periodic pension expense for all defined benefit plans sponsored by the
Corporation and its subsidiaries includes the following components:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost (benefits earned during the period)..... $ 4,064 $ 4,732 $ 4,214
Interest cost on projected benefit obligation........ 8,977 8,537 7,719
Actual return on plan assets......................... (21,172) (607) (8,357)
Net amortization and deferral........................ 13,983 (5,384) 3,003
-------- ------- -------
$ 5,852 $ 7,278 $ 6,579
======== ======= =======
</TABLE>
Certain employees are covered under union-sponsored, collectively
bargained, defined benefit plans. Expenses for these plans were $0.9 million in
1996 and 1995 and $0.8 million in 1994, as determined in accordance with
negotiated labor contracts.
Provisions of the Multi-Employer Pension Amendments Act of 1980 require
participating employers to assume a proportionate share of a multi-employer
plan's unfunded, vested benefits in the event of withdrawal from or termination
of such plan. Information concerning the Corporation's share of unfunded, vested
benefits is not available from plan administrators. Provisions of the Act may
have the effect of increasing the level of contributions in future years.
OTHER POST RETIREMENT BENEFITS
In addition to providing pension benefits, in the United States, the
Corporation provides certain health care benefits to its retired employees. The
plan provides health care benefits including hospital, physicians', dentists',
and eye care services and major medical expense benefits. The plan provides
benefits supplemental
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<PAGE> 81
to Medicare after retirees are eligible for these benefits. The cost of the
benefits provided are shared by the Corporation and the retiree, with the
Corporation portion increasing as the retiree has increased years of credited
service. The Corporation has the ability to change these benefits at any time.
The retiree health care cost provision was $1.5 million and $1.9 million
for fiscal 1996 and 1995, respectively. The components of the expense were as
follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Service costs (benefits earned during the period).................. $ 284 $ 418
Interest cost on accumulated postretirement benefit obligation..... 857 975
Amortization and deferred amounts.................................. 326 505
------ ------
Net periodic postretirement cost................................... $1,467 $1,898
====== ======
</TABLE>
Benefit costs were calculated based on assumed cost growth for retiree
health care costs of a 14.0% annual rate for 1997, decreasing to a 6.0% annual
growth rate over a nine year period. The health care cost trend rate assumed has
a significant effect on the amount reported. To illustrate, increasing the
assumed medical cost trend rate by 1 percentage point would increase the
accumulated postretirement benefit obligation at February 29, 1996 by $2.1
million and the net periodic postretirement benefit cost for the year by $0.2
million. The accumulated retiree health care obligation at fiscal year end 1996
and 1995 was determined using a weighted average discount rate of 8.2% and 9.2%,
respectively.
The accumulated retiree health care obligation at February 29/28 consisted
of the following components:
<TABLE>
<CAPTION>
1996 1995
------- -------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees....................................................... $ 4,598 $ 4,643
Fully eligible active plan participants........................ 3,039 2,486
Other active plan participants................................. 4,324 3,541
------- -------
Unfunded accumulated postretirement benefit obligation........... 11,961 10,670
Unrecognized transition obligation............................... (5,546) (5,872)
Unrecognized losses.............................................. (2,536) (1,665)
------- -------
Accrued postretirement benefit cost.............................. $ 3,879 $ 3,133
======= =======
</TABLE>
NOTE 8 -- BUSINESS ACQUISITIONS
At the end of fiscal 1996, the Corporation acquired a company located in
the United Kingdom with annual sales revenues of approximately $70 million. The
acquisition included equity shares with a total value of $16.0 million. Funding
for the acquisition was provided from credit line borrowings. The newly acquired
operations were consolidated with the Corporation's existing operations in the
United Kingdom.
At the time of the organization of Univar Europe in 1991, Univar and its
then 31% shareholder, Pakhoed Investeringen B.V. (Pakhoed), entered into a
Shareholder Agreement resulting in the formation of Univar Europe, which was
incorporated in the Netherlands in 1990. At the time Univar Europe was
capitalized, it was 51% owned by the Corporation and 49% owned by Pakhoed. On
September 1, 1994 the Corporation acquired the minority shareholder's 49%
interest in Univar Europe, in accordance with the terms of the Shareholder
Agreement. The acquisition included equity shares and subordinated debt with a
total value of $25.8 million. Funding for this aggregate purchase price was
provided through the sale of 2 million shares of the Corporation's common stock
to The Dow Chemical Company (Dow) as described in Note 9.
During fiscal 1995, the Corporation completed an acquisition in Europe. The
acquired company had annual revenues of approximately $6.5 million. The
aggregate purchase price was $3.2 million, consisting of fixed assets,
inventories and customer lists.
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<PAGE> 82
NOTE 9 -- COMMON STOCK TRANSACTIONS
STOCK OPTIONS AND RESTRICTED STOCK AWARDS
The Corporation's long-term incentive stock plans (the Plans) provide for
the granting of non-qualified stock options, incentive stock options, and
restricted stock awards, to non-employee directors, officers, and key employees.
For incentive stock options, the option price may not be less than the fair
market value of the common stock at the date of grant. Non-qualified stock
options may be granted at less than the fair market value of the common stock.
Options may be exercisable as determined by the committee of the Board of
Directors that administers the Plans.
Under the 1993 Non-Employee Director Stock Option Plan, options become
exercisable six months after grant or upon termination of service to the Board,
whichever is earlier, and expire three months to five years after termination of
service to the Board, depending on the circumstances of retirement.
Under the 1992 Long-Term Incentive Plan (LTIP), options become exercisable
at the earlier of ten years after date of grant, or beginning 3 years after the
date of grant, based on the Corporation's performance compared with performance
of a selected peer group. Options typically expire 10 years and 3 months after
the date of grant. Certain recipients of grants under the 1992 LTIP are also
entitled to receive , subject to achievement of specified
Corporation performance compared with the selected peer group, cash incentives
equivalent to the tax adjusted exercise price of the options.
Under the 1986 and 1995 Long-Term Incentive Stock Plans, options become
exercisable at the rate of 20% per year beginning two years after the date of
grant, and expire ten years after the date of grant.
Restricted Stock Awards (RSA's) may be granted or sold to officers and key
employees. RSA's may not be sold or otherwise disposed of during the established
restriction periods, presently up to six years. At the end of fiscal 1995, RSA's
totaling 142,293 shares were held for the benefit of certain executive and other
officers in connection with an incentive compensation arrangement. Vesting of
these RSA's and payment of the related dividends were subject to performance
criteria which were not achieved.
Unamortized deferred stock compensation expense related to RSA's granted of
approximately $4,000 and $74,000, is classified as such in the shareholders'
equity section of the Corporation's balance sheet for 1996 and 1995,
respectively.
The Compensation Committee of the Board of Directors may, at its
discretion, determine the number of shares, the purchase price, applicable
vesting periods, and any other terms of each option or award. Options and awards
include provisions for acceleration of such applicable vesting periods in the
event of certain transactions that may result in a change of control of the
Corporation.
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<PAGE> 83
The following table summarizes activity in the Plans:
<TABLE>
<CAPTION>
NUMBER
OF AVAILABLE
SHARES FOR
RESTRICTED FUTURE
UNDER STOCK OPTION OR
OPTION AWARDS AWARD PRICE RANGE
--------- -------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding, year-end 1994................ 794,559 79,007 760,311 $4.19 - $14.56
Granted................................. 353,114 144,345 (497,459) 4.58 - 13.75
Exercised............................... (15,167) -- -- 4.19 - 11.20
Canceled or expired..................... (25,098) (4,540) 29,638 5.91 - 13.75
RSA's vested............................ -- (26,329) --
Reserved under 1992 Plan................ -- -- 750,000
Reserved under 1993 Plan................ -- -- 150,000
--------- -------- ---------
Outstanding, year-end 1995................ 1,107,408 192,483 1,192,490 4.58 - 14.56
Granted................................. 292,372 -- (292,372) 4.20 - 13.50
Exercised............................... (36,908) -- -- 5.91 - 11.20
Canceled or expired..................... (25,011) (144,205) 169,216 8.72 - 13.75
RSA's vested............................ -- (28,193) --
Reserved under 1992 Plan................ -- -- 750,000
Reserved under 1995 Plan................ -- -- 2,000,000
--------- -------- ---------
Outstanding, year-end 1996................ 1,337,861 20,085 3,819,334 4.20 - 13.86
========= ======== =========
Exercisable at year-end 1996.............. 172,295
=========
</TABLE>
PUT AGREEMENT WITH THE DOW CHEMICAL COMPANY
On June 24, 1991, the Corporation and The Dow Chemical Company ("Dow")
entered into an Agreement of Purchase and Sale of Stock (the "Dow Purchase
Agreement"). In accordance with the Dow Purchase Agreement, Univar sold
1,900,000 shares of its common stock to Dow at a price of $15.84 per share. In
addition, Univar reserved the right to put to Dow between approximately
2,500,000 and 2,900,000 additional shares of common stock at a price that
escalated over time, but which reached a maximum price of $18.74 per share. The
number of additional shares that could be sold depended on whether Pakhoed
Investeringen B.V. (Pakhoed) exercised its right to acquire shares from Univar
at the same price as they were sold to Dow in order for Pakhoed to maintain its
percentage share ownership in Univar. Pakhoed elected not to exercise its right
to acquire additional shares. Therefore, based on the manner in which the
calculation of the number of additional shares to be sold was made, the actual
maximum number of shares that Univar could put to Dow was 2,509,371. In lieu of
the unilateral right of Univar to put 2,509,371 shares of common stock to Dow,
on May 13, 1994, Univar and Dow executed an Amended and Restated Agreement of
Purchase and Sale of Stock (the "Amended Agreement").
Under the terms of the Amended Agreement, Dow purchased from Univar
2,000,000 shares of common stock at a price of $18.74 per share (a total
purchase price of $37,480,000). Dow now holds 3,900,000 shares of common stock
representing 17.89% of the issued and outstanding shares of Univar. In addition,
Dow and Univar have agreed that, at any time within the period ending May 12,
1997, Univar can put to Dow, or Dow can call, up to 101,874 shares of Series A
Convertible Preferred Stock. The price per share will be $93.70. Each share of
Series A Convertible Preferred Stock is convertible into five shares of common
stock by either Dow or Univar. In the event of a call or put, either all or half
the 101,874 shares must be called by Dow or put by Univar. With respect to the
conversion of the Series A Convertible Preferred Stock into Univar common stock,
Univar has agreed that it will not convert the preferred shares if, following
the conversion, Dow would own in excess of 19.9% of the issued and outstanding
common stock of the Corporation. Dow has agreed that it will pay to Univar
$350,000 per year for each of the three years ending May 12, 1995, 1996, and
1997, in the event Univar does not elect to put the Series A Convertible
Preferred Stock to Dow, or in the event Dow does not call the Series A
Convertible Preferred Stock.
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<PAGE> 84
NOTE 10 -- LITIGATION AND CONTINGENCIES
Because of the nature of its business, the Corporation is involved in
numerous contractual, product liability, and public liability cases and claims.
The liabilities for injuries to persons or property are frequently covered by
liability insurance, and the deductible and self-insured portions of these
liabilities, where applicable, have been accrued in these financial statements.
The Corporation is subject to a variety of environmental laws and
regulations and faces exposure from actual or potential claims and legal
proceedings involving environmental matters. The Corporation or related entities
have been contacted by various governmental agencies regarding potential
liability for a share of the cost of clean up of independent waste disposal or
recycling sites with alleged or confirmed contaminated soil and/or groundwater
to which the Corporation or related entities may have taken waste products. With
regard to many of these sites, the Corporation has denied liability because of
an absence of any connection between the Corporation or related entities and the
waste disposal or recycling site. The Corporation believes there are
twenty-eight in which the Corporation may be liable for a share of the cost of
clean up. With the exception of one site, those sites which show some alleged
evidence of an association between the Corporation or related entities and the
waste disposal or recycling site, the Corporation is considered a de minimis, or
small quantity, "potentially responsible party." The Corporation estimates the
probable liability for the remediation of independent waste disposal sites
totals $1.7 million, which is included in the Corporation's environmental
accrual. Possible costs for these sites could range up to $3.0 million.
Forty-three owned, previously owned, or leased sites of the Corporation are
currently undergoing remediation efforts or are in the process of active review
of the need for potential remedial efforts. Some of these efforts are being
conducted pursuant to governmental proceedings or investigations, while others
are being conducted voluntarily by the Corporation, with appropriate state or
federal agency oversight and approval. The following table shows additions to
and expenditures charged against the Corporation's environmental accruals during
the past three fiscal years:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Beginning balance........................................... $17.0 $15.6 $15.4
Expense provisions.......................................... 5.0 5.4 4.0
Expenditures................................................ (5.4) (4.0) (3.8)
----- ----- -----
Ending balance.............................................. $16.6 $17.0 $15.6
===== ===== =====
</TABLE>
Annual cash expenditures for remedial, monitoring, and investigatory
activities have averaged approximately $4.4 million during the past three years.
In addition, annual cash expenditures for environmental capital expenditures
have averaged $1.0 million. While the Corporation does not anticipate a material
increase in the projected annual level of its environmental related
expenditures, there is the possibility that such increases may occur in the
future. The precision of the Corporation's environmental estimates is affected
by several uncertainties such as the developments at sites resulting from
investigatory studies; the extent of required cleanup; the complexity of
applicable government laws and regulations and their interpretations; the
varying costs and effectiveness of alternative cleanup technologies and methods;
the uncertainty concerning recovery of such costs from third-parties which may
be jointly liable; and the questionable level of the Corporation's involvement
at various sites at which the Corporation is allegedly associated. The
Corporation periodically reviews the status of all significant existing or
potential environmental issues and adjusts its accruals as new remediation
requirements are defined, as information relevant to reasonable estimates to be
made becomes available, and to reflect new and changing facts. The accruals do
not reflect any possible future insurance recoveries.
Although the Corporation believes adequate accruals have been provided for
environmental contingencies, it is possible, due to the uncertainties previously
noted, that additional accruals could be required in the future that could have
a material effect on the results of operations in a particular quarter or annual
period. However, the ultimate resolution of these contingencies, to the extent
not previously provided for, is not expected to have a material adverse effect
on the Corporation's financial position.
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<PAGE> 85
At year end 1996, the Corporation had letters of credit outstanding
totaling approximately $8.1 million, which guaranteed various insurance and
financing activities. Substantially all of these are automatically renewable
each year.
NOTE 11 -- GEOGRAPHIC INFORMATION
Univar operates in only one industry segment (chemical distribution) in the
United States, Canada, and Europe.
<TABLE>
<CAPTION>
UNITED
STATES CANADA EUROPE
---------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
1996
Sales........................................... $1,276,709 $401,338 $359,627
Income (loss) from operations................... (3,302) 18,935 10,903
Identifiable assets............................. 406,449 149,179 184,977
Depreciation and amortization expense........... 22,085 2,710 4,340
Capital expenditures............................ 14,567 4,794 3,175
1995
Sales........................................... $1,273,429 $356,089 $283,210
Income (loss) from operations (1)............... (34,785) 15,370 6,960
Identifiable assets............................. 418,659 122,041 132,503
Depreciation and amortization expense........... 21,723 2,168 3,129
Capital expenditures............................ 13,723 4,538 4,774
1994
Sales........................................... $1,251,549 $295,564 $255,351
Income from operations (1)...................... 8,755 9,940 3,943
Identifiable assets............................. 438,519 102,241 111,934
Depreciation and amortization expense........... 21,496 2,353 3,600
Capital expenditures............................ 7,844 2,141 4,039
</TABLE>
- ---------------
(1) The income (loss) from operations includes reengineering charges totaling
$37.4 million and $4.5 million, respectively, in fiscal 1995 and 1994.
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<PAGE> 86
NOTE 12 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1996
Sales......................................... $552,932 $531,054 $479,756 $473,932
Gross margin.................................. 77,929 73,301 67,313 62,291
Net income (loss)............................. 7,770 4,294 28 (6,192)
Net income (loss) per share................... $ .36 $ .20 $ .00 $ (.29)
1995
Sales......................................... $503,335 $496,820 $468,778 $443,795
Gross margin.................................. 71,260 69,927 68,964 63,522
Net income (loss)............................. 1,497 (19,094) 935 405
Net income (loss) per share................... $ .08 $ (.88) $ .04 $ .02
1994
Sales......................................... $487,951 $474,118 $430,299 $410,096
Gross margin.................................. 70,399 70,022 64,224 64,888
Net income (loss)............................. 3,273 1,957 458 (228)
Net income (loss) per share................... $ .17 $ .10 $ .02 $ (.01)
</TABLE>
The net loss in the second quarter of 1995 includes recognition of
net-of-tax reengineering charges totaling $20.6 million. These charges represent
the costs to reorganize the U.S. operating company, eliminate up to 2 layers of
management, redesign its distribution network, develop a national procurement
and materials management strategy, increase sales force efficiency, improve
gross margins, and reduce the amount of capital required to conduct ongoing
operations. Costs accrued included severance, other employee benefits, facility
closure costs, the non-cash write-down to fair value of certain facilities, and
consultant fees and expenses.
Significant items increasing income for the fourth quarter of 1995 include
settlement gains, net of related costs and deferrals totaling $2.7 million,
reduction of reserves and accruals totaling $1.4 million, costing adjustments
totaling $0.8 million, and reduction of the LIFO reserve by $0.8 million.
Significant items increasing income for the fourth quarter of 1994 include
costing adjustments totaling $1.4 million, reductions in self-insurance reserves
for general liability totaling $0.9 million, and reductions in self-insured
health reserves by $1.0 million. The significant item which decreased fourth
quarter 1994 net income was the cost of the Corporation's re-engineering effort
of ($1.8 million).
The total of the amounts shown as quarterly earnings per share may differ
from the amount shown on the Consolidated Statement of Operations because the
annual computation is made separately and is based upon average numbers of
shares and equivalent shares outstanding for the entire year.
NOTE 13 -- SETTLEMENT ACHIEVED
In fiscal 1992, Univar Europe executed a foreign currency denominated note
(U.S. dollar equivalent of $6.8 million) in connection with certain business
acquisitions. The note was contingently payable in June 1995, or could be
deferred until December 1998 if the seller did not achieve certain minimum net
worth requirements by December 1994. In accordance with contract provisions, the
seller agreed to provide indemnification to Univar Europe for certain
environmental and other undisclosed contingencies that may have existed as of
the acquisition date. Univar Europe had the right to offset these liabilities
against the note's principal balance. Univar Europe had also agreed to pay
additional consideration, in the minimum amount of $1.8 million, which was
non-interest bearing and payable in 1995.
Shortly after the acquisition, the Corporation began negotiations with the
seller to settle certain disputes regarding acquisition asset values and other
claims. When the seller subsequently entered bankruptcy, the seller's largest
secured creditor, a Swedish bank, was appointed the receiver in bankruptcy for
the seller's assets, liabilities, and contingent obligations. In addition to the
original claims and disputes with the seller,
C-21
<PAGE> 87
certain disputes also arose with the receiver, due to its handling of the
seller's bankruptcy proceedings and the attachment of certain of Univar Europe's
assets.
The Corporation and the receiver reached a settlement of all claims,
counterclaims and disputes on October 31,1994. As part of the settlement
agreement, the note plus accrued interest and the additional consideration
discussed above were satisfied. A settlement gain totaling $3.0 million, net of
related costs, was recorded as a recovery of representations and warranties
pertaining to environmental costs ($0.9 million), interest ($0.8 million) and
damages caused by the receiver's actions as part of the bankruptcy proceedings
($1.3 million). Univar Europe is consolidated using its financial year-end,
December 31. Accordingly, recognition of the settlement gain is included in the
Corporation's fourth quarter of fiscal 1995.
NOTE 14 -- SUBSEQUENT EVENT
The Corporation announced on June 3, 1996 that it had entered into an
agreement to merge with a subsidiary of Royal Pakhoed N.V., a Netherlands
limited liability company. Pakhoed and its affiliates currently own
approximately 28% of the Corporation's common stock. The merger will be preceded
by a cash tender offer for all the outstanding common shares of the Corporation
at a price of $19.45 per common share. The tender offer will be initiated by UC
Acquisition Corp., a subsidiary of Pakhoed which was created for this
transaction.
UC Acquisition Corp. has filed with the Securities and Exchange Commission
a Tender Offer Statement on Schedule 14D-1, dated June 7, 1996 relating to the
offer, and the Corporation has filed its Schedule 14D-9
Solicitation/Recommendation Statement concerning the transaction.
The offer is being made pursuant to the Agreement and Plan of
Reorganization, dated as of May 31, among the Corporation, Royal Pakhoed N.V.,
and UC Acquisition Corp. The offer is subject to certain conditions described in
the Schedule 14D-1 and the Schedule 14D-9 and is expected to close not earlier
than July 15, 1996.
MANAGEMENT RESPONSIBILITY FOR FINANCIAL DATA
The management of Univar Corporation has prepared and is responsible for
the integrity and fairness of the financial statements and other financial
information presented in this annual report. The statements have been prepared
in accordance with generally accepted accounting principles and, to the extent
appropriate, include amounts based on management's judgment and/or estimates. In
order to discharge its responsibilities for these financial statements and
information, management maintains accounting systems and related internal
controls. These controls are designed to provide reasonable assurance that
transactions are properly authorized and recorded, that assets are safeguarded,
and that financial records are reliably maintained. While management continually
monitors the effectiveness of and compliance with its control systems, the
concept of reasonable assurance, however, incorporates an acknowledgment that
the cost of a control system must be related to the benefits derived.
The Corporation's financial statements have been audited by Arthur Andersen
LLP, independent public accountants. Management has made available to Arthur
Andersen LLP all the Corporation's financial records and related data, as well
as the minutes of shareholders' and directors' meetings. Furthermore, management
believes that all representations made to Arthur Andersen LLP during its audit
were valid and appropriate.
Management has reviewed the recommendations of Arthur Andersen LLP, and has
responded in what we believe to be appropriate and cost-effective ways.
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<PAGE> 88
The Audit Committee of the Board of Directors, which is composed solely of
outside directors, meets periodically with management and with the independent
auditors to review the quality of financial reporting, the operation and
development of the internal control systems, and the work of independent
auditors.
The independent auditors regularly meet with the Audit Committee without
the presence of any other parties.
/s/ PAUL H. HOUGH
--------------------------------------
PAUL H. HOUGH
President and Chief Executive Officer
/s/ GARY E. PRUITT
--------------------------------------
GARY E. PRUITT
Chief Financial Officer
(Principal Financial Officer)
(Principal Accounting Officer)
C-23
<PAGE> 89
ARTHUR ANDERSEN LLP
801 SECOND AVENUE, SUITE 800
SEATTLE, WA 98104
(206) 623-8023
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Univar Corporation:
We have audited the accompanying consolidated balance sheets of Univar
Corporation (a Washington corporation) and subsidiaries as of February 29, 1996
and February 28, 1995, and the related consolidated statements of operations,
cash flows and shareholders' equity for each of the three years in the period
ended February 29, 1996. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Univar Corporation and
subsidiaries as of February 29, 1996 and February 28, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended February 29, 1996, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Seattle, Washington,
April 24, 1996, except for Note 14
as to which the date is June 21, 1996.
C-24
<PAGE> 90
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The Corporation has a classified board of twelve directors. Four directors
are elected each year for a term of three years.
DIRECTORS -- TERM WILL EXPIRE IN 1996
Richard E. Engebrecht, 69, has been a director of the Corporation since
1984. Mr. Engebrecht has served as Chair of the Board of Directors of
PrimeSource Corporation, a distributor of graphic arts and photographic
supplies, since September 1994. He was Chair of Momentum Corporation, a
predecessor corporation to PrimeSource Corporation, from December 1992 to
September 1994, and was President and Chief Executive Officer of Momentum
Corporation from March 1990 through December 1992. Mr. Engebrecht served as
President and Chief Executive Officer of VWR Scientific Products Corporation
from 1986 through 1990. In addition, Mr. Engebrecht serves as a director of
PENWEST, LTD. and VWR Scientific Products Corporation.
Sjoerd D. Eikelboom, 60, has served as a director of the Corporation since
1993. Since 1976, Mr. Eikelboom has been Senior Vice President -- Corporate
Strategy and Economic Affairs of Royal Pakhoed N.V.
N. Stewart Rogers, 66, has served the Corporation as a director since 1990.
Mr. Rogers was Senior Vice President of the Corporation from 1989 until 1991. He
serves as Chair of PENWEST, LTD., a company involved in the development,
manufacture and marketing of carbohydrate-based chemicals for the paper, food,
textile, and pharmaceutical industries, and as a director of Fluke Corporation,
U.S. Bancorp, and VWR Scientific Products Corporation. Mr. Rogers is the
brother-in-law of James H. Wiborg, retiring Chair of the Board.
Paul H. Hough, 57, has served as a director since December 1995 and as
President and Chief Executive Officer of the Corporation since November 1995.
Since November 1995, Mr. Hough has also served as President of Van Waters &
Rogers Inc., the U.S. operating company of the Corporation. Mr. Hough was
President of Van Waters & Rogers Ltd., the Canadian operating company of the
Corporation, from 1991 to 1995.
DIRECTORS -- TERM WILL EXPIRE IN 1997
James W. Bernard, 59, has served as a director of the Corporation since
1986. From 1986 to October 1995, Mr. Bernard was President and Chief Executive
Officer of the Corporation. From 1988 to 1992, Mr. Bernard was also President of
Van Waters & Rogers Inc., the U.S. operating company of the Corporation. In
addition, Mr. Bernard is a director of VWR Scientific Products Corporation and
U.S. Bank of Washington.
John G. Scriven, 53, has been a director of the Corporation since 1994.
From January 1995 to present, Mr. Scriven has served as Vice President & General
Counsel of The Dow Chemical Company. Prior to that, he was Associate General
Counsel of The Dow Chemical Company from 1993 to 1994 and Vice President of Dow
Europe S.A., Switzerland, from 1986 to 1993.
Roy E. Wansik, 52, has been a director of the Corporation since 1991. Since
1984, Mr. Wansik has been President of Pakhoed Corporation, a chemical storage,
distribution, and services company. In addition, Mr. Wansik has served as
President of Paktank Corporation, a bulk liquid chemical storage and
distribution company, since 1982. Since 1984, Mr. Wansik has also acted as
President of EMPAK, Inc., a company engaged in environmental services and
chemical cleaning and disposal, and as President of Pakhoed Dry Bulk Terminals,
Inc., a chemical dry bulk storage and distribution company.
James H. Wiborg, 71, has served as Chairman of the Corporation's Board
since 1986 and as a director since 1966. In addition, he has acted as Chair and
Chief Strategist for VWR Corporation, a distributor of scientific equipment and
supplies, since 1986. Mr. Wiborg was Chairman and Chief Strategist of the
C-25
<PAGE> 91
Corporation from 1986 through 1990. Mr. Wiborg serves as a director of
PrimeSource Corporation, PACCAR, Inc., and PENWEST, LTD. Mr. Wiborg is the
brother-in-law of director N. Stewart Rogers.
DIRECTORS -- TERM WILL EXPIRE IN 1998
Roger L. Kesseler, 59, has been a director of the Corporation since 1991.
Since 1984, Mr. Kesseler has been the Vice President and Controller of The Dow
Chemical Company, which is engaged in the manufacture and sale of chemicals and
other products.
Curtis P. Lindley, 71, has been a director of the Corporation since 1984.
Mr. Lindley is the Chair of the Ostrom Company, growers and distributors of
mushrooms. He also serves as a director of VWR Scientific Products Corporation.
Nicolaas J. Westdijk, 55, has been a director of the Corporation since
1992. Mr. Westdijk has been Chair of the Board of Management of Royal Pakhoed
N.V., a company providing chemical storage, transportation, and distribution
services, since May 1992. Mr. Westdijk served as a member of the Board of
Management of Royal Pakhoed N.V. during 1991. He also serves as a director on
the boards of N.V. Nationale Investerings Bank and Wolters Kluwer N.V.
Andrew V. Smith, 71, has been a director of the Corporation since 1982. Mr.
Smith is a director of Airborne Express Corporation, Cascade Natural Gas
Corporation, PrimeSource Corporation, and also serves on the University of
Washington Board of Regents.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes, for the three fiscal years ending February
29, 1996, the annual and long-term compensation paid to (i) the Chief Executive
Officer, (ii) the other four highest paid executive officers at the end of the
last fiscal year ending February 29, 1996, (iii) the former Chief Executive
Officer who retired from the Corporation during the last fiscal year, and (iv) a
former executive officer who resigned from the Corporation during the last
fiscal year.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1)
--------------------------- ---- --------- -----------
<S> <C> <C> <C>
Paul H. Hough................................ 1996 $ 261,691 $ 74,246
President & CEO 1995 $ 134,962 $ 94,768
1994 $ 117,749 $ 100,514
Jeffrey Ellwood(4)........................... 1996 $ 173,668 $ 94,728
V.P. 1995 $ 158,764 $ 61,299
1994 $ 140,634 $ 41,319
James L. Fletcher............................ 1996 $ 200,835 0
V.P. 1995 $ 196,810 0
1994 $ 180,200 $ 72,849
William A. Butler............................ 1996 $ 158,373 0
V.P. 1995 $ 147,024 0
1994 $ 134,125 $ 53,038
Gary E. Pruitt............................... 1996 $ 158,011 0
V.P. 1995 $ 134,116 0
1994 $ 127,391 $ 53,038
James W. Bernard (5)......................... 1996 $ 332,940 0
Retired President & CEO 1995 $ 482,308 0
1994 $ 421,769 $ 249,852
James P. Alampi (6).......................... 1996 $ 249,975 0
Former V.P. 1995 $ 279,734 0
1994 $ 244,541 $ 132,605
</TABLE>
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<PAGE> 92
LONG-TERM COMPENSATION AWARDS
<TABLE>
<CAPTION>
RESTRICTED SECURITIES ALL
STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR AWARDS($)(2) OPTIONS(#) COMPENSATION($)(3)
- --------------------------- ---- ------------ ---------- ------------------
<S> <C> <C> <C> <C>
Paul H. Hough............................. 1996 0 18,571 $ 1,313
President & CEO 1995 0 6,607 $ 543
1994 0 6,778 $ 634
Jeffrey Ellwood........................... 1996 0 6,657 $ 3,066
V.P. 1995 0 0 $ 1,524
1994 0 0 $ 1,612
James L. Fletcher......................... 1996 0 6,124 $ 10,787
V.P. 1995 0 6,607 $ 8,430
1994 0 6,778 $ 8,048
William A. Butler......................... 1996 0 3,563 $ 1,726
V.P. 1995 0 3,844 $ 400
1994 0 3,944 $ 422
Gary E. Pruitt............................ 1996 0 3,563 $ 5,930
Chief Financial Officer 1995 0 3,844 $ 5,058
1994 0 3,944 $ 5,493
James W. Bernard.......................... 1996 0 20,057 $292,772
Retired President & CEO 1995 0 21,636 $ 12,174
1994 0 19,302 $ 11,187
James P. Alampi........................... 1996 0 13,187 $103,404
Former V.P. 1995 0 14,225 $ 5,868
1994 0 11,899 $ 5,422
</TABLE>
- ---------------
(1) Amounts included are paid under the Management Annual Incentive Plan (the
"Incentive Plan") administered by the Compensation Committee. The Incentive
Plan provides that the Compensation Committee may authorize annual cash or
deferred awards to full-time, salaried management employees of the
Corporation or its subsidiaries. Participation in the Incentive Plan is
subject to approval by the President of the Corporation and the Compensation
Committee. Mr. Hough was paid an annual cash incentive for fiscal year 1996
based on the performance of Van Waters & Rogers Ltd. Mr. Ellwood was paid an
annual cash incentive for calendar year 1995 based on the performance of
Univar Europe.
(2) In fiscal year 1995, the Corporation awarded restricted shares valued as
follows: Mr. Hough, $22,384; Mr. Ellwood, $29,492; Mr. Fletcher, $126,010;
Mr. Butler, $83,401; Mr. Pruitt, $83,401; Mr. Bernard, $419,087; and Mr.
Alampi, $247,993. Performance criteria for the vesting of these shares were
not met and the shares represented by these awards were forfeited and
returned to the Corporation.
(3) The Corporation's contributions during fiscal year 1996 (except as otherwise
noted) to the Company's 401(k) Plan, Employee Stock Purchase Plan, and group
term life insurance premiums were as follows: Mr. Hough -- $0, $293, and
$1,020; Mr. Ellwood -- $0, $0, and $3,066 (for calendar year 1995); Mr.
Fletcher -- $4,171, $2,400, and $4,216; Mr. Butler -- $1,507, $0, and $219;
Mr. Pruitt -- $4,256, $0, and $1,674; Mr. Bernard -- $2,826, $0, and $5,388;
and Mr. Alampi -- $3,667, $200, and $655. Also included for Mr. Bernard is
compensation for unused vacation of $96,490, separation payments of
$166,948, and additional retirement payments of $21,120. Also included for
Mr. Alampi is compensation for unused vacation of $23,457, separation
payments of $50,425, and outplacement services of $25,000.
(4) Mr. Ellwood serves on the Managing Board of Univar Europe N.V., a subsidiary
of the Corporation. Because Univar Europe's fiscal year ran from January 1,
1995 through December 31, 1995, Mr. Ellwood's compensation reflects payments
during calendar year 1995 and not the Corporation's fiscal year.
(5) Mr. Bernard retired as an executive officer of the Corporation effective
October 26, 1995.
(6) Mr. Alampi resigned as an executive officer of the Corporation effective
October 26, 1995.
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<PAGE> 93
OPTION GRANTS IN LAST FISCAL YEAR
Set forth below is a summary of the individual grants of stock options
awarded to the named executive officers during the fiscal year ended February
29, 1996. In addition, in accordance with SEC rules, shown below are the
hypothetical gains or "option spread" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
RATES OF STOCK
% OF PRICE
TOTAL OPTIONS APPRECIATION FOR
NUMBER OF SECURITIES GRANTED TO OPTION TERMS (2)
UNDERLYING OPTIONS EMPLOYEES EXERCISE PRICE -------------------
NAME GRANTED (#)(1) IN FISCAL YEAR ($/SHARE) EXPIRATION DATE 5% 10%
- ---------------------- -------------------- -------------- -------------- ---------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Paul H. Hough......... 6,124 2.19% $12.50 June 1, 2005 $ 49,672 $126,789
12,447 4.45 $13.50 February 3, 2006 $109,035 $278,313
Jeffrey Ellwood(3).... 6,657 2.38 $11.50 April 25, 2002 $ 31,166 $ 72,630
James L. Fletcher..... 6,124 2.19 $12.50 June 1, 2005 $ 49,672 $126,789
William A. Butler..... 3,563 1.27 $12.50 June 1, 2005 $ 28,900 $ 73,767
Gary E. Pruitt........ 3,563 1.27 $12.50 June 1, 2005 $ 28,900 $ 73,767
James W. Bernard...... 20,057 7.16 $12.50 June 1, 2005 $162,684 $415,252
James P. Alampi....... 13,187 4.71 $12.50 June 1, 2005 $106,961 $273,018
</TABLE>
- ---------------
(1) Each of the options reflected in this table was granted to the named
executive officers pursuant to the 1992 Long-Term Incentive Plan of the
Corporation (the "1992 Plan") which was approved by the shareholders in
August 1992. Each grant was made at the fair market value of the
Corporation's common stock on the date of grant. The number of shares
granted is dependent on the recipient's salary grade and is determined in
accordance with a formula approved by the Compensation Committee. Each
option has a term of ten years and three months. Each option will vest and
become exercisable not later than the tenth anniversary of the date of
grant. The option may vest earlier than the tenth anniversary (but not
before the third anniversary of the date of grant) depending on how the
"total shareholder return" achieved by the Corporation ranks in comparison
to the "total shareholder return" of ten peer group companies selected by
the Committee. Upon the vesting of the options before the tenth anniversary,
a deferred cash incentive is paid to the named executive officer in an
amount sufficient to exercise the option, plus an increment to cover the
federal and state taxes the executive officer would be obliged to pay with
respect to the receipt of the deferred cash, assuming an overall tax rate of
35%. This Plan provides that the recipient may elect, upon vesting, to have
shares withheld to satisfy any federal, state, or local taxes.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises and common stock holdings are
dependent on the future performance of the Corporation's common stock and
overall stock market conditions. There can be no assurance that the amounts
reflected in this table will be achieved.
(3) Mr. Ellwood's options have a seven year term.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
Set forth below is a summary of individual exercises of stock options by
the named executive officers during the last fiscal year, including the
aggregate value realized upon the date of exercise. This table includes the
number of shares covered by both exercisable and non-exercisable stock options
as of February 29, 1996.
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<PAGE> 94
Also reported are the values for "in-the-money" options which represent the
positive spread between the exercise price of any such existing stock options
and the fiscal year end stock price.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS HELD AT IN-THE-MONEY OPTIONS
ACQUIRED VALUE FISCAL YEAR END(#) HELD AT FISCAL YEAR END($)
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
- --------------------------- -------------- ----------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Paul H. Hough.............. 0 N/A 1,403/18,932 $ 1,012/$0
Jeffrey Ellwood............ 0 N/A 0/ 6,657 $ 0/$0
James L. Fletcher.......... 0 N/A 1,994/18,932 $ 0/$0
William A. Butler.......... 0 N/A 1,964/15,069 $ 0/$0
Gary E. Pruitt............. 0 N/A 5,394/14,577 $13,345/$0
James W. Bernard........... 7,616 $12,076 0/56,728 $ 0/$0
James P. Alampi............ 0 N/A 0/34,024 $ 0/$0
</TABLE>
UNIVAR CORPORATION RETIREMENT PLAN AND SUPPLEMENTAL BENEFITS PLAN
The table below shows the estimated annual benefits payable on retirement
under the Univar Corporation Retirement Plan ("Retirement Plan") to persons in
specified remuneration and years-of-service classifications. The retirement
benefits shown do not include deductions for FICA, Federal Income Tax, state or
city taxes and are not offset by Social Security payments. These benefits are
based upon retirement at age 65 during 1995 and the payment of a single-life
annuity to the employee. All regular, full-time employees not members of a
collective bargaining unit (except for bargaining units participating in all of
Univar's benefits) are eligible to participate in the Retirement Plan. As of
February 29, 1996, approximately 1,855 employees were eligible to participate in
the Retirement Plan.
<TABLE>
<CAPTION>
HIGHEST AVERAGE
ANNUAL EARNINGS
DURING ANY
CONSECUTIVE YEARS OF SERVICE
SIXTY MONTHS ------------------------------------------------------------
OF EMPLOYMENT 15 20 25 30 35
-------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
100,000............. $ 23,933 $ 31,910 $ 39,888 $ 43,638 $ 47,388
200,000............. 49,433 65,910 82,388 89,888 97,388
300,000............. 74,933 99,910 124,888 136,138 147,388
400,000............. 100,433 133,910 167,388 182,388 197,388
500,000............. 125,933 167,910 209,888 228,638 247,388
600,000............. 151,433 201,910 252,388 274,888 297,388
700,000............. 176,933 235,910 294,888 321,138 347,388
</TABLE>
With certain exceptions, Section 415 of the Internal Revenue Code currently
limits pensions which may be paid under plans qualified under the Internal
Revenue Code to an annual benefit of $120,000 (indexed annually). Section
401(a)(17) of the Internal Revenue Code limits the amount of annual compensation
which may be considered in determining qualified plan pensions to $150,000
(indexed annually). The Board of Directors, upon the recommendation of the
Compensation Committee, has established a Supplemental Benefits Plan for certain
designated highly compensated employees to whom these limits apply, or will
apply in the future, so that these employees will obtain the benefit that would
have applied in the absence of these limits. Only eleven retired employees of
the Corporation have received payments under the Supplemental Benefits Plan
during the past five fiscal years. Such payments have aggregated $341,366 for
one participant (the only executive officer within the group) and $483,129 for
the other ten retirees, collectively, for the five-year period ended February
29, 1996.
The Compensation Committee has approved the adoption of a Trigger Rabbi
Trust for the benefit of employees of Univar Corporation and Van Waters & Rogers
Inc. who have been designated as participants in the Supplemental Benefits Plan.
In the event of a change of control of the Corporation, the Trigger Rabbi Trust
would require immediate and full funding by Univar Corporation of the benefits
to be paid under the
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<PAGE> 95
Supplemental Benefits Plan. Similarly, Van Waters & Rogers Ltd. has adopted its
own Supplemental Benefits Plan with a trust arrangement providing comparable
benefits.
Compensation of executive officers covered by the Retirement Plan would
include salaries and incentives as reported in the Summary Compensation Table.
The following are the years of service of the persons named in the Summary
Compensation Table under the Retirement Plan: Mr. Fletcher, 7 years; Mr. Butler,
5 years; Mr. Pruitt, 17 years; Mr. Bernard, 38 years; and Mr. Alampi, 17 years.
Mr. Hough has 35 years of service, and as a former employee of Van Waters &
Rogers Ltd., participates in both the Univar Corporation and Van Waters & Rogers
Ltd. plans. Upon retirement, Mr. Hough would receive similar retirement benefits
as shown above.
As an employee of the Univar Europe N.V. group, the Corporation's European
subsidiary, Mr. Ellwood would receive retirement benefits under an employer
provided pension plan. Mr. Ellwood has 21 years of service. Under this pension
plan, normal retirement is reached at age 60, and the pension for Mr. Ellwood
equals two-thirds of the employee's final salary, exclusive of any bonus
payments.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 1, 1996 regarding the
beneficial ownership of the Corporation's common stock by the Corporation's
directors including the Corporation's Chief Executive Officer, each named
executive officer, and by the directors and executive officers as a group. As of
June 1, 1996, there were 21,735,415 shares of common stock issued and
outstanding. Except to the extent each listed individual's shares are subject to
community property laws or as otherwise indicated, beneficial ownership
represents sole voting and sole investment power with respect to no par value
common stock, the Corporation's only outstanding class of stock.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
OWNED OF CLASS
------------ ----------
<S> <C> <C>
Directors
Richard E. Engebrecht (1)................................. 77,574 *
Sjoerd D. Eikelboom....................................... 0 N/A
N. Stewart Rogers (2)..................................... 302,219 1.39%
Paul H. Hough (3)......................................... 56,525 *
James W. Bernard (4)...................................... 162,470 *
John G. Scriven........................................... 0 N/A
Roy E. Wansik............................................. 0 N/A
Roger L. Kesseler......................................... 500 *
Curtis P. Lindley (5)..................................... 214,804 *
Nicolaas J. Westdijk (6).................................. 6,106,000 28.09%
James H. Wiborg (7)....................................... 446,865 2.06%
Andrew V. Smith (8)....................................... 24,409 *
Executive Officers Named in the Summary Compensation Table
Jeffrey Ellwood........................................... 0 N/A
James L. Fletcher (9)..................................... 19,817 *
William A. Butler (10).................................... 5,936 *
Gary E. Pruitt (11)....................................... 21,176 *
James P. Alampi (12)...................................... 4,556 *
All Directors and Executive Officers as a Group (18
persons) (13)(14)...................................... 7,393,703 34.02%
</TABLE>
- ---------------
* less than 1.00%
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<PAGE> 96
(1) Mr. Engebrecht's total includes stock options to purchase 8,020 shares
which are exercisable within sixty days and were granted under the 1993
Non-Employee Director Stock Option Plan.
(2) Mr. N. Stewart Rogers has voting and investment power as a trustee with
respect to 18,816 shares beneficially owned by his grandchildren and his
mother. Mr. N. Stewart Rogers disclaims beneficial ownership of these
18,816 shares, but such shares are included in his total above as required
by SEC regulations.
(3) Mr. Hough's total includes stock options to purchase 1,403 shares which are
exercisable within sixty days and were granted under the 1986 Long-Term
Incentive Stock Plan.
(4) Mr. Bernard disclaims beneficial ownership of 76,200 shares owned by his
spouse, but such shares are included in his total above as required by SEC
regulations.
(5) Mr. Lindley disclaims beneficial ownership of 4,336 shares owned by his
spouse, but such shares are included in his total above as required by SEC
regulations.
(6) Mr. Westdijk's total includes 3,333,333 shares held by Pakhoed USA, Inc.
and 2,772,667 shares held by Pakhoed Investeringen B.V., wholly owned
subsidiaries of Royal Pakhoed N.V., as to which Mr. Westdijk shares voting
and investment power as Chair of the Board of Management of Royal Pakhoed
N.V. These shares are deemed to be beneficially owned by Mr. Westdijk in
accordance with SEC regulations, but he disclaims such beneficial
ownership.
(7) Mr. Wiborg shares voting and investment power as a co-trustee for 65,743 of
these shares. He disclaims beneficial ownership of these 65,743 shares and
of 142,000 shares owned by his spouse, but such shares are included in his
total above as required by SEC regulations.
(8) Mr. Smith's total includes stock options to purchase 7,409 shares which are
exercisable within sixty days and were granted under the 1993 Non-Employee
Director Stock Option Plan.
(9) Mr. Fletcher's total includes stock options to purchase 1,994 shares which
are exercisable within sixty days and were granted under the 1986 Long-Term
Incentive Stock Plan.
(10) Mr. Butler's total includes stock options to purchase 1,964 shares which
are exercisable within sixty days and were granted under the 1986 Long-Term
Incentive Stock Plan.
(11) Mr. Pruitt's total includes stock options to purchase 5,394 shares which
are exercisable within sixty days and were granted under the 1986 Long-Term
Incentive Stock Plan.
(12) Mr. Alampi resigned as an executive officer of the Corporation effective
October 26, 1995.
(13) Includes 3,333,333 shares held by Pakhoed USA, Inc. and 2,772,667 shares
held by Pakhoed Investeringen B.V., over which Mr. Westdijk shares voting
and investment control.
(14) Includes 18,775 shares for which certain directors and executive officers
have stock options exercisable within sixty days.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Listed in the following table are the only known beneficial owners as of
June 1, 1996 of more than five percent (5%) of the Corporation's outstanding
stock based on 21,735,415 shares outstanding on June 1, 1996. The Corporation
knows of no other person or "group," as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, that is the beneficial owner of more than
five percent of the Corporation's common stock.
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<PAGE> 97
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------------ --------------------- -------------------- --------
<S> <C> <C> <C>
The Dow Chemical Company (1).............. Common Stock 3,900,000 17.94%
Willard H. Dow Ctr.
Midland, MI 48674
Pakhoed USA, Inc. (2)..................... Common Stock 3,333,333 15.34%
2000 W. Loop S. Suite 2200
Houston, TX 77027
Pakhoed Investeringen B.V. (2)............ Common Stock 2,772,667 12.76%
c/o Royal Pakhoed N.V.
333 Blaak
3011 GB Rotterdam
The Netherlands
</TABLE>
- ---------------
(1) The shares are subject to a Standstill Agreement. See "Agreements with The
Dow Chemical Company" below.
(2) Pakhoed USA, Inc. and Pakhoed Investeringen B.V. are each a wholly owned
subsidiary of Royal Pakhoed N.V. The shares held by each corporation are
subject to a Standstill Agreement. See "Agreements with Royal Pakhoed N.V."
below.
The Corporation has previously entered into standstill agreements with The
Dow Chemical Company ("Dow") and Pakhoed which have been modified by the
Reorganization Agreement, a confidentiality agreement with Pakhoed (described
below), and a consent executed by the Corporation in favor of both Dow and
Pakhoed. Pursuant to these agreements, the Corporation has modified the
standstill agreements to permit a tender offer to the Corporation's shareholders
by UC Acquisition Corp. ("Buyer"), an affiliate of Pakhoed. In addition, the
agreement with Dow provides that Dow, as appropriate, will (i) tender all Shares
held of record or beneficially by it as of May 31, 1996, or thereafter, pursuant
to Buyer's Offer; (ii) provide all consents and approvals pursuant to a certain
Distributor Agreement by and between Dow and Van Waters & Rogers Inc., dated
March 8, 1996, required to consummate the Merger and the transactions
comtemplated by the Reorganization Agreement; and (iii) at Pakhoed's request (a)
exercise its option to purchase all or such portion required of the 101,874
shares of Series A Junior Participating Convertible Preferred Shares (the
"Preferred Shares"), which Dow is entitled to purchase pursuant to the Amended
and Restated Agreement of Purchase and Sale of Stock (the "Stock Purchase
Agreement") entered into by and between Dow and the Corporation, dated May 13,
1994, (b) convert all the Preferred Shares acquired pursuant to the Stock
Purchase Agreement into Shares, and (c) tender all Shares acquired pursuant to
such conversion of the Preferred Shares to Buyer pursuant to Buyer's Offer. If
such request is not made by Pakhoed, and the option is not exercised, Pakhoed,
or the Surviving Corporation, (as defined below) has agreed to pay Dow on
consummation of the merger described in the Reorganization Agreement, the
difference between the aggregate exercise price of the option to acquire the
Preferred Shares and the aggregate price that would have been paid in the tender
offer for the Shares which would have otherwise been issued pursuant to the
conversion of the Preferred Shares. See the Schedule 14D-1 and Schedule 14D-9
filings made in connection with the Tender Offer, which is described further at
the beginning of this report.
The following descriptions of the original standstill agreements continue
to apply to the extent they have not been modified by the agreements described
above and would also continue in effect in the event the tender offer is not
consummated or otherwise terminated.
AGREEMENTS WITH THE DOW CHEMICAL COMPANY
The Corporation has sold to The Dow Chemical Company ("Dow") 3,900,000
shares of the Corporation's common stock. Pursuant to the Amended and Restated
Agreement of Purchase and Sale of Stock with
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<PAGE> 98
Dow (the "Purchase Agreement"), the Corporation may also sell to Dow, and Dow
may purchase from the Corporation, up to an additional 101,874 shares of Series
A Preferred Stock (which are convertible on a five for one basis into 509,370
shares of common stock) pursuant to a put option (the "Put Option"). Terms
beginning with an initial capital letter are defined in either the Purchase
Agreement or the Dow Standstill Agreement described below, both of which have
been filed with the Securities and Exchange Commission.
The following is a summary of certain provisions of the Purchase Agreement.
This summary is not intended to be complete and is qualified in its entirety by
the Purchase Agreement.
SALE OF ORIGINAL SHARES AND PUT OPTION FOR ADDITIONAL SHARES
In 1991, Dow purchased 1,900,000 shares of the Corporation's common stock.
In 1994, Dow purchased an additional 2,000,000 shares of the Corporation's
common stock.
Dow and the Corporation have agreed that, at any time within the three-year
period ending May 12, 1997, the Corporation can put to Dow, or Dow can call, up
to 101,874 shares of Series A Preferred Stock (the "Additional Shares"). The
price per share will be $93.70.
Dow has agreed that it will pay to the Corporation $350,000 per year, in
arrears, for each of the three years ending May 12, 1997, in the event the
Corporation does not elect to put the Series A Preferred Stock to Dow, or in the
event Dow does not call said Series A Preferred Stock. If there is a put or call
of the Series A Preferred Stock during said three year period, the annual fee
shall be prorated accordingly.
The shares of Series A Preferred Stock (i) do not have any right to vote,
(ii) receive dividends in an amount equal to five times the dividend paid on
each share of common stock (if, as, and when paid on the common stock), and
(iii) are convertible at any time by the holder into five shares of common
stock. Further, the Series A Preferred Stock can be so converted by the
Corporation at any time after three years after issuance and can be redeemed in
whole or in part by the Corporation at any time. The Corporation has agreed that
it will not convert the Series A Preferred Stock into common stock if, following
said conversion, Dow would own in excess of 19.9% of the issued and outstanding
common stock of the Corporation.
The purchase price and number of Additional Shares are subject to
adjustment in the event the Corporation declares a stock split or any
extraordinary dividend payable in stock, or approves any capital reorganization
or reclassification, consolidation or merger, or sale of all or substantially
all of its assets. Dow Standstill Agreement
Dow and the Corporation have also entered into a Standstill Agreement (the
"Dow Standstill Agreement") which provides that Dow will not acquire beneficial
ownership of any Voting Securities of the Corporation without the approval of a
majority of the directors who are not affiliated with either Pakhoed or Dow (the
"Unaffiliated Directors") if such acquisition would result in Dow owning more
than 21% of the Common Stock Equivalents of the Corporation. Dow may acquire
additional Voting Securities above the 21% limit by making a tender offer for
shares of Voting Securities which is made to all shareholders, is payable in
cash, and is accepted by shareholders owning two-thirds of the outstanding
common stock excluding shares held by Dow or Pakhoed and any shares not tendered
by the Core Shareholders (as defined in "Agreements with Royal Pakhoed N.V."
below). Dow is also permitted to make a tender offer in response to a tender
offer by a third party for an equivalent number of shares. In the event of a
third party tender offer, Dow's percentage limitation would be increased to 27%
and the Corporation would have the right to buy back shares acquired by Dow in
excess of 27%.
The Dow Standstill Agreement also provides that Dow will not (without
approval of the Unaffiliated Directors) (i) deposit any Voting Securities in a
voting trust or subject them to a voting agreement except a trust or agreement
between Dow and its affiliates, (ii) join any group for the purpose of
acquiring, holding, or disposing of Voting Securities within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, (iii) induce any other
person to initiate a tender offer for any securities of the Corporation, or to
effect any change of control of the Corporation or take any action for the
purpose of convening a shareholders' meeting, or (iv) acquire more than 1% of
any class of securities of any entity that is publicly disclosed to be the
beneficial owner of 5% or more of the Voting Securities.
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<PAGE> 99
Under the Dow Standstill Agreement, Dow has the right to have the
composition of the Board of Directors reflect the proportional ownership
interest of Dow. Accordingly, Mr. Roger L. Kesseler and Mr. John G. Scriven have
served on the Board of the Corporation since 1991 and 1994, respectively.
Pursuant to the Dow Standstill Agreement, Dow has the right to maintain its
ownership at its percentage which may vary from time to time, but, as described
above, is generally capped at 21%. Dow has the preemptive right to purchase
shares from the Corporation whenever the Corporation proposes to sell shares in
a public offering or a private placement. The Corporation has established a
reserve of 21% of the Corporation's unissued shares to accommodate the
possibility that future sales of shares might be made by the Corporation giving
rise to Dow's preemptive right. At this time, the Corporation has no plan to
sell shares to a third party or in the public market (other than pursuant to
employee benefit plans such as those described elsewhere in this Proxy
Statement). Further, Dow has the right to participate in certain repurchases of
shares by the Corporation and in certain public offers or private placements by
the Corporation.
AGREEMENTS WITH ROYAL PAKHOED N.V.
The Corporation has entered into various agreements with Royal Pakhoed N.V.
and its wholly owned subsidiaries, Pakhoed USA, Inc. and Pakhoed Investeringen
B.V. (collectively, "Pakhoed") including a Standstill Agreement which is
substantially the same as the Dow Standstill Agreement. Pakhoed also has entered
into Shareholder Agreements (the "Core Shareholder Agreements") with Directors
Bernard, Engebrecht, Lindley, Rogers, and Wiborg (and their respective wives),
with former director Robert S. Rogers and his wife, with M.M. Harris (now
Director Emeritus) and his wife, and with Nat S. Rogers and his wife (both
deceased) (parents of Robert S. and N. Stewart Rogers and the parents-in-law of
James H. Wiborg). These shareholders and their spouses as noted are referred to
as the "Core Shareholders."
Certain terms used in this Proxy Statement with initial capital letters are
defined in the agreements mentioned above. Each of those agreements has been
filed with the Securities and Exchange Commission.
PAKHOED STANDSTILL AND CORE SHAREHOLDER AGREEMENTS
The Standstill Agreement provides that Pakhoed will not acquire beneficial
ownership of any Voting Securities of the Corporation if such acquisition would
result in Pakhoed owning more than 35% of the Common Stock Equivalents of the
Corporation. Pakhoed may acquire additional Voting Securities above the 35%
limit by making a tender offer for shares of Voting Securities in response to a
third-party tender offer for such securities, in which event the percentage
limitation will increase to 45% and Pakhoed may retain shares over 45% to the
extent the Corporation elects not to repurchase such shares pursuant to its
right to do so under the Standstill Agreement. Pakhoed may also acquire shares
in excess of the percentage limitation either by receiving approval of
five-eighths of the directors of the Corporation who are not affiliated with
Pakhoed (the "Unaffiliated Directors"), or by a tender offer (without approval
by the Unaffiliated Directors) which is (i) made to all shareholders, (ii)
payable in cash, and (iii) accepted by shareholders owning two-thirds of the
outstanding common stock excluding shares held by Pakhoed and shares not
tendered by the Core Shareholders.
Subject to the foregoing restrictions, Pakhoed may acquire shares by open
market purchase, partial tender offer, or private transaction. In response to an
increase in the number of outstanding shares of the Corporation's common stock,
Pakhoed may purchase unissued shares of common stock under certain
circumstances.
The Standstill Agreement also provides that Pakhoed will not (without prior
written approval of the Board, including the concurrence of a majority of the
Unaffiliated Directors) (i) deposit any Voting Securities into a voting trust or
subject them to a voting agreement except a trust or agreement between Pakhoed
and its affiliates or as required by Netherlands law, (ii) join any group for
the purpose of acquiring, holding, or disposing of Voting Securities within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, (iii) induce
any other person to initiate a tender offer for any securities of the
Corporation, or to effect any change of control of the Corporation, or take any
action for the purpose of convening a shareholders' meeting,
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<PAGE> 100
or (iv) acquire more than 1% of any class of securities of any entity that is
publicly disclosed to be the beneficial owner of 5% or more of the Voting
Securities of the Corporation.
The Standstill Agreement requires the Corporation to provide Pakhoed with
representation on the Board proportionate to its stock ownership. Accordingly,
during the Corporation's last fiscal year, Messrs. Eikelboom, Wansik, and
Westdijk held three of twelve seats on the Board. Directors designated by
Pakhoed are entitled to representation on any committee of the Board at
Pakhoed's request. Pakhoed is required to vote its shares so as to afford the
Corporation's other shareholders with proportionate representation.
The Core Shareholder Agreements provide that the Core Shareholders will
vote their shares in favor of Pakhoed's representatives, as described in the
preceding paragraph, in consideration for the right of the Core Shareholders to
sell their shares to Pakhoed after a tender offer by Pakhoed made in accordance
with and satisfying the requirements of the Standstill Agreement.
The terms of the Standstill Agreement have been modified by a
Confidentiality Agreement, dated April 12, 1996 between the Corporation and
Pakhoed. The Confidentiality Agreement, which was executed in connection with
the Tender Offer, provides that Pakhoed may not, without the prior written
consent of the Corporation, disclose to any person other than Pakhoed and its
representatives, the fact that the Corporation and Pakhoed were considering a
transaction. The Confidentiality Agreement further provides that Pakhoed is to
keep confidential, subject to being legally compelled to disclose, certain
documents provided to Pakhoed by the Corporation in connection with the proposed
transaction (the "Evaluation Documents"). In the event that Pakhoed is legally
compelled to disclose any of the Evaluation Documents, it is required to notify
the Corporation so that the Corporation can take such measure to protect the
confidentiality of the Evaluation Documents.
In connection with a Tender Offer Protocol, attached as Exhibit B to the
Confidentiality Agreement (the "Protocol"), the Confidentiality Agreement also
provides that Pakhoed, until October 30, 1996 (which was extended to April 30,
1998), except with the written approval of the Corporation, agrees not to: (i)
acquire any of the stock or other securities of the Corporation other than as
permitted by the 1986 Standstill Agreement, but specifically excluding the right
to make a tender offer pursuant to Section 2.10 of the 1986 Standstill
Agreement, (ii) submit to the Corporation or any other person any proposal for a
transaction between Pakhoed and Company or involving any of its securities
holders other than in accordance with the Protocol, (iii) solicit proxies or
shareholder consents with respect to the securities of the Corporation or become
a "participant" in any "solicitation" or a member of a "group" (as such terms
are used in Regulation 14A and Section 13(d)(3) of the Exchange Act) in
opposition to the recommendation of the majority of the Unaffiliated Directors,
or (iv) otherwise assist, advise, encourage, or act alone or in concert with any
other person in acquiring or attempting to acquire, directly or indirectly,
control of the Corporation or its assets.
Finally, the Confidentiality Agreement provides that if certain conditions
set forth in Section 2.1 and 2.2 of the Protocol are satisfied, the standstill
provisions of the Confidentiality Agreement automatically extends to April 30,
1998. These conditions were subsequently satisfied on April 26, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Change of Control Agreements
The Board of Directors has unanimously approved change of control
agreements (the "Agreements") between the Corporation and certain of the named
executive officers of the Corporation. At February 29, 1996, the Corporation had
Agreements in place with each of the then employed named executive officers (the
"Executives"). Each Agreement provides that the Executive will receive
compensation for 30 months if his employment is terminated (voluntarily or
involuntarily) for any reason other than gross misconduct, death, permanent and
total disability, or reaching age 65, provided such termination occurs within 24
months after certain defined events which might lead to a change of control of
the Corporation. The compensation will be paid at a rate equal to the
Executive's then current salary and target incentive. The compensation is
subject to a minimum annual rate of not less than the Executive's average
compensation for the preceding three calendar years, and is subject to reduction
if the aggregate present value of all payments would exceed three times the
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<PAGE> 101
Executive's "annualized includible compensation", as defined in Section 280G of
the Internal Revenue Code, for the Executive's most recent five taxable years.
The Executive will also continue to have "employee" status for the 30-month
period and will be entitled to retain most employee benefits and rights during
this period.
The Corporation may cease payments in the event the Executive breaches
certain non-competition or confidentiality covenants. The Corporation also has
the right to terminate the Agreements upon a one-year notice, except as to
rights already accrued as a result of an event which has triggered the change of
control provisions of the Agreements. The Board of Directors believes that the
terms and conditions of the Agreements are in the best interest of the
Corporation because the Agreements will enable the Executives to continue to
focus on activities providing for the maximum long-term value to the
Corporation's shareholders, even when faced with the possible change of control
of the Corporation.
On May 31, 1996, the Corporation executed letter amendments to the Change
of Control Agreements to clarify and make provisions for certain payments to be
made in the event the Offer is consummated (the "Letter Amendments"). The Letter
Amendments, among other provisions: (i) clarify that the consummation of the
Offer is a "change in control," (ii) provide for payment of the 30 months of
base compensation, target incentives and benefits in a lump sum upon
consummation of the Offer rather than upon termination of the Executive, and
(iii) provide for a "Gross-Up Payment" to each Executive to cover the effect of
excise and other taxes on the payments made pursuant to the Change of Control
Agreements, as amended, the conversion of outstanding stock options and other
payments likely to be treated as "parachute payments" for federal income tax
purposes, recognizing that payments in excess of the "three times annualized
includible compensation" may be paid to these individuals. Absent a specific
agreement to the contrary, the Letter Amendments provide that payments pursuant
to the revised agreements shall be in lieu of any other severance benefit which
they presently are entitled to in the event of a termination within 30 months
after the consummation of the Offer and by execution of the Letter Agreements
will also grant a release to the Surviving Corporation of any other claim,
right, or cause of action relating to his employment with the Corporation.
As a result of the Letter Amendments, the estimated amounts payable to the
following executive officers in the event of a change of control would be
approximately: Mr. Hough, $4,500,000; Mr. Ellwood, $1,000,000; Mr. Fletcher,
$1,550,000; Mr. Butler, $1,200,000; Mr. Pruitt, $1,500,000; and Mr. MacAfee,
$1,150,000. These amounts include payments for base compensation, target
incentives and benefits, and cash payments for surrender of stock options,
restricted stock awards, and deferred cash incentives pursuant to the
Corporation's stock option plans. The foregoing amounts do not include the gross
up payments which, when determined, will equal the related excise and other
taxes attributable to amounts deemed to be parachute payments.
Employment Separation Agreements
In connection with Mr. Bernard's retirement, he and the Corporation entered
into a separation agreement. Under the agreement, Mr. Bernard (a) receives
monthly payments of $41,737 from November 1995 through October 1996, (b)
remained eligible to participate in the Management Annual Incentive Plan for
fiscal year 1996, (c) was deemed vested in 802 non-qualified stock options
granted April 9, 1990, and (d) is entitled to an additional retirement payment
equal to the difference between his monthly pension benefits under the
Retirement Plan and the amount of benefits he would have received if he retired
at age 62. Mr. Bernard earned no payment under the Incentive Plan for fiscal
year 1996. Mr. Bernard's additional retirement payments of $5,280 per month
commenced in November 1995 and will continue as long as monthly benefits are
paid pursuant to the Retirement Plan.
In connection with Mr. Alampi's resignation, he and the Corporation also
entered into a separation Agreement. Under the Agreement, Mr. Alampi (a)
terminated his employment with the Corporation effective December 30, 1995, (b)
receives monthly payments of $25,212 per month from January 1996 through October
1996, (c) remained eligible to participate in the Management Annual Incentive
Plan for fiscal year 1996, (d) is entitled to receive limited outplacement
services, and (e) was deemed vested in 3,348 shares of restricted stock and
3,348 non-qualified stock options granted June 21, 1991. Mr. Alampi earned no
payment under the Incentive Plan for fiscal year 1996.
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<PAGE> 102
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNIVAR CORPORATION
Date: June 21, 1996 /s/ PAUL H. HOUGH
- ------------------- -----------------------------
Paul H. Hough
President and Chief Executive
Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
Date: June 21, 1996 /s/ GARY E. PRUITT
- ------------------- ------------------------------
Gary E. Pruitt,
Chief Financial Officer
(Principal Financial and Accounting
Officer)
Directors
James W. Bernard
Sjoerd D. Eikelboom
Richard E. Engebrecht
Paul H. Hough
Roger L. Kesseler
Curtis P. Lindley
N. Stewart Rogers
John G. Scriven
Andrew V. Smith
Roy E. Wansik
Nicolaas J. Westdijk
James H. Wiborg
By: /s/ WILLIAM A. BUTLER
------------------------------
William A. Butler,
Attorney-in-Fact
Power of Attorney dated May 2,
1996
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<PAGE> 103
EXHIBIT D
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-5858
UNIVAR CORPORATION
<TABLE>
<S> <C>
A WASHINGTON I.R.S. EMPLOYER
CORPORATION NO. 91-0816142
</TABLE>
6100 CARILLON POINT
KIRKLAND, WASHINGTON 98033
TELEPHONE NO. (206) 889-3400
Indicate by a check mark whether the Corporation (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Corporation was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO ___
On June 17, 1996 the Corporation had outstanding 21,750,757 shares of no
par common stock, which is the Corporation's only class of common stock.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 104
UNIVAR CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets May 31, 1996 and February
28, 1996......................................................... 2
Consolidated Statements of Operations Three Months Ended May 31,
1996 and 1995.................................................... 3
Condensed Consolidated Statements of Cash Flows Three Months
Ended May 31, 1996 and 1995...................................... 4
Notes to Condensed Consolidated Financial Statements............. 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 6
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 7
SIGNATURES........................................................................... 8
</TABLE>
D-1
<PAGE> 105
UNIVAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (SEE NOTES)
ASSETS
<TABLE>
<CAPTION>
(000'S) MAY 31, 1996 FEBRUARY 28, 1996
- ---------------------------------------------------------------- ------------ -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents..................................... $ 13,948 $ 19,053
Receivables -- net............................................ 324,952 271,893
Inventories................................................... 184,731 162,469
Other current assets.......................................... 11,300 11,301
-------- --------
Total current assets.................................. 534,931 464,716
Real Properties Held for Sale and Long Term Receivables......... 24,170 24,193
Property, Plant and Equipment -- net............................ 212,598 214,011
Other Assets.................................................... 36,746 37,685
-------- --------
$808,445 $ 740,605
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank overdrafts............................................... $ 28,802 $ 21,217
Notes payable................................................. 61,814 49,502
Current portion of long-term debt............................. 4,226 6,389
Accounts payable.............................................. 314,129 253,500
Accrued liabilities........................................... 58,673 58,665
-------- --------
Total current liabilities............................. 467,644 389,273
Long-term Debt.................................................. 115,856 132,812
Other Long-term Liabilities..................................... 38,979 38,914
SHAREHOLDERS' EQUITY
Common stock.................................................... 106,089 105,505
Retained earnings............................................... 80,881 73,859
Cumulative translation adjustment............................... (423) 246
Deferred stock compensation expense............................. (581) (4)
-------- --------
Total shareholders' equity............................ 185,966 179,606
-------- --------
$808,445 $ 740,605
======== ========
</TABLE>
D-2
<PAGE> 106
UNIVAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (SEE NOTES)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
---------------------
(000'S EXCEPT SHARE DATA) 1996 1995
- ----------------------------------------------------------------------- -------- --------
<S> <C> <C>
Sales.................................................................. $576,432 $552,932
Cost of Sales.......................................................... 493,861 475,003
Gross Margin........................................................... 82,571 77,929
Gross Margin Percentage................................................ 14.3% 14.1%
Operating Expenses..................................................... 64,742 61,626
-------- --------
Income from Operations................................................. 17,829 16,303
Other Income (Expense):
Interest expense..................................................... (3,783) (3,431)
Other income-net..................................................... 699 548
-------- --------
Income Before Provision for Taxes and Minority Interest................ 14,745 13,420
Provision for Taxes on Income.......................................... 6,096 5,650
-------- --------
Net Income............................................................. $ 8,649 $ 7,770
======== ========
Net Income per Share................................................... $ 0.40 $ 0.36
======== ========
Dividends per Share.................................................... $ 0.075 $ 0.075
======== ========
Weighted Average Shares Outstanding.................................... 21,813 21,793
======== ========
</TABLE>
D-3
<PAGE> 107
UNIVAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (SEE NOTES)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
---------------------
(000'S) 1996 1995
- ----------------------------------------------------------------------- -------- --------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net Income........................................................... $ 8,649 $ 7,770
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization..................................... 7,381 7,388
Other............................................................. 205 (194)
Changes in assets and liabilities:
Accounts receivable............................................... (53,289) (55,076)
Inventories....................................................... (22,627) (18,857)
Accounts payable.................................................. 71,199 66,234
Other current assets.............................................. (483) (285)
Other current liabilities......................................... (1,952) 2,083
-------- --------
Net Cash Provided by Operating Activities.............................. 9,083 9,063
-------- --------
CASH FLOWS USED BY INVESTING ACTIVITIES:
Investment activity.................................................. 457 (1,249)
Additions to property, plant, and equipment.......................... (3,457) (4,507)
Changes in other assets.............................................. (367) (455)
-------- --------
Net Cash Used by Investing Activities.................................. (3,367) (6,211)
-------- --------
CASH FLOWS (USED) PROVIDED BY FINANCING ACTIVITIES:
Short-term borrowing -- net.......................................... 17,255 8,426
Common stock activity................................................ 3 (39)
Long-term debt incurred.............................................. 11,014 0
Reduction in long-term debt.......................................... (37,464) (3,491)
Payment of dividends................................................. (1,626) (3,270)
-------- --------
Net Cash (Used) Provided by Financing Activities....................... (10,818) 1,626
-------- --------
Effect of exchange rate changes on cash................................ (3) 1,429
-------- --------
NET CASH (USED) PROVIDED............................................... (5,105) 5,907
Cash and Cash Equivalents at Beginning of Period....................... 19,053 19,516
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................. $ 13,948 $ 25,423
======== ========
</TABLE>
D-4
<PAGE> 108
UNIVAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements were
prepared in accordance with generally accepted accounting principles for interim
financial information pursuant to the rules and regulations of the Securities
and Exchange Commission and instructions to Form 10-Q. While these statements
reflect all adjustments (which consist of normal recurring accruals) which are,
in the opinion of management, necessary to a fair presentation of the results
for the interim periods presented, they do not include all of the information
and disclosures required by generally accepted accounting principles for
complete financial statements. These statements should be read in conjunction
with the financial statements and notes thereto included in the Annual Report of
the Corporation for the fiscal year ended February 28, 1996, and filed as Item 8
to Form 10-K, Commission File No. 1-5858. On June 24, 1996, the Corporation
filed an amendment to its Form 10-K.
Results of operations for interim periods are not necessarily indicative of
the results that may be expected for the year ending February 29, 1997.
2. LIFO INVENTORY
The LIFO method of pricing is used for approximately 54% of the
Corporation's inventory. Because an actual valuation of inventory under the LIFO
method can be made only at the end of each fiscal year based on the inventory
levels and costs at that time, interim financial results are based on estimated
LIFO adjustments and are subject to final fiscal year-end LIFO inventory
amounts.
3. SUBSEQUENT EVENT
The Corporation announced on June 3, 1996 that it had entered into an
agreement to merge with a subsidiary of Royal Pakhoed N.V., a Netherlands
limited liability company. Pakhoed and its affiliates currently own
approximately 28% of the Corporation's common stock. The merger will be preceded
by a cash tender offer for all the outstanding common shares of the Corporation
at a price of $19.45 per common share. The tender offer will be initiated by UC
Acquisition Corp., a subsidiary of Pakhoed which was created for this
transaction.
UC Acquisition Corp. has filed with the Securities and Exchange Commission
a Tender Offer Statement on Schedule 14D-1, dated June 7, 1996 relating to the
offer, and the Corporation has filed its Schedule 14D-9
Solicitation/Recommendation Statement concerning the transaction.
The offer is being made pursuant to the Agreement and Plan of
Reorganization, dated as of May 31, 1996, among the Corporation, Royal Pakhoed
N.V., and UC Acquisition Corp. The offer is subject to certain conditions
described in the Schedule 14D-1 and the Schedule 14D-9 and is expected to close
not earlier than July 15, 1996.
D-5
<PAGE> 109
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The Corporation reported earnings of $8.6 million, or $0.40 per share for
its first fiscal quarter ended May 31, 1996, up from $7.8 million or $0.36 per
share for the first quarter last year.
Total sales for the quarter were $576.4 million, an increase of 4% over the
first quarter last year. European operations lead the way, with sales up 21%,
which was attributable to an acquisition in the U.K. Canadian sales decreased
2%, while sales in the United States increased by 1%. In Canada, industrial
chemical sales continued to grow, however, adverse weather conditions delayed
normal agricultural chemical sales.
Gross margin dollars increased by 6% for the quarter. The gross margin
percentage increased to 14.3% compared with 14.1% for the first quarter last
year. The increase in margin percentage is due to a change in the mix of
products sold, notably decreased volumes of lower margin agricultural chemical
sales in Canada. Margin percentage was constant in the U.S. while margin
percentage in Europe decreased compared with last year's first quarter.
Total operating expenses for the quarter were $64.7 million, compared with
$61.6 million for the first quarter last year. Expenses for the first quarter
last year were lower, in part as a result of reversing $1.5 million in unearned
executive incentive compensation related to the prior year. Excluding the
non-recurring reduction last year, operating expenses increased by 2.6%. As a
percentage of sales, operating expenses decreased to 11.2% of sales, compared
with 11.4% in the first quarter last year, excluding the non-recurring item.
The Corporation is involved in certain elective and required environmental
programs. The following table shows additions to and expenditures charged
against the Corporation's environmental accruals for the current and prior year
comparable quarters.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
-------------------
(000'S) 1996 1995
--------------------------------------------------------- ----- -----
<S> <C> <C>
Beginning balance........................................ $16.6 $17.0
Expense provisions....................................... 1.4 1.4
Expenditures............................................. (1.4) (1.0)
----- -----
Ending balance........................................... $16.5 $17.4
===== =====
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital at the end of the first quarter was $67.3 million, compared
with $75.4 million at the prior year-end. Over the same period, the current
ratio decreased to 1.14:1 compared with 1.19:1 The change in working capital is
due in part to seasonal fluctuations in working capital components and to
temporary replacement of long term borrowings with short term borrowings.
Cash flow provided by operations is unchanged at $9.1 million for the
quarter, compared to the first quarter last year.
The Corporation has domestic and foreign short-term credit lines totaling
$104.7 million, of which $42.9 million was available at quarter-end. The
Corporation also has access to funds of up to $195 million under a medium-term
revolving credit agreement with a group of banks, of which $95 million was
available at quarter-end. Additionally, the Corporation's non-U.S. subsidiaries
have access to funds under terms of a $90 million multi-currency revolving
credit agreement, of which $80.8 was available at quarter-end. The Corporation
believes its internally generated cash, together with its access to bank lines,
will be adequate to fund planned capital expenditures, investments, and to
support working capital requirements.
D-6
<PAGE> 110
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
CAPITAL EXPENDITURES
During the first quarter of this fiscal year, additions to property, plant,
and equipment totaled $3.5 million, compared with $4.5 million for the prior
year quarter. Current quarter additions consisted primarily of normal
replacement and upgrading of fixed assets and construction expenditures for
warehouse facilities. The Corporation utilized available cash to fund the
capital expenditures.
SUBSEQUENT EVENT
The Corporation announced on June 3, 1996 that it had entered into an
agreement to merge with a subsidiary of Royal Pakhoed N.V., a Netherlands
limited liability company. Pakhoed and its affiliates currently own
approximately 28% of the Corporation's common stock. The merger will be preceded
by a cash tender offer for all the outstanding common shares of the Corporation
at a price of $19.45 per common share. The tender offer will be initiated by UC
Acquisition Corp., a subsidiary of Pakhoed which was created for this
transaction.
UC Acquisition Corp. has filed with the Securities and Exchange Commission
a Tender Offer Statement on Schedule 14D-1, dated June 7, 1996 relating to the
offer, and the Corporation has filed its Schedule 14D-9
Solicitation/Recommendation Statement concerning the transaction.
The offer is being made pursuant to the Agreement and Plan of
Reorganization, dated as of May 31, 1996, among the Corporation, Royal Pakhoed
N.V., and UC Acquisition Corp. The offer is subject to certain conditions
described in the Schedule 14D-1 and the Schedule 14D-9 and is expected to close
not earlier than July 15, 1996.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A Form 8-K, dated May 31, 1996, and filed June 7, 1996, announced the
commencement by Royal Pakhoed N.V. of a tender offer for all of the outstanding
shares of the Corporation at a per share price of $19.45, to be followed as soon
as practicable by a cash out merger for all remaining untendered shares,
pursuant to an Agreement and Plan of Reorganization, which was filed as Exhibit
2.1 to the Form 8-K.
D-7
<PAGE> 111
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVAR CORPORATION
<TABLE>
<S> <C>
Date: June 25, 1996 By: /s/ PAUL H. HOUGH
------------------------------------------
Paul H. Hough
President and Chief Executive Officer
(Duly Authorized Officer)
Date: June 25, 1996 By: /s/ GARY E. PRUITT
------------------------------------------
Gary E. Pruitt
Chief Financial Officer
(Principal Financial and Accounting
Officer)
</TABLE>
D-8
<PAGE> 112
EXHIBIT E
DISSENTERS' RIGHTS
The following has been reproduced in its entirety from the Washington
Business Corporation Act:
DISSENTERS' RIGHTS
23B.13.010 DEFINITIONS -- As used in this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RCW 23B.13.020 and who exercises that right when and in
the manner required by RCW 23B.13.200 through 23B.13.280.
(3) "Fair value" with respect to a dissenter's shares means the value of
the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
23B.13.020 RIGHT TO DISSENT
(1) A shareholder is entitled to dissent from, and obtain payment of the
fair value of the shareholder's shares in the event of any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party
(i) if shareholder approval is required for the merger by RCW
23B.11.030, 23B.11.080, or the articles of incorporation and the
shareholder is entitled to vote on the merger, or (ii) if the
corporation is a subsidiary that is merged with its parent under RCW
23B.11.040;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
(d) An amendment of the articles of incorporation that materially
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under
RCW 23B.06.040; or
E-1
<PAGE> 113
(e) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action fails to comply with
the procedural requirements imposed by this title, RCW 25.10.900 through
25.10.955, the articles of incorporation, or the bylaws, or is fraudulent with
respect to the shareholder or the corporation.
(3) The right of a dissenting shareholder to obtain payment of the fair
value of the shareholder's shares shall terminate upon the occurrence of any one
of the following events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets aside the
corporate action; or
(c) The shareholder's demand for payment is withdrawn with the written
consent of the corporation. (Last amended by Ch. 269, L. '91, eff.
7-28-91.)
23B.13.030 DISSENT OF NOMINEES AND BENEFICIAL OWNERS
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the shareholder's name only if the shareholder dissents
with respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the shareholder asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares as to which the dissenter
dissents and the dissenter's other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all shares of
which such shareholder is the beneficial shareholder or over which such
shareholder has power to direct the vote.
23B.13.200 NOTICE OF DISSENTERS' RIGHTS
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this chapter and be accompanied by a copy of this chapter.
(2) If corporate action creating dissenters' rights under RCW 23B.13.020 is
taken without a vote of shareholders, the corporation, within ten days after the
effective date of such corporate action, shall notify in writing all
shareholders entitled to assert dissenters' rights that the action was taken and
send them the dissenters' notice described in RCW 23B.13.220.
23B.13.210 NOTICE OF INTENT TO DEMAND PAYMENT
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights must (a) deliver to the corporation before
the vote is taken written notice of the shareholder's intent to demand payment
for the shareholder's shares if the proposed action is effected, and (b) not
vote such shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section is not entitled to payment for the shareholder's shares under
this chapter.
E-2
<PAGE> 114
23B.13.220 DISSENTERS' NOTICE
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of RCW 23B.13.210.
(2) The dissenters' notice must be sent within ten days after the effective
date of the corporate action, and must:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired beneficial
ownership of the shares before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days
after the date the notice in subsection (1) of this section is delivered;
and
(e) Be accompanied by a copy of this chapter.
23B.13.230 DUTY TO DEMAND PAYMENT
(1) A shareholder sent a dissenters' notice described in RCW 23B.13.220
must demand payment, certify whether the shareholder acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenters' notice pursuant to RCW 23B.13.220(2)(c), and deposit the
shareholder's certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits the shareholder's
share certificates under subsection (1) of this section retains all other rights
of a shareholder until the proposed corporate action is effected.
(3) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter.
23B.13.240 SHARE RESTRICTIONS
(1) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is effected or the restriction is released under RCW 23B.13.260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until the
effective date of the proposed corporate action.
23B.13.250 PAYMENT
(1) Except as provided in RCW 23B.13.270, within thirty days of the later
of the effective date of the proposed corporate action, or the date the payment
demand is received, the corporation shall pay each dissenter who complied with
RCW 23B.13.230 the amount the corporation estimates to be the fair value of the
shareholder's shares, plus accrued interest.
E-3
<PAGE> 115
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(b) An explanation of how the corporation estimated the fair value of
the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under RCW
23B.13.280; and
(e) A copy of this chapter.
23B.13.260 FAILURE TO TAKE ACTION
(1) If the corporation does not effect the proposed action within sixty
days after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release any transfer
restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation wishes to undertake the proposed action, it must
send a new dissenters' notice under RCW 23B.13.220 and repeat the payment demand
procedure.
23B.13.270 AFTER-ACQUIRED SHARES
(1) A corporation may elect to withhold payment required by RCW 23B.13.250
from a dissenter unless the dissenter was the beneficial owner of the shares
before the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of the dissenter's demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares, an explanation of
how the interest was calculated, and a statement of the dissenter's right to
demand payment under RCW 23B.13.280.
23B.13.280 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
(1) A dissenter may notify the corporation in writing of the dissenter's
own estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate, less any payment under RCW
23B.13.250, or reject the corporation's offer under RCW 23B.13.270 and demand
payment of the dissenter's estimate of the fair value of the dissenter's shares
and interest due, if:
(a) The dissenter believes that the amount paid under RCW 23B.13.250
or offered under RCW 23B.13.270 is less than the fair value of the
dissenter's shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under RCW 23B.13.250 within
sixty days after the date set for demanding payment; or
(c) The corporation does not effect the proposed action and does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(2) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (1) of this section within thirty days after the
corporation made or offered payment for the dissenter's shares.
E-4
<PAGE> 116
EXHIBIT F
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT, PAKHOED USA, INC. ("PAKHOED USA"), BUYER AND
PAKHOED INVESTERINGEN, B.V. ("INVESTERINGEN")
SECTION A. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The name, business address, present principal occupation or employment and
five (5)-year employment history of each of the directors and executive officers
of Parent are set forth below. All such directors and executive officers listed
below are citizens of The Netherlands, except Roy E. Wansik, who is a citizen of
the United States. Unless otherwise indicated, the principal business address of
each director or executive officer is 333 Blaak, 3011 GB Rotterdam, The
Netherlands.
<TABLE>
<CAPTION>
POSITION WITH PARENT;
NAME, AGE AND PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS FIVE (5)-YEAR EMPLOYMENT HISTORY
- ------------------------------ --------------------------------------------------------------------
<S> <C>
N. J. Westdijk (54)........... Managing Director of Parent from 1990 to 1992. Chairman of the Board
of Parent from 1992 to present. See Sections B, C and D for further
employment history.
Pierre A. Pellenaars (51)..... Senior Vice President, Finance and Administration, of Parent from
1989 to present. Director of Univar Europe N.V. from 1991 to 1994.
See Section D for further employment history.
J. W. Berghuis (61)........... Vice Chairman of the Board of Management of Parent from 1991 to
present. See Sections B, C and D for further employment history.
G. P. Krans (48).............. Member of the Board of Management of Parent from May 1996 to
present. Chief Executive Officer of Shell Saudi Arabia Oil and
Chemicals from 1994 to 1995. Chief Financial Officer of Shell
Indonesia Oil and Chemicals from 1989 to 1994.
A. H. Spoor (47).............. Member of the Board of Management of Parent from 1996 to present.
Director of Special Products Division, Natural Gas, Exxon Company
Int. from 1993 to February 1996. Statutory Member of Managing Board
of Esso Netherlands and Esso Belgium since 1991.
Frederick van der Ploeg Professor of Political Economy at the University of Amsterdam from
(40)........................ 1991 to present. Member of the Lower House of the Dutch Parliament
for the Labour Party (PvdA) (Financial Spokesperson) from 1994 to
present. Member of the Supervisory Board of Parent from 1996 to
present.
H. de Ruiter (62)............. Member of the Supervisory Board of Parent from 1996 to present.
Currently serving as Deputy Chairman. Managing Director of
Royal/Dutch Shell until 1994.
J. F. M. Peters (64).......... Member of the Supervisory Board of Parent from 1983 to present.
Chairman and Chief Financial Officer, Executive Board of AEGON N.V.
from 1984 to 1993. Retired, various board memberships from 1993 to
present.
J. H. Choufoer (69)........... Chairman of the Supervisory Board of Parent from 1990 to present.
Chairman of the Supervisory Board of Koninklijke Ahold N.V. from
1990 to May 1996. Chairman of the Supervisory Board of ING Group
N.V. from 1990 to May 1996. Chairman of the Supervisory Board of
Koninklijke Hoogovens N.V. from 1990 to present. Member of the
Supervisory Board of N.V. Koninklijke Nederlandsche Petroleum
Maatschappij (Royal Dutch Petroleum Co.) from 1990 to present.
Member of the Board of Directors of The Shell Petroleum Co. Ltd.
from 1990 to present.
Hubert Crijns (65)............ Member of the Supervisory Board of Parent from 1993 to present.
Chief Executive Officer of Parent from 1976 to 1993.
Arie A. van der Louw (62)..... Member of the Supervisory Board of Parent, Heidemij N.V., Verenigde
Tankrederijen, Nelcon and Groot Themsen from 1991 to present.
Chairman of Supervisory Board of Feijenoord -- Stadium from 1991 to
present. Chairman of Dutch Broadcasting Corporation from 1992 to
present.
</TABLE>
F-1
<PAGE> 117
<TABLE>
<CAPTION>
POSITION WITH PARENT;
NAME, AGE AND PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS FIVE (5)-YEAR EMPLOYMENT HISTORY
- ------------------------------ --------------------------------------------------------------------
<S> <C>
J. Groenendijk (68)........... Retired since 1988. Chairman of the Executive Board of Royal
Nedlloyd Group N.V. from 1985 to 1988. Several non-executive
directorships with Dutch companies, including Parent, from 1988 to
1996.
J. Bouwens (60)............... Division President of Gebr. Broere from prior to 1988 to present.
Member of the Strategic Committee of Parent and Group President of
the Shipping and Chemical Storage Group of Parent from 1994 to
present.
J. Brouwer (54)............... Division President of Paktank International from prior to 1990 to
present. Member of the Strategic Committee of Parent and Group
President of International Tank Storage and Development Group of
Parent from 1994 to present.
P.Y. Divet (50)............... Managing Director of Lambert Riviere S.A. from prior to 1991 to
present. President of Lambert Riviere S.A. from 1995 to present.
Member of the Strategic Committee of Parent from 1996 to present.
S.D. Eikelboom (60)........... Senior Vice President Strategy & Development of Parent from 1976 to
present.
P.P. Witte (42)............... Senior Vice President, Human Resources, of Parent from 1995 to
present. Senior Vice President, Human Resources (Netherlands) at
Asea Brown Boveri B.V. from 1991 to 1994. Personnel Manager
(Netherlands) of BASF Netherlands B.V. from 1986 to 1991.
Roy E. Wansik (52) Group President, North America, of Parent from 1993 to present.
2000 West Loop South, #2200 Member of the Strategic Committee of Parent from 1993 to present.
Houston, Texas 77027.......... See Section B for further employment history.
</TABLE>
SECTION B. DIRECTORS AND EXECUTIVE OFFICERS OF PAKHOED USA
The name, business address, present principal occupation or employment and
five (5)-year employment history of each of the directors and executive officers
of Pakhoed USA are set forth below. Unless otherwise indicated, the business
address of each such director and executive officer is 2000 West Loop South,
#2200, Houston, Texas 77027. All such directors and executive officers listed
below are citizens of the United States, except N.J. Westdijk and J. Berghuis,
who are citizens of The Netherlands.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH PAKHOED, USA; PRINCIPAL OCCUPATION
BUSINESS ADDRESS OR EMPLOYMENT; FIVE (5)-YEAR EMPLOYMENT HISTORY
- ------------------------------ ----------------------------------------------------------------------------
<S> <C>
N.J. Westdijk (54)............ Director, Chairman and President of Pakhoed USA from 1992 to present. See
333 Blaak Sections A, C and D for further employment history.
3011 GB Rotterdam
The Netherlands
Roy E. Wansik (52)............ Vice President and Director of Pakhoed USA from 1991 to present. See Section
A for further employment history.
John H. Trow (61)............. Treasurer and Secretary of Pakhoed USA from 1991 to present. See Section C
for further employment history.
J.W. Berghuis (61)............ Director of Pakhoed USA from 1992 to present. See Sections A, C and D for
333 Blaak further employment history.
3011 GB Rotterdam
The Netherlands
</TABLE>
F-2
<PAGE> 118
SECTION C. DIRECTORS AND EXECUTIVE OFFICERS OF BUYER
The name, business address, present principal occupation or employment and
five (5)-year employment history of each of the directors and executive officers
of Buyer are set forth below. Unless otherwise indicated, the business address
of each such director and executive officer is UC Acquisition Corp., in care of
Pakhoed USA, 2000 West Loop South, #2200, Houston, Texas 77027. All such
directors and executive officers listed below are citizens of the United States,
except Mr. N.J. Westdijk and Mr. J.W. Berghuis, who are citizens of The
Netherlands.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH BUYER; PRINCIPAL OCCUPATION
BUSINESS ADDRESS OR EMPLOYMENT; FIVE (5)-YEAR EMPLOYMENT HISTORY
- ------------------------------ ----------------------------------------------------------------------------
<S> <C>
N. J. Westdijk (54)........... Chairman of the Board, President and Director of Buyer from May 1996 to
333 Blaak present. See Sections A, B and D for further employment history.
3011 GB Rotterdam
The Netherlands
Roy E. Wansik (52)............ Vice President and Director of Buyer from May 1996 to present. See Sections
A and B for further employment history.
John H. Trow (61)............. Treasurer and Secretary of Buyer from May 1996 to present. See Section B for
further employment history.
J. W. Berghuis (61)........... Director of Buyer from May 1996 to present. See Sections A, B and D for
333 Blaak further employment history.
3011 GB Rotterdam
The Netherlands
</TABLE>
SECTION D. DIRECTORS AND EXECUTIVE OFFICERS OF INVESTERINGEN
The name, business address, present principal occupation or employment and
five (5)-year employment history of each of the directors and executive officers
of Investeringen are set forth below. The business address of each such director
and executive officer is Pakhoed Investeringen, in care of Parent, 333 Blaak,
3011 GB Rotterdam, The Netherlands. All such directors and executive officers
listed below are citizens of The Netherlands.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH INVESTERINGEN; PRINCIPAL OCCUPATION
BUSINESS ADDRESS OR EMPLOYMENT; FIVE (5)-YEAR EMPLOYMENT HISTORY
- ------------------------------ ----------------------------------------------------------------------------
<S> <C>
N.J. Westdijk (54)............ Managing Director of Investeringen from 1992 to present. See Sections A, B
and C for further employment history.
J. W. Berghuis (61)........... Director of Investeringen from 1992 to present. See Sections A, B and C for
further employment history.
Pierre A. Pellenaars (51)..... Director of Investeringen from 1989 to present. See Section A for further
employment history.
</TABLE>
F-3
<PAGE> 119
PROXY
UNIVAR CORPORATION
SPECIAL MEETING OF SHAREHOLDERS -- SEPTEMBER 30, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Nicholas J. Westdijk, Paul H. Hough, and William
A. Butler, and each of them, the attorneys and proxies of the undersigned, each
with full power of substitution, to vote all the shares of Common Stock of
Univar Corporation which the undersigned is entitled to vote at the Special
Meeting of Shareholders of Company to be held on September 30, 1996 at the 40th
Floor Conference Room, Columbia Seafirst Center, 701 Fifth Avenue, Seattle,
Washington 98104 at 10:00 a.m., Seattle, Washington time, and at any adjournment
or adjournments thereof, and authorizes and instructs said proxies to vote in
the manner directed below:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
FOR AGAINST ABSTAIN
------- ------- -------
1. On the Proposal to Approve and Adopt the Merger
Agreement described in the accompanying Proxy
Statement: [ ] [ ] [ ]
2. In their discretion, the proxies are authorized
to vote upon such other business as may properly
come before the meeting, or any adjournment
thereof, upon matters incident to the conduct of
the meeting.
This proxy when properly signed will be voted and will be voted in the manner
directed herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Signature Signature (if held jointly) Dated: , 1996
------------------ --------- ----
IMPORTANT--PLEASE SIGN AND RETURN PROMPTLY. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
