<PAGE> 1
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:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Materials Pursuant to Section 240.14a-11(c) of Section
240.14a-12
UNIVAR CORPORATION
(Name of Registrant as Specified In Its Charter)
UNIVAR CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 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).
[X] 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: Common Stock, no Par Value per Share
2) Aggregate number of securities to which transaction applies:
shares 21,701,666
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):
<PAGE> 2
Pursuant to the Agreement and Plan of Reorganization, dated as of May
31, 1996 (the "Reorganization Agreement"), among the Registrant, Royal Pakhoed
N.V. (a translation of Koninklijke Pakhoed N.V.), and UC Acquisition Corp., the
price to be paid per Common Share, no par value per share (the "Shares"), in the
merger contemplated by the Merger Agreement is $19.45. Pursuant to Rule
0-11(c)(1), the filing fee of $60,798.42 was calculated as 1/50 of 1% of the
cash payment required under the Reorganization Agreement, which is equal to the
product of $19.45 per Share and 15,629,415 Shares outstanding, which equal those
Shares that were not owned by Royal Pakhoed and its affiliates, as of May 31,
1996.
4) Proposed maximum aggregate value of transaction:
$303,992,121.80
5) Total fee paid: $60,798.42
[_] Fee paid previously with preliminary materials.
[X] 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: $60,798.42
2) Form, Schedule or Registration Statement No.: Schedule 14D-1
3) Filing Party: Royal Pakhoed N.V., Pakhoed Investeringen B.V.,
Pakhoed USA Inc., and UC Acquisition Corp.
4) Date Filed: June 7, 1996
<PAGE> 3
UNIVAR CORPORATION
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 ____________ __, 1996 a special meeting (the "Meeting") of shareholders
of Univar Corporation, a Washington corporation ("Company"), of record on
____________ __, 1996 (the "Record Date"), will be held at the offices of
Preston Gates & Ellis, 701 Fifth Avenue, Suite 5000, 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 __________ __, 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 cash tender offer, and the second step being the Merger of Buyer with
and into Company.
<PAGE> 4
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.
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.
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<PAGE> 5
A Letter of Transmittal to enable you to send in your Shares and
receive payment of the Merger Consideration is enclosed. To expedite receipt of
this payment, you should fill out the enclosed 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 ________ __, 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
Date
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<PAGE> 6
UNIVAR CORPORATION
Proxy Statement
Special Meeting of Shareholders
This Proxy Statement is being furnished to the shareholders of Univar
Corporation, a Washington corporation ("Company"), as of _________________ (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 shares, 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 has been 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 offices of Preston Gates & Ellis, 701 Fifth Avenue,
Suite 5000, Seattle, Washington 98104 at 10:00 a.m., Seattle, Washington time,
on _______________, 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
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<PAGE> 7
The date of this Proxy Statement is ____________ __, 1996. This Proxy
Statement and the accompanying form of proxy are being furnished by Company and
were first mailed on or about ________ __, 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. Subsequent to and as a result of the expiration of the Offer, Buyer will
acquire a majority of the outstanding 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, IN THE FORM BEING
FURNISHED HEREWITH, 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
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<PAGE> 8
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 21,701,666
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.
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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<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION...................................................... 6
INTRODUCTION............................................................... 8
THE SPECIAL MEETING........................................................ 10
General........................................................... 10
Vote Required..................................................... 11
PROPOSAL: THE MERGER...................................................... 12
Special Factors................................................... 12
Purpose of Merger........................................ 12
Plans for Company........................................ 12
Recommendation of the Board and Reasons for the Merger... 13
Opinion of Financial Advisor............................. 15
Financial Projections.................................... 21
Certain Effects of the Merger............................ 22
Certain Tax Consequences of the Merger................... 22
Interest of Certain Persons in the Merger................ 23
Interest in Securities of Company........................ 25
Certain Information Concerning Company............................ 26
Certain Information Concerning Parent and Buyer................... 26
Background of the Merger.......................................... 27
Structure of the Merger........................................... 33
Accounting Treatment of the Merger................................ 33
Financing the Acquisition......................................... 33
The Reorganization Agreement...................................... 34
Regulatory and Other Approvals.................................... 38
DISSENTERS' RIGHTS......................................................... 39
CERTAIN LITIGATION......................................................... 42
MARKET PRICES OF AND DIVIDENDS ON STOCK.................................... 43
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............................ 43
SELECTED FINANCIAL INFORMATION CONCERNING COMPANY.......................... 44
INCORPORATION BY REFERENCE................................................. 45
INDEPENDENT PUBLIC ACCOUNTANTS............................................. 45
SHAREHOLDERS' PROPOSALS.................................................... 45
</TABLE>
EXHIBITS:
EXHIBIT A Agreement and Plan of Reorganization
EXHIBIT B Fairness Opinion of Schroder Wertheim & Co. Incorporated
EXHIBIT C Company's Form 10-K 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 Letter of Transmittal
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<PAGE> 10
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 other direct or indirect subsidiary of
Parent, or Company) will be converted into the right to receive $19.45 net per
Share in cash, without interest.
The Meeting will be held on __________ __, 1996 at the offices of
Preston Gates & Ellis, 701 Fifth Avenue, Suite 5000, 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 21,701,666
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
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<PAGE> 11
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 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.
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 21,701,666
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,
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<PAGE> 12
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.
THE SPECIAL MEETING
General
The Special Meeting will be held at 10:00 a.m., local time, on
__________________, at the offices of Preston Gates & Ellis, 701 Fifth Avenue,
Suite 5000, 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 (______________, 1996) are entitled to vote at the Meeting.
On the Record Date, there were approximately _____ holders of record of
Shares, with 21,701,666 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 of Company
do 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
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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.
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,
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<PAGE> 14
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.
PROPOSAL: THE MERGE
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 Shares held by shareholders who perfect any
available dissenters' rights under the WBCA) 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, the Offer, a
cash tender offer, followed by 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
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<PAGE> 15
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> 16
(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 of the Protocol 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, that Parent might proceed with a
tender offer on a unilateral basis at a significantly lower price.
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.
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<PAGE> 17
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 which is more fully described in the section titled
"Background of the Merger -- Recent Discussions Between Company and Parent
Regarding a Potential Tender Offer."
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
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<PAGE> 18
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 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.
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<PAGE> 19
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
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<PAGE> 20
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.
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
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<PAGE> 21
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 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
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<PAGE> 22
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.
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<PAGE> 23
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 Company. Included
among 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 their 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,
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<PAGE> 24
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 the $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 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, 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 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 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 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
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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 of the named 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 termination occurs within 24 months after
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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 has the right to cease payments in the event the Executive
breaches 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 believe 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) clarify that the
consummation of the Offer is a "change in control," (ii) provide 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 purchases shares satisfying the Minimum Condition, as defined in the
Reorganization Agreement, (iii) provide 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) provide 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 estimated amount to be paid has been filed as an exhibit
to the Schedule 14D-9 and
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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 so listed, beneficially owns any equity security of
Company, and none of Buyer, Parent, Pakhoed USA Inc., or Pakhoed Investeringen
B.V. or, to the 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"),
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.
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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 following summary 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 should be
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 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.
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<PAGE> 29
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.
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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 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 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.
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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 "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,
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<PAGE> 32
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
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<PAGE> 33
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 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.
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<PAGE> 34
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.
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,
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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 $____ million, of which approximately $300
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. To date, Parent has borrowed approximately
$_____________ on these Lines of Credit.
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 Credits range from the applicable LIBOR or AIBOR plus
0.20% to 0.325%. The agreements documenting
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<PAGE> 36
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.
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.
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 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
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<PAGE> 37
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 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
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<PAGE> 38
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 (as defined in the Reorganization Agreement) or
Employee Welfare Benefit Plans (as defined in the Reorganization Agreement); (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" (as defined in ERISA Section 3(2)) or "Employee Welfare Benefit
Plans" (as defined in ERISA Section 3(1))
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<PAGE> 39
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 with specific reference to this Section , 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 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) regarding 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
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<PAGE> 40
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.
Termination. The Merger Agreement may be terminated at any time prior
to the Effective Date, whether before or after approval by the shareholders of
Company: (a) by Parent, Buyer or Company, if prior to the Effective Time, except
for transactions contemplated by the Reorganization Agreement, Company and
Company Subsidiaries have effected or agreed to effect any Business Combination,
and the two (2) business days provided for in the Reorganization Agreement has
expired without a modification to the Reorganization Agreement which is approved
by Company's Board of Directors; or (b) 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, the Reorganization
Agreement or the Merger.
If the Reorganization Agreement is terminated because (i) Company and
Company Subsidiaries have effected or agreed to effect any Business Combination,
and the two (2) business days provided for in the Reorganization Agreement have
expired without a modification to the Reorganization Agreement which is approved
by Company's Board of Directors, or (ii) if the foregoing events occur within 12
months following termination of the Reorganization Agreement, Company shall pay
to Parent and Buyer, on demand, the aggregate sum of $4,000,000.
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.
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
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"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 in interest of
Company. On August 12, 1996, Parent made such a notice filing.
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 Merger Agreement.
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
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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 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
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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 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
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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 taken prior to the
consummation of the Offer.
The plaintiff has served the Complaint on Buyer and 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 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 and certain directors have obtained an agreement from the plaintiff to
delay, until September 23, 1996, their response to the Complaint and the
document request. Buyer plans to obtain a similar extension from plaintiff.
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<PAGE> 45
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
Third Quarter* _______ ______
</TABLE>
* Through September __, 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 __________ __,1996, the last trading day prior to the printing of this
Proxy Statement, the closing sale price per Share on the NYSE was $_____ 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.
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<PAGE> 46
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."
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 160
charges ----------
Income (loss) from operations 26,536
Interest expense (15,226)
Other -- net 896
----------
Income (loss) before provision for 12,206
(benefit of) taxes on income and
minority interest
Provision for (benefit of) taxes on 6,306
income (loss) ----------
Income (loss) before minority interest 5,900
Minority interest's share in income (loss) --
----------
Net income (loss) $ 5,900
==========
Weighted average common shares 21,701
outstanding
</TABLE>
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<PAGE> 47
<TABLE>
<S> <C>
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 Anderson LLP will be
present at the Meeting.
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
-45-
<PAGE> 48
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.
-46-
<PAGE> 49
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
================================================================================
<PAGE> 50
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. THE TENDER OFFER....................................................................................... 1
1.1 The Tender Offer.............................................................................. 1
1.2 Buyer's Filings............................................................................... 2
1.3 Company Action................................................................................ 3
1.4 Company Filings............................................................................... 3
1.5 Stock Plans................................................................................... 4
2. THE MERGER............................................................................................. 5
2.1 Effective Time................................................................................ 5
2.2 Closing....................................................................................... 5
2.3 Effect of the Merger.......................................................................... 6
3. CONVERSION AND CANCELLATION OF SHARES.................................................................. 6
3.1 Conversion of Shares.......................................................................... 6
3.2 Surrender of Shares........................................................................... 6
3.3 No Further Transfers of Shares................................................................ 7
4. COVENANTS OF THE PARTIES............................................................................... 7
4.1 Covenants of Parent and Buyer................................................................. 7
(a) Government Approvals................................................................. 7
(b) Notification of Breach of Representations, Warranties and Covenants.................. 7
(c) Press Releases....................................................................... 7
(d) Offer to Purchase Shares............................................................. 8
(e) Litigation Developments.............................................................. 8
(f) Indemnification and Insurance........................................................ 8
(g) Company Agreements and Plans......................................................... 9
4.2 Covenants of Company.......................................................................... 9
(a) Approval by Company Shareholders. ................................................... 9
(b) Acceptance of Tender Offer........................................................... 10
(c) Agreements of Officers and Directors, and Major Shareholder.......................... 10
(d) Government Approvals................................................................. 10
(e) Notification of Breach of Representations, Warranties and Covenants.................. 10
(f) Compensation......................................................................... 11
</TABLE>
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<TABLE>
<S> <C>
(g) Conduct of Business in the Ordinary Course........................................... 11
(h) Press Releases....................................................................... 13
(i) No Merger or Solicitation............................................................ 14
(j) Dividends............................................................................ 15
(k) Accounting Methods................................................................... 15
(l) Additional Agreements................................................................ 15
(m) Litigation Developments.............................................................. 15
(n) Employment Agreements................................................................ 15
(o) Access to Properties, Books and Records; Confidentiality............................. 15
(p) Resignation and Appointment of Directors............................................. 16
(q) Approval of Merger................................................................... 16
(r) Deregistration....................................................................... 16
4.3 Covenants of the Parties...................................................................... 16
5. REPRESENTATIONS AND WARRANTIES OF COMPANY.............................................................. 17
5.1 Corporate Status and Power to Enter into Agreements........................................... 17
5.2 Execution and Delivery of the Agreement....................................................... 17
5.3 Capitalization................................................................................ 19
5.4 Employment Contracts and Benefits............................................................. 19
5.5 Legal Actions and Proceedings................................................................. 21
5.6 Retention of Broker or Consultant............................................................. 21
5.7 Accuracy of Representations and Warranties.................................................... 21
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER ......................................................... 21
6.1 Corporate Status and Power to Enter into Agreements........................................... 21
6.2 Execution and Delivery of the Agreement....................................................... 22
6.3 Retention of Broker or Consultant............................................................. 22
6.4 Financing..................................................................................... 22
6.5 Accuracy of Representations and Warranties.................................................... 23
7. CONDITIONS TO THE MERGER............................................................................... 23
7.1 Conditions to the Obligations of Each Party................................................... 23
8. EXPENSES............................................................................................... 23
9. AMENDMENT; TERMINATION................................................................................. 24
9.1 Amendment..................................................................................... 24
9.2 Termination................................................................................... 24
9.3 Notice........................................................................................ 25
</TABLE>
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<TABLE>
<S> <C>
9.4 Breach of Obligations......................................................................... 25
9.5 Termination and Expenses...................................................................... 25
10. MISCELLANEOUS.......................................................................................... 25
10.1 Notices....................................................................................... 25
10.2 Binding Agreement............................................................................. 26
10.3 Governing Law................................................................................. 27
10.4 Attorneys' Fees............................................................................... 27
10.5 Entire Agreement; Severability................................................................ 27
10.6 Counterparts.................................................................................. 27
10.7 Waivers....................................................................................... 27
10.8 Survival of Representations and Warranties.................................................... 28
</TABLE>
Exhibits Initial Section Reference
A. Merger Agreement 1.1
B. Director Agreements 4.2(c)
C. Shareholder Agreement 4.2(c)
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<PAGE> 53
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
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<PAGE> 54
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 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
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<PAGE> 55
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
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<PAGE> 56
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 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
4
<PAGE> 57
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.
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.
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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.
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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 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
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<PAGE> 60
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 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
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<PAGE> 61
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
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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 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
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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$aver Plan") with respect to a guaranteed investment
contract which was issued by Confederation Life Insurance Company and is held by
that plan ("GIC");
(2) obtain letters of credit which name as beneficiary the trustees of
trusts which fund supplemental pension benefits as required or permitted by the
terms of the supplemental benefits plans and trusts, and secure such letters of
credit with assets of Company or the Company Subsidiaries as required by the
bank(s) issuing the letters of credit;
(3) take whatever steps are necessary to obtain the approval of the
U.S. Department of Labor and the Internal Revenue Service for Company's
guarantee of the book value of the GIC
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and Company's promise to make loans to the Uni$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 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
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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
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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.
(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.
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(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 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"):
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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
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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;
(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
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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;
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(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;
(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
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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 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;
- --------------------------------------------------------------------------------
Telephone 212-492-6000 Equitable Center, 787 Seventh Avenue
New York, NY 10019-6016
<PAGE> 74
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.
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
A-2
<PAGE> 75
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
A Washington I.R.S. Employer
Corporation No. 91-0816142
6100 Carillon Point
Kirkland, Washington 98033
Telephone No. (206) 889-3400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, No Par Value New York Stock Exchange
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
1
<PAGE> 76
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.
PART 1
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.
2
<PAGE> 77
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.
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.
3
<PAGE> 78
ITEM 1. BUSINESS (Continued)
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.
4
<PAGE> 79
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 Registrant 1995 -
President and CEO 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,
Vice President, General and Corporate Secretary of Registrant 1990 -
Counsel and Corporate
Secretary
Gary E. Pruitt 46 Chief Financial Officer 1995 -
Chief Financial Officer Vice President-Finance, Treasurer and
Assistant Corporate Secretary of the Registrant 1992 - 1995
Vice President, Treasurer and Assistant
Corporate Secretary of Registrant 1989 - 1992
James L. Fletcher 52 Vice President of Registrant 1989 -
Vice President
H. Drew MacAfee 46 Vice President - Human Resources of Registrant 1995 -
Vice President - Human Resources 1992 -
Vice President, Van Waters & Rogers Inc.
Human Resources Vice President - Human Resources
Spacelabs, Inc. (Medical Electronics) 1985 - 1992
</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.
5
<PAGE> 80
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.
6
<PAGE> 81
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 Activ 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.
7
<PAGE> 82
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 29/28
(Thousands of dollars) 1996 1995
ASSETS
<S> <C> <C>
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
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE> 83
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 29/28
(Thousands of dollars) 1996 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
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.
9
<PAGE> 84
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deferred
Stock Total
For the Three Years Ended Additional Cumulative Compen- Share-
February 29, 1996 Common Paid-in Retained Translation Treasury sation holders'
(Thousands of dollars) 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.
10
<PAGE> 85
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>
(Thousands of dollars) 1996 1995
<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.
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
11
<PAGE> 86
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.
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.
12
<PAGE> 87
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.
NOTE 3 - LONG-TERM DEBT AND REVOLVING CREDIT
Long-term debt consists of the following at February 29/28:
<TABLE>
<CAPTION>
(Thousands of dollars) 1996 1995
Senior Debt:
<S> <C> <C>
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>
13
<PAGE> 88
Maturities of long-term debt for the fiscal years ending 1998-2001 are as
follows:
<TABLE>
<CAPTION>
<S> <C> <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 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.
14
<PAGE> 89
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
(Thousands of dollars) Leases Leases
<S> <C> <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.
15
<PAGE> 90
NOTE 6 - TAXES ON INCOME
The components of income (loss) before income taxes and minority interest were
as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1996 1995 1994
---- ---- ----
<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>
(Thousands of dollars) 1996 1995 1994
---- ---- ----
<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>
16
<PAGE> 91
Deferred tax balances consisted of the following temporary differences at
February 29/28:
<TABLE>
<CAPTION>
(Thousands of dollars) 1996 1995 1994
Deferred Tax Deferred Tax Deferred Tax Deferred Tax Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities Assets Liabilities
<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>
17
<PAGE> 92
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
---- ---- ----
(Thousands of dollars) AMOUNT PERCENT Amount Percent Amount Percent
- ---------------------------------------------------------------------------------------------------------------------------------
<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.
18
<PAGE> 93
The status of the Corporation's funded defined benefit plans is as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1996 1995
<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>
(Thousands of dollars) 1996 1995
<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>
(Thousands of dollars) 1996 1995 1994
<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.
19
<PAGE> 94
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 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>
(Thousands of dollars) 1996 1995
<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.
20
<PAGE> 95
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.
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.
21
<PAGE> 96
The following table summarizes activity in the Plans:
<TABLE>
<CAPTION>
Number of Shares
Restricted Available
Under Stock for Future
Option Awards Option or 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.
22
<PAGE> 97
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>
(Millions of dollars) 1996 1995 1994
------------------------------------------------
<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
23
<PAGE> 98
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.
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>
(Thousands of dollars) UNITED STATES CANADA EUROPE
<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.
24
<PAGE> 99
NOTE 12 - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(Thousands of dollars,
except per share data) First Second Third Fourth
<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
25
<PAGE> 100
seller's assets, liabilities, and contingent obligations. In addition to the
original claims and disputes with the seller, 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.
26
<PAGE> 101
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.
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)
27
<PAGE> 102
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.
28
<PAGE> 103
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
29
<PAGE> 104
distributor of scientific equipment and supplies, since 1986. Mr. Wiborg was
Chairman and Chief Strategist of the 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>
Name and Principal Annual Compensation
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
</TABLE>
30
<PAGE> 105
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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 $132,605
</TABLE>
Long-Term Compensation Awards
<TABLE>
<CAPTION>
All
Restricted Other
Stock Securities Compen-
Name and Principal Awards ($) Underlying sation
Position Year (2) Options(#) ($) (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 1995 0 3,844 $ 5,058
Officer 1994 0 3,944 $ 5,493
James W. Bernard 1996 0 20,057 $292,772
Retired President 1995 0 21,636 $ 12,174
& CEO 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.
31
<PAGE> 106
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 $25,000.
(4) Mr. Ellwood serves on the Managing Board of Univar Europe N.V., a
subsidiary of the Corporation. Because Univar Europe's fiscal year ran from
January 1, 1995 through December 31, 1995, Mr. Ellwood's compensation
reflects payments during calendar year 1995 and not the Corporation's
fiscal year.
(5) Mr. Bernard retired as an executive officer of the Corporation effective
October 26, 1995.
(6) Mr. Alampi resigned as an executive officer of the Corporation effective
October 26, 1995.
Option Grants In Last Fiscal Year
Set forth below is a summary of the individual grants of stock options
awarded to the named executive officers during the fiscal year ended February
29, 1996. In addition, in accordance with SEC rules, shown below are the
hypothetical gains or "option spread" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term.
Individual Grants
<TABLE>
<CAPTION>
% of
Total
Number of Options
Securities Granted
Underlying to
Options Employees Exercise
Granted in Fiscal Price
Name (#)(1) Year ($/share)
<S> <C> <C> <C>
Paul H. Hough 6,124 2.19% $12.50
12,447 4.45 $13.50
Jeffrey Ellwood(3) 6,657 2.38 $11.50
James L. Fletcher 6,124 2.19 $12.50
William A. Butler 3,563 1.27 $12.50
Gary E. Pruitt 3,563 1.27 $12.50
James W. Bernard 20,057 7.16 $12.50
</TABLE>
32
<PAGE> 107
<TABLE>
<CAPTION>
<S> <C> <C> <C>
James P. Alampi 13,187 4.71 $12.50
</TABLE>
<TABLE>
<CAPTION>
Rates of Stock Price
Appreciation for Option
Terms (2)
Expiration Date 5% 10%
<S> <C> <C> <C>
Paul H. Hough June 1, 2005 $ 49,672 $126,789
February 3, 2006 $109,035 $278,313
Jeffrey Ellwood April 25, 2002 $ 31,166 $ 72,630
James L. Fletcher June 1, 2005 $ 49,672 $126,789
William A. Butler June 1, 2005 $ 28,900 $ 73,767
Gary E. Pruitt June 1, 2005 $ 28,900 $ 73,767
James W. Bernard June 1, 2005 $162,684 $415,252
James P. Alampi 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. 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>
Shares Number of Unexercised
Acquired Options Held at Fiscal
on Value Year End (#)
Exercise Realized Exercisable/
Name (#) ($) Unexercisable
<S> <C> <C> <C>
</TABLE>
33
<PAGE> 108
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Paul H. Hough 0 N/A 1,403 / 18,932
Jeffrey Ellwood 0 N/A 0 / 6,657
James L. Fletcher 0 N/A 1,994 / 18,932
William A. Butler 0 N/A 1,964 / 15,069
Gary E. Pruitt 0 N/A 5,394 / 14,577
James W. Bernard 7,616 $12,076 0 / 56,728
James P. Alampi 0 N/A 0 / 34,024
</TABLE>
<TABLE>
<CAPTION>
Value of Unexercised
In-the-Money Options
Held at Fiscal Year End ($)
Exercisable/
Name Unexercisable
<S> <C>
Paul H. Hough $1,012 / $0
Jeffrey Ellwood $0 / $0
James L. Fletcher $0 / $0
William A. Butler $0 / $0
Gary E. Pruitt $13,345 / $0
James W. Bernard $0 / $0
James P. Alampi $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
Sixty Months Years of Service
of Employment 15 20 25 30 35
<C> <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
34
<PAGE> 109
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 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 of
Owned Class
DIRECTORS
<S> <C> <C>
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 *
</TABLE>
EXECUTIVE OFFICERS NAMED IN THE SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C>
Jeffrey Ellwood 0 N/A
</TABLE>
35
<PAGE> 110
<TABLE>
<CAPTION>
<S> <C> <C>
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%
(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.
36
<PAGE> 111
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.
<TABLE>
<CAPTION>
Name and Address of Title of Amount and Nature of Percent
Beneficial Owner Class Beneficial Ownership of Class
<S> <C> <C> <C>
The Dow Chemical Common Stock 3,900,000 17.94%
Company (1)
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 Invest- Common Stock 2,772,667 12.76%
eringen B.V. (2)
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
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<PAGE> 112
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 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
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<PAGE> 113
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.
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
39
<PAGE> 114
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, 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,
40
<PAGE> 115
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
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
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<PAGE> 116
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.
42
<PAGE> 117
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
------------
43
<PAGE> 118
EXHIBIT D FORM 10-Q OF COMPANY FOR THE QUARTER ENDED MAY 31, 1996
<PAGE> 119
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
<PAGE> 120
(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) 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.)
<PAGE> 121
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.
<PAGE> 122
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.
<PAGE> 123
(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.
(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.
<PAGE> 124
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.
<PAGE> 125
EXHIBIT F
LETTER OF TRANSMITTAL
LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATES FORMERLY REPRESENTING
SHARES OF COMMON STOCK
OF
UNIVAR CORPORATION
SURRENDERED FOR CASH PAYMENT PURSUANT TO THE MERGER WITH
UC ACQUISITION CORP.
AN INDIRECT SUBSIDIARY OF
ROYAL PAKHOED N.V.
Mail or deliver this Letter of Transmittal, or a facsimile hereof,
together with the certificate(s) representing your shares of common stock, to
Chemical Mellon Shareholder Services, at the following address.
THE PAYING AGENT: CHEMICAL MELLON SHAREHOLDER SERVICES, LLC
Deliver by Mail: By Overnight Delivery:
P.O. Box 817 Midtown Station Attn.: Reorg. Dept., First Floor
New York, NY 10018 85 Challenger Road
Ridgefield Park, NJ 07660
By Facsimile Transmission
For Guaranteed Deliveries Only:
(201) 296-4293
Delivery by Hand: New York Drop:
First Interstate Bank of Washington 120 Broadway, 13th Floor
999 Third Avenue New York, NY 10271
Stock Transfer, 14th Floor
Seattle, Washington 98104
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 126
Information Agent:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005-4495
Call Toll Free: 1 (800) 735-3591
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO
AN ACCOUNT MAINTAINED BY THE PAYING AGENT WITH A BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING:
Name of Surrendering Institution:
----------------------------------------------
Check Box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Account Number:
------------------------------
Transaction Code Number:
----------------------
/ / CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE PAYING AGENT AND COMPLETE THE
FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
--------------------------------------
Window Ticket Number (if any):
----------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------
Name of Institution which Guaranteed Delivery:
-------------------------
<PAGE> 127
DESCRIPTION OF SHARES SURRENDERED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
NAME(S) AND ADDRESSES OF REGISTERED CERTIFICATE NUMBER* NUMBER AND CLASS OF
HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS SHARES**
NAME(S) APPEAR ON SHARES CERTIFICATE(S))
- -------------------------------------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Total Shares:
- -------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Shareholders.
** Unless otherwise indicated, it will be assumed that all Shares represented by
certificates delivered to the Paying Agent are being surrendered. See
Instruction 4.
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned, the registered holder(s) of the certificate(s)
referred to above or the assigns of such registered holders, hereby surrenders
to Chemical Mellon Shareholder Services as Paying Agent the above-described
common shares (the "Shares"), of Univar Corporation, a Washington corporation
("Company"), in exchange for the right to receive $19.45 per Share, in cash
without interest, in connection with the merger of UC Acquisition Corp., a
Washington corporation ("UC Acquisition") which is an indirect, wholly-owned
subsidiary of 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"), with and into Company, with Company surviving as an
indirect wholly-owned subsidiary of Parent (the "Merger"), all as described and
on the terms and conditions set forth in the Proxy Statement of Company dated
_____________ __, 1996 (the "Proxy Statement").
The undersigned hereby surrenders all right, title and interest in and
to the certificate(s) formerly representing the Common Shares (the
"certificate(s)"). The undersigned hereby irrevocably appoints Chemical Mellon
Shareholder Services and Company as the lawful attorneys-in-fact of the
undersigned, each with full power of substitution, to deliver such
certificate(s) together with all accompanying evidence of authority to Company
and to effect the cancellation of such certificate(s). All such powers
<PAGE> 128
of attorney, being deemed to be irrevocable, shall be considered coupled with an
interest in the certificate(s) surrendered with this Letter of Transmittal. Such
appointment will be effective when, and only to the extent that, such
certificate(s) are surrendered. Upon such surrender of certificate(s), all prior
powers of attorney given by the undersigned with respect to such certificate(s)
will be revoked, without further action, and no subsequent powers of attorneys
and proxies may be given with respect thereto (and, if given, will be deemed
ineffective).
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to surrender the certificate(s) and that there is no
lien, restriction, charge or encumbrance against the certificate(s). The
undersigned, upon request, will execute and deliver any additional documents
deemed to be necessary or desirable to perfect the surrender of certificate(s).
UC Acquisition acquired approximately 97.15 percent of the Shares of
Company. Under Washington law and Company's Articles of Incorporation, a
majority of the Shares must approve the Merger at the shareholders' meeting to
be held on __________ __, 1996, to consummate the Merger. In the unlikely event
that the Merger Agreement is terminated without the Merger being consummated,
all certificates delivered to the Paying Agent will be promptly returned.
The undersigned hereby acknowledges that the undersigned has received
and read the Proxy Statement referred to in the first paragraph and the "General
Instructions" accompanying the Letter of Transmittal.
Unless otherwise indicated in this Letter of Transmittal under "Special
Payment Instructions," please issue the check in payment for the certificate(s)
surrendered in the name(s) of the registered holder(s) appearing under
"Description of Shares Surrendered." Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail the check in payment for the
certificate(s) surrendered or return any certificate(s) should the Merger
Agreement be terminated without the Merger being consummated to the address(es)
of the registered holder(s) appearing under "Description of Shares Surrendered."
In the event that both the "Special Payment Instructions" and the "Special
Delivery Instructions" are completed, please issue such check or return any such
certificate(s) (and accompanying documents, as appropriate) in the name(s) of,
and deliver such check and/or return such certificate(s) (and accompanying
documents, as appropriate) to the person(s) so indicated.
<PAGE> 129
- --------------------------------------------------------------------------------
SPECIAL PAYMENT
INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if the check in payment for the certificate(s)
should be payable to someone other than the undersigned.
Issue check to:
Name
---------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
(Include Zip Code)
Social Security Number or Taxpayer Identification Number of above
person:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY
INSTRUCTION
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if the certificate(s) to be returned should the
Reorganization Agreement be terminated without the Merger being consummated are
to be sent to someone other than the undersigned or to the undersigned at an
address other than that shown above.
Mail Certificate(s) to:
Name
---------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
(Include Zip Code)
Social Security Number or Taxpayer Identification Number of above
person:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE SIGN HERE AND FORM W-9 (IF APPLICABLE) (ON REVERSE)
(SEE INSTRUCTIONS 1 AND 5)
(Must be signed by the registered holder(s) exactly as name(s)
appear(s) on the Share Certificate or on a security position listing or by
person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by trustee, executors,
administrators, guardians, attorneys-in-fact, agents, officers of corporations
or others acting in a fiduciary or representative capacity, please provide the
following information. See instruction .)
X Name(s):
- ----------------------------------- -------------------------------
(Please Print)
X Name(s):
- ----------------------------------- -------------------------------
(Please Print)
X Capacity (Full Title):
- ----------------------------------- -----------------
(Signature(s) of Owner(s)
---------------------------------------
(Area Code and Telephone No.)
---------------------------------------
---------------------------------------
(Taxpayer Identification or
Social Security No.)
- --------------------------------------------------------------------------------
<PAGE> 130
INSTRUCTIONS
GENERAL INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below,
signatures on this Letter of Transmittal must be guaranteed by a member firm of
a registered national securities exchange (registered under Section 6 of the
Securities Exchange Act of 1934 (the "Exchange Act")), by a member firm of the
National Association of Securities Dealers, Inc., by a commercial bank or trust
company having an office or correspondent in the United States or by any other
"Eligible Guarantor Institution" (bank, stockholder, savings and loan
association or credit union with membership approved signature guarantee
medallion program) as defined in Rule 17Ad-15 under the Exchange Act (each of
the foregoing constituting an "Eligible Institution"), unless the certificate(s)
surrendered hereby are surrendered (i) by the registered holder of such
certificate(s) who has completed neither the box entitled "Special Payment
Instructions" nor the box entitled "Special Delivery Instructions" in this
Letter of Transmittal or (ii) for the account of an Eligible Institution. See
Instruction 6. If the certificate(s) are registered in the name of a person
other than the signer of this Letter of Transmittal, or if payment is to be made
or delivered to, or certificate(s) are to be returned to, a person other than
the registered owner, then the surrendered certificate(s) must be endorsed or
accompanied by duly executed stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificate(s),
with the signatures on the certificate(s) or stock powers guaranteed by an
Eligible Institution as provided in this Letter of Transmittal. See Instruction
6.
2. METHOD OF DELIVERY. The certificate(s) for Shares and the Letter of
Transmittal must be sent or delivered to the Paying Agent in order to make an
effective surrender. The method of delivery of certificate(s), this Letter of
Transmittal, and any other required documents to the Paying Agent set forth on
the front of the Letter of Transmittal is at the option and sole risk of the
holder of Shares and the delivery will be deemed made only when actually
received by the Paying Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. Do not send material
to Company, UC Acquisition, or to Parent.
3. INADEQUATE SPACE. If the space provided in this Letter of
Transmittal is inadequate, the information required under "Description of Shares
Surrendered" should be listed on a separate signed schedule attached to this
Letter of Transmittal.
4. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the certificate(s) surrendered hereby, the signature(s) must
correspond exactly with the name(s) as written on the face of the certificate(s)
without alteration, enlargement or any change whatsoever.
<PAGE> 131
If any of the certificate(s) surrendered hereby are owned of record by
two or more joint owners, all the owners must sign this Letter of Transmittal.
If any of the surrendered certificate(s) are registered in different
names on several certificate(s), it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are different
registrations of certificate(s).
If this Letter of Transmittal or any certificate(s) or instruments of
transfer are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, that person should so indicate when signing, and
proper evidence satisfactory to UC Acquisition of that person's authority to so
act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of
the certificate(s) listed and transmitted hereby, no endorsements of
certificate(s) or separate instruments of transfer are required unless payment
is to be made, or certificate(s) are to be returned should the Merger Agreement
be terminated without the Merger being consummated, to a person other than the
registered holder(s). Signatures on the certificate(s) or instruments of
transfer must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by the certificate(s) listed and
transmitted hereby, the certificate(s) must be endorsed or accompanied by
appropriate instruments of transfer, in either case signed exactly as the
name(s) of the registered holder(s) appear on the certificate(s). Signatures on
the certificate(s) or instruments of transfer must be guaranteed by an Eligible
Instruction.
5. TRANSFER TAXES. Except as set forth in this Instruction 5, UC
Acquisition will pay or cause to be paid any transfer taxes with respect to the
surrender of certificate(s) to it. If, however, payment for the certificates
surrendered is to be made to any person other than the registered holder(s), or
if surrendered certificate(s) are registered in the name of any person other
than the person(s) signing this Letter of Transmittal, the amount of any
transfer taxes (whether imposed on the registered holder(s) or such person)
payable on account of the transfer to such person will be deducted from the
purchase priced unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) listed in this Letter of
Transmittal.
6. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be
issued in the name of a person other than the signer of this Letter of
Transmittal or if a check is to be sent and/or certificate(s) are to be returned
to someone other than the signer of this Letter of Transmittal or to an address
other than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed.
<PAGE> 132
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance may be directed to the Paying Agent at its address or telephone
number set forth below and requests for additional copies of the Proxy Statement
and this Letter of Transmittal may be directed to the Paying Agent or brokers,
dealers, commercial banks and trust companies and such materials will be
furnished at UC Acquisition's expense.
8. BACKUP WITHHOLDING TAX. Each holder of Shares surrendering
certificate(s) is required to provide the Paying Agent with a correct Taxpayer
Identification Number ("TIN") on Substitute Form W-9, which is provided under
"Important Tax Information" below and to certify that Shareholder is not subject
to backup withholding. Failure to provide the information on the Substitute Form
W-9 may subject the holder to 31% federal income tax backup withholding on the
payment of the amounts due for the certificate(s). The holder should indicate in
the box in Part III of the Substitute Form W-9 if the holder has not been issued
a TIN and has applied for a TIN or intends to apply for a TIN in the near
future. If the holder has indicated in the box in Part III that a TIN has been
applied for and the Paying Agent is not provided with a TIN by the time of
payment, the Paying Agent will withhold 31% of the payment amounts due for the
certificate(s) until a TIN is provided to the Paying Agent.
9. LOST OR DESTROYED CERTIFICATE(S). If any certificate(s) representing
Shares has been lost or destroyed, the holders should promptly notify Company's
transfer agent, First Interstate Bank of Washington, N.A. The holders will then
be instructed as to the procedure to be followed in order to replace the
certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificate(s)
have been followed.
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder of Common Shares whose
surrendered certificate(s) are accepted for payment is required to provide the
Paying Agent (as payor) with such holder's correct TIN on Substitute Form W-9
below. If such holder is an individual, the TIN is his social security number.
If the holder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future, the holder should so indicate on the
Substitute Form W-9. See Instruction 8. If the Paying Agent is not provided with
the correct TIN, the holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, payments that are made to the holder with
respect to certificate(s) surrendered may be subject to backup federal income
tax withholding.
Certain shareholders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that shareholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt
<PAGE> 133
status. Forms for such statements can be obtained from the Paying Agent. See the
enclosed Guidelines for Certificate(s) of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
If backup withholding applies, the Paying Agent is required to withhold
31% of any payments made to the Shareholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding with respect to
payment of the amounts due for the certificate(s), a holder must provide the
Treasury with his correct TIN by completing the Substitute Form W-9 below,
certifying that the TIN provided on Substitute Form W-9 is correct (or that the
holder is awaiting a TIN) and that (1) the holder has not been notified by the
Internal Revenue Service that he is subject to backup withholding as a result of
failure to report all interest or dividends or (2) the Internal Revenue Service
has notified the holder that he is no longer subject to backup withholding.
<PAGE> 134
WHAT NUMBER TO GIVE THE PAYING AGENT
The holder is required to give the Paying Agent the social security
number or employer identification number of the record holder of the
certificate(s) surrendered. If the certificate(s) are registered in more than
one name or are not in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance on which number to report.
PAYER'S NAME:
UC ACQUISITION CORP.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX Social Security Number
SUBSTITUTE AT RIGHT AND CERTIFY BY SIGNING AND DATING or
BELOW Employer Identification Number
FORM W-9
------------------------------------
-----------------------------------------------------------------------------------
PART 2--CERTIFICATION -- Under the penalties of perjury, I certify that (1) the
Department of the Treasury number shown on this form is my correct taxpayer identification number (or I am
Internal Revenue Service waiting for a number to be issued to me), (2) I am not subject to backup
withholding because: (a) I am exempt from backup withholding, (b) I have not
Payer's Request for Taxpayer been notified by the Internal Revenue Service (the "IRS") that I am subject to
Identification Number (TIN) backup withholding as a result of a failure to report all interest or dividends,
(c) the IRS has notified me that I am no longer subject to backup withholding.
- --------------------------------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS. You must cross PART 3 --
out item (2) in Part 2 above if you have
been notified by the IRS that you are Awaiting TIN
subject to backup withholding because of / /
under reporting interest or dividends on
your tax returns. However, if after being
notified by the IRS that you were subject to PART 4 --
backup withholding you received another
notification from the IRS stating that you Exempt TIN
are no longer subject to backup withholding, / /
do not cross out such item (2). If you are
exempt from backup withholding, check the
box in Part 4 above. If you are awaiting
your TIN number, check the box in Part 3
above.
- --------------------------------------------------------------------------------------------------------------------
SIGNATURE DATE , 1996
----------------------------------------------------- ----------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE MERGER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.
<PAGE> 135
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I Certify under penalties of perjury that a Taxpayer Identification
Number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administrative officer or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a Taxpayer Identification Number by the Paying Agent within
60 days, 31 percent of all reportable payments made to me thereafter will be
withheld until I provide the number, and that, if I do not provide my Taxpayer
Identification Number within the aforementioned 60 days, such retained amounts
shall be remitted to the IRS as backup withholding and 31 percent of all
reportable payments made to me thereafter will be withheld and remitted to the
IRS until I provide a Taxpayer Identification Number.
SIGNATURE DATE:
------------------------------------- ----------------------
- --------------------------------------------------------------------------------
<PAGE> 136
NOTICE OF GUARANTEED DELIVERY
FOR
SURRENDER OF COMMON SHARES
OF
UNIVAR CORPORATION
This form or one substantially equivalent hereto must be used to
surrender certificates for common shares (the "Shares"), of Univar Corporation,
a Washington corporation ("Company") if such Shares are not immediately
available. This form may be delivered by hand to the Paying Agent or transmitted
by facsimile transmission or mail to the Paying Agent and must include a
guarantee by an Eligible Institution (as defined in the Letter of Transmittal).
TO: CHEMICAL MELLON SHAREHOLDER SERVICES, LLC, PAYING AGENT
Deliver by Mail: By Overnight Delivery:
P.O. Box 817 Midtown Station Attn.: Reorg. Dept., First Floor
New York, NY 10018 85 Challenger Road
Ridgefield Park, NJ 07660
By Facsimile Transmission
For Guaranteed Deliveries Only:
(201) 296-4293
Delivery by Hand: New York Drop:
First Interstate Bank of Washington 120 Broadway, 13th Floor
999 Third Avenue New York, NY 10271
Stock Transfer, 14th Floor
Seattle, Washington 98104
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
Information Agent:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005-4495
Call Toll Free: 1 (800) 735-3591
This form is not to be used to guarantee signatures. If a signature on
a Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions
<PAGE> 137
thereto, such signature guarantee must appear in the applicable space provided
in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby surrenders to UC Acquisition Corp., a Washington
corporation ("UC Acquisition"), the number of Shares (as defined in the Letter
of Transmittal, all pursuant to the guaranteed delivery procedures set forth in
the Letter of Transmittal) in exchange for the right to receive $19.45 per
Share, in cash without interest, in connection with the merger of to UC
Acquisition, which is an indirect, wholly-owned subsidiary of 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"), with
and into Univar Corporation ("Company"), with Company surviving as an indirect
wholly-owned subsidiary of Parent (the "Merger"), all as described and on the
terms and conditions set forth in the Proxy Statement of Company dated
_____________ __, 1996 (the "Proxy Statement").
Number of Shares: ______________
Name(s) of Record Holder(s): __________________
Certificate Nos. (if available): ____________________ (PLEASE PRINT)
Address(es): ___________________________________________________________
City, State, Country: ____________________________________________________
ZIP CODE: ________________________ Tel. No.: __________________________
(Check one box if Shares will be Surrendered by book-entry transfer)
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Account Number: ______________________
Dated: _______________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program, hereby guarantees to deliver to
the Paying Agent
<PAGE> 138
either the certificates representing the Shares Surrendered hereby, in proper
form for transfer, or a Book-Entry Confirmation with respect to such Shares, in
any such case together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, or
an Agent's Message, and any other required documents within three (3) trading
days after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Paying Agent and must deliver the Letter of Transmittal and
certificates for Shares to the Paying Agent within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
All terms used herein have the meanings set forth in the Letter of Transmittal.
Name of Firm:
------------------------------------------------------------------
Address(es):
-------------------------------------------------------------------
City, State, Country:
----------------------------------------------------------
ZIP CODE: Tel. No.:
------------------------ ---------------------------------
AUTHORIZED SIGNATURE:
--------------------------------------
Name:
------------------------------------------------------
PLEASE PRINT
Title:
-----------------------------------------------------
Dated:
-----------------------------------------------------
<PAGE> 139
[FRONT]
PROXY
UNIVAR CORPORATION
SPECIAL MEETING OF SHAREHOLDERS - ___________ __, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints _____________________ and
___________________, 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 __________ __, 1996
at the offices of Preston Gates & Ellis, 701 Fifth Avenue, Suite 5000, 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:
1. On the Proposal to Approve and Adopt the Merger Agreement described in
the accompanying Proxy Statement: / / FOR / / ABSTAIN / / AGAINST
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.
<PAGE> 140
[REVERSE]
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.
F
