<PAGE>
VWR SCIENTIFIC PRODUCTS CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of VWR Scientific Products Corporation
will be held at the Rittenhouse Hotel, 210 West Rittenhouse Square,
Philadelphia, Pennsylvania, on May 1, 1998, at 11:00 a.m. for the following
purposes:
1. To elect four Directors.
2. To amend the Company's Articles of Incorporation to increase the total
number of Common Shares which the Corporation shall have authority to
issue to 120,000,000, par value $1.00 per share, and increase the number
of Preferred Shares the Corporation shall have authority to issue to
25,000,000, par value $1.00.
3. To ratify the selection of Ernst & Young LLP as independent auditors for
the year ending December 31, 1998.
4. To transact such other business as may properly come before the Meeting.
Only shareholders of record at the close of business on March 16, 1998 are
entitled to notice of, and to vote at, this meeting.
BY ORDER OF THE BOARD OF DIRECTORS
LOGO
DAVID M. BRONSON
Senior Vice President Finance
Chief Financial Officer
and Corporate Secretary
West Chester, Pennsylvania
April 3, 1998
EACH SHAREHOLDER IS URGED TO SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY
IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE
UNITED STATES.
<PAGE>
LOGO
Dear Shareholder:
You are cordially invited to attend the VWR Scientific Products Corporation
Annual Meeting of Shareholders to be held at the Rittenhouse Hotel, 210 West
Rittenhouse Square, Philadelphia, Pennsylvania, on May 1, 1998, at 11:00 am.
At the Meeting, we will report on the operations of the Corporation and
respond to any questions you may have.
Your Board of Directors recommends that you vote to re-elect four Directors
whose terms of office will expire this year, approve the proposed amendment to
the Company's Articles of Incorporation to increase the Company's authorized
Common and Preferred Shares, and ratify the selection of Ernst & Young LLP as
our independent auditors. These matters are described more fully in the formal
notice of annual meeting and proxy statement which appear on the following
pages.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Meeting,
it is important that your shares be represented. Therefore, I urge you to
sign, date, and promptly return the accompanying proxy in the enclosed
postage-paid envelope. If you attend the Meeting, you will, of course, have
the privilege of voting in person.
I look forward to greeting you personally; and on behalf of the Board of
Directors and management of the Corporation, I would like to express our
appreciation for your interest in VWR Scientific Products Corporation.
Sincerely,
LOGO
JERROLD B. HARRIS
President and Chief Executive
Officer
West Chester, Pennsylvania
April 3, 1998
<PAGE>
VWR SCIENTIFIC PRODUCTS CORPORATION
CORPORATE OFFICES
1310 GOSHEN PARKWAY
WEST CHESTER, PENNSYLVANIA 19380
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 1, 1998
----------------
This proxy statement and accompanying proxy, which are being mailed to
shareholders on or about April 3, 1998, are furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of VWR Scientific
Products Corporation (the "Corporation," "Company" or "VWR") to be voted at
the Annual Meeting of Shareholders of the Corporation to be held at 11:00 a.m.
on May 1, 1998 at the Rittenhouse Hotel, 210 West Rittenhouse Square,
Philadelphia, Pennsylvania, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. Shareholders who execute proxies
retain the right to revoke them at any time before they are voted. A proxy may
be revoked by written notice to the Secretary of the Corporation at 1310
Goshen Parkway, West Chester, Pennsylvania 19380; by submission of a proxy
with a later date; or by a request in person to return the executed proxy.
The Company has engaged Corporate Investor Communications, Inc. to assist in
the solicitation of proxies for a fee of approximately $4,000. The cost of
solicitation of proxies is to be borne by the Corporation.
Shareholders of record at the close of business on March 16, 1998, will be
entitled to vote at the meeting. On March 16, 1998, there were 28,668,297
Common Shares outstanding.
Each Common Share is entitled to one vote on all matters to come before the
Annual Meeting, except that, because of the existence of a "40% Shareholder"
(as defined in VWR's Articles of Incorporation) as discussed below in this
proxy statement, shareholders have the right to cumulate their votes in the
election of Directors. This means that shareholders may multiply the number of
votes to which they are entitled by the number of Directors to be elected, and
the whole number of such votes may be cast for one nominee or distributed
among any two or more nominees. If you wish to cumulate your votes in this
manner, you must clearly indicate on your proxy card your desire to cumulate
and the number of votes you wish to cast for each nominee.
In the election of Directors, assuming a quorum is present, the four
nominees receiving the highest number of votes cast at the Meeting will be
elected Directors. Approval of the amendment to the Company's Articles of
Incorporation to increase the authorized Common Shares to 120,000,000 and
increase the authorized Preferred Shares to 25,000,000, and ratification of
the selection of Ernst & Young LLP as independent auditors, require the
affirmative vote of a majority of the votes cast by all shareholders entitled
to vote thereon. If a proxy is marked as "withhold authority" or "abstain" on
any matter, or if specific instructions are given that no vote be cast on any
specific matter (a "specified non-vote"), the shares represented by such proxy
will not be voted on such matter. Accordingly, abstentions and specified non-
votes will have no effect on the vote for election of Directors, amendment to
the Articles of Incorporation or ratification of Ernst & Young LLP as
independent auditors.
1
<PAGE>
ELECTION OF DIRECTORS
Your Corporation has a classified Board of eleven Directors. Directors are
elected for terms of three years in two classes of four and one class of
three. This year, Messrs. Jerrold B. Harris, Donald P. Nielsen, Dr. Harald J.
Schroder, and Walter W. Zywottek, all of whom are current Directors, have been
nominated to be re-elected for a term which expires in 2001.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF, AND UNLESS YOU
INDICATE OTHERWISE, YOUR SIGNED PROXY WILL BE VOTED FOR THE ELECTION OF THESE
NOMINEES (IN EQUAL AMOUNTS OR CUMULATIVELY AS THE PERSONS VOTING THE PROXIES
MAY DETERMINE). The Board of Directors expects that each of the nominees will
be available for election; but if any of them is not a candidate at the time
the election occurs, it is intended that such proxy will be voted for the
election of another nominee to be designated to fill any such vacancy by the
Board of Directors of the Corporation.
Merck KGaA, Darmstadt, Germany, through its affiliates EM Laboratories,
Incorporated ("EML") and Merck Labor GmbH, is the beneficial owner of 49.89%
of the Company's issued and outstanding Common Shares as of March 16, 1998. An
affiliate of EML holds a $135 million subordinated debenture of the Company.
EML and its direct parent, EM Industries, Incorporated ("EMI") are parties to
a Standstill Agreement with the Company, pursuant to which EML and EMI agreed
that they and their affiliates would not, subject to certain specified
exceptions, prior to April 13, 1999, increase their beneficial ownership of
the Company's Common Shares above 49.89% without prior consent of the Company.
Pursuant to the Standstill Agreement, VWR is required annually to cause
representatives of EML to be nominated for election to the Board so as to
provide EML with Board representation, rounded down to the next whole number,
which is commensurate with the proportion of Common Shares of VWR owned by EML
and its affiliates. EML is also entitled to be represented on any committee of
the Board. Five members of VWR's current Board, which consists of eleven
Directors, are representatives of EML. Two of the nominees for election at the
Annual Meeting, Walter W. Zywottek and Dr. Harald J. Schroder are designees of
EML. Of the Directors whose terms will continue after the Annual Meeting,
Wolfgang Honn, Stephen J. Kunst, Esq., and Dieter Janssen are serving as
designees of EML. THE STANDSTILL AGREEMENT OBLIGATES EML TO VOTE ITS COMMON
SHARES FOR THE ELECTION OF ITS DESIGNATED NOMINEES AND FOR THE ELECTION OF
THOSE PERSONS NOMINATED BY VWR'S DIRECTORS WHO ARE NOT AFFILIATED WITH EML.
During 1997, in the ordinary course of VWR's business, VWR purchased $40.7
million of inventory from affiliates of Merck KGaA. Merck KGaA and its
affiliates manufacture and distribute pharmaceutical, laboratory, and chemical
products.
NOMINEES FOR ELECTION
JERROLD B. HARRIS--Mr. Harris, 55, was elected President and Chief Executive
Officer of VWR effective March 1, 1990. He is a Director of the Provident
Institutional Funds, Institutional Money Market Fund. Mr. Harris has been a
Director of the Corporation since 1988.
DONALD P. NIELSEN--Mr. Nielsen, 59, retired, was founder, President, Chief
Executive Officer, and Chairman of Hazleton Corporation, a biological and
chemical research and testing company, headquartered in Herndon, Virginia. Mr.
Nielsen has been a Director of the Corporation since 1988.
DR. HARALD J. SCHRODER--Dr. Schroder, 59, has been a Partner and member of
the Executive Board of Merck KGaA since 1990 and is currently serving as Vice
Chairman of the Executive Board. Dr. Schroder has been a Director of the
Corporation since 1995.
WALTER W. ZYWOTTEK--Mr. Zywottek, 50, is President and Chief Executive
Officer of EMI and EML. He also serves as North American Regional Manager of
Merck AG and is a Director of Dey
2
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Laboratories, Inc., both of which are affiliates of Merck KGaA. Since 1991,
Mr. Zywottek has served as Director and General Manager of the Pigments and
Cosmetics Division of Merck KGaA. Mr. Zywottek has been a Director of the
Corporation since 1995.
CONTINUING DIRECTORS--TERM EXPIRES IN 1999
JAMES W. BERNARD--Mr. Bernard, 60, retired, was President and Chief
Executive Officer of Univar Corporation, a distributor of industrial
chemicals, from 1986 to October 1995. Mr. Bernard has been a Director of the
Corporation since 1988.
RICHARD E. ENGEBRECHT--Mr. Engebrecht, 71, is Chairman of the Board of
PrimeSource Corporation ("PrimeSource"), a distributor of graphic arts
equipment and supplies. He was Chairman of the Board of Momentum Corporation,
a distributor of photographic and graphic arts equipment and supplies
("Momentum") from January 1, 1993 until it merged with PrimeSource on
September 1, 1994. He is a Director of PENWEST, Ltd. ("PENWEST"), a
manufacturer of specialty carbohydrate chemicals and flavor and food additive
products, and SeaMED Corporation, a manufacturer of medical instruments. Mr.
Engebrecht has been a Director of the Corporation since 1986.
DIETER JANSSEN--Mr. Janssen, 55, is Group Vice President--Finance and Chief
Financial Officer of EMI. Since 1994, Mr. Janssen has been the Divisional
Manager of Purchasing and Controlling for MEPRO, an affiliate of Merck KGaA.
From 1988 to 1994, Mr. Janssen was Chief Financial Officer of Merck S.A.,
Caracas, Venezuela, an affiliate of Merck KGaA. Mr. Janssen has been a
Director of the Corporation since 1996.
STEPHEN J. KUNST, ESQ.--Mr. Kunst, 49, is Vice President and, since 1995,
has been General Counsel of EMI and a Director of EMI and EML. From 1989
through 1995, Mr. Kunst served as Vice President--Administrative Services of
EMI. Mr. Kunst has been a Director of the Corporation since 1995.
CONTINUING DIRECTORS--TERM EXPIRES IN 2000
WOLFGANG HONN--Mr. Honn, 60, is a Partner and, since 1981, has been a member
of the Executive Board of Merck KGaA. Mr. Honn has been a Director of the
Corporation since 1995.
EDWARD A. MCGRATH, JR.--Mr. McGrath, 67, has been Chairman of the Board of
the Corporation since November 1996. He was President, Chief Executive Officer
and Chairman of Graybar Electric Company, Inc., an electrical distributor,
from 1989 to July 1995. Mr. McGrath has been a Director of the Corporation
since 1992.
N. STEWART ROGERS--Mr. Rogers, 68, has been Chairman of the Board of
Directors of PENWEST since February 1990. He is a Director of Fluke
Corporation, a manufacturer of electronic testing tools; U.S. Bancorporation,
a bank holding company; Penford Corporation, a manufacturer of carbohydrate-
based specialty chemicals; and Royal Pakhoed NV, a logistics and distribution
company. Mr. Rogers has been a Director of the Corporation since 1986.
3
<PAGE>
OWNERSHIP OF VWR SCIENTIFIC PRODUCTS CORPORATION COMMON SHARES
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL
OWNERSHIP OF PERCENT OF
COMMON SHARES CLASS AS OF
DIRECTORS AS OF JANUARY 31, 1998(1) JANUARY 31, 1998
- --------- ------------------------- ----------------
<S> <C> <C>
NOMINEES FOR ELECTION
Jerrold B. Harris 390,451(2) 1.26%
Donald P. Nielsen 23,158 *
Dr. Harald J. Schroder -- (3) --
Walter W. Zywottek -- (3) --
CONTINUING DIRECTORS--TERM EXPIRES
IN 1999
James W. Bernard 90,718(4) *
Richard E. Engebrecht 110,640 *
Dieter Janssen -- (3) --
Stephen J. Kunst, Esq. -- (3) --
CONTINUING DIRECTORS--TERM EXPIRES
IN 2000
Wolfgang Honn -- (3) --
Edward A. McGrath, Jr. 6,078 *
N. Stewart Rogers 336,031(5) 1.09%
CERTAIN EXECUTIVE OFFICERS
- --------------------------
Paul J. Nowak 74,284(6) *
David M. Bronson 51,684(7) *
David S. Barth 52,406(8) *
Hal G. Nichter 58,777(9) *
Directors and Executive Officers
as a group
(18 persons) 1,313,215(10) 4.24%
CERTAIN BENEFICIAL OWNERS
- -------------------------
Merck KGaA 15,438,274(11) 49.89%
Darmstadt, Germany
</TABLE>
- --------
*Less than one percent
(1) Except as otherwise indicated, beneficial ownership represents sole
voting and sole investment power with respect to $1.00 par value Common
Shares, the Corporation's only outstanding class of stock.
(2) Includes 154,170 shares which Mr. Harris had the right to acquire within
60 days of January 31, 1998 through the exercise of options. Also
includes 23,075 shares held under the Company's benefit plans and 29,796
shares of restricted stock for which beneficial ownership is based upon
sole voting power.
(3) Excludes Common Shares owned by Merck KGaA, as to which the named
director disclaims beneficial ownership.
(4) Mr. Bernard disclaims any beneficial interest in 40,500 shares (included
in the amounts shown in the above table) owned by his spouse.
(5) Mr. N. Stewart Rogers is a trustee of a trust for grandchildren which
holds 4,000 shares (included in the amounts shown in the above table).
(6) Includes 66,522 shares which Mr. Nowak had the right to acquire within 60
days of January 31, 1998 through the exercise of options. Also includes
7,456 shares held under the Company's benefit plans for which beneficial
ownership is based upon sole voting power.
(7) Includes 50,000 shares which Mr. Bronson had the right to acquire within
60 days of January 31, 1998 through the exercise of options. Also
includes 1,184 shares Mr. Bronson held under the Company's benefit plans
for which beneficial ownership is based upon sole voting power.
4
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(8) Includes 50,000 shares which Mr. Barth had the right to acquire within 60
days of January 31, 1998 through the exercise of options. Also includes
1,456 shares Mr. Barth held under the Company's benefit plans for which
beneficial ownership is based upon sole voting power.
(9) Includes 49,000 shares which Mr. Nichter had the right to acquire within
60 days of January 31, 1998 through the exercise of options. Also
includes 7,947 shares held under the Company's benefit plans for which
beneficial ownership is based upon sole voting power.
(10) Includes 469,692 shares which certain executive officers had the right to
acquire within 60 days of January 31, 1998 through the exercise of
options. Members of the group shared voting and/or investment power with
other persons as to 4,000 of such shares.
(11) Ownership of Common Shares includes shares held by EM Laboratories,
Incorporated and Merck Labor GmbH, affiliates of Merck KGaA. Includes
1,176,448 shares Merck KGaA has the right to acquire in the event
employee stock options are exercised. Pursuant to the Standstill
Agreement, EML and its affiliates have the right to maintain a 49.89%
interest in the event VWR issues additional shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1984, as amended, requires
the Company's Directors, executive officers and holders of more than 10% of
the Company's Common Stock to file with the Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. The Company believes that all parties subject to
Section 16(a) complied with the filing requirements during the year ended
December 31, 1997 with the following exceptions: EM Laboratories, Inc., an
affiliate of Merck KGaA, reported one acquisition of stock late on a
subsequently filed Form 4; Merck Labor GmbH, an affiliate of Merck KGaA, filed
Form 3 late.
FEES TO DIRECTORS AND COMMITTEES OF THE BOARD
Each Non-employee Director receives for services an annual retainer of
$10,000, fees of $1,000 for attendance at each Board of Directors meeting
($2,500 if the meeting is held outside a Director's state of residence), fees
of $500 for attendance at each Board Committee meeting, and reimbursement of
travel expenses in connection with meetings. Effective for terms beginning
with the Annual Meeting in 1998, each Director who is not also a Company
employee or a designee of EML, will be entitled, under the Non-Employee
Directors' Restricted Stock Plan adopted in February 1998, to choose to be
paid the annual retainer for his elected term either in annual cash payments
or by means of a grant of restricted Common Shares of the Company, vesting in
equal amounts of shares at the end of each year of his elected term. Each
member of the Executive Committee receives an annual retainer of $2,000 and
the Chairman of each standing Committee of the Board receives an annual
retainer of $2,000.
The Corporation's Board of Directors has standing Audit/Pension,
Compensation and Nominating Committees. The members of each Committee and the
functions performed thereby are outlined below:
Messrs. Nielsen, McGrath, Kunst, Janssen and Rogers, are members of the
AUDIT/PENSION COMMITTEE of which Mr. Rogers is Chairman. The Audit/Pension
Committee has responsibility for recommending to the Board of Directors the
firm of independent auditors to be retained by the Corporation; reviewing with
the Corporation's auditors the scope of the audit; reviewing and recommending
corporate accounting policies to the Board of Directors; reviewing reports of
independent auditors as to the adequacy of the Corporation's accounting
system, controls, and other matters; and reviewing areas of possible conflicts
of interest and sensitive payments. The Committee also has the responsibility
of general oversight of the administration of the assets of the Company's
retirement and pension plans, and of the investment of the funds of such
plans; and reviewing and making recommendations to the Board of Directors with
respect to the performance of any third parties responsible for the
administration and for the investment of funds.
Messrs. Bernard, Engebrecht, Zywottek, and Dr. Schroder are members of the
COMPENSATION COMMITTEE of which Dr. Schroder is Chairman. The Compensation
Committee has the responsibility
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for recommending compensation of officers who are corporate vice presidents
and higher; establishing bonus criteria; reviewing annually the operation of
all compensation and benefit practices and salary administration procedures;
granting of options, except for executive officers, whose grants are made by
the Board of Directors; consulting with the Audit/Pension Committee regarding
the pension cost effects of trends in compensation; recommending benefit
levels in the Corporation's retirement program; and recommending Directors'
fees.
Messrs. Bernard, Nielsen, Honn, Zywottek and Harris (Ex-Officio) are members
of the NOMINATING COMMITTEE of which Mr. Bernard is the Chairman. The
Nominating Committee has the responsibility for receiving, reviewing, and
maintaining files of individuals qualified to be recommended as nominees for
election as Directors; reviewing annually the capability of each incumbent
Director to continue to serve as Director; recommending to the Board of
Directors a list of individuals for nomination for election to the Board of
Directors; and recommending individuals for appointment to various committees
of the board.
Shareholder nominations to the Board of Directors must be made in accordance
with the procedures set forth in the Bylaws of the Corporation which require,
among other things, that nominations must be received not less than 120 days
prior to the date which corresponds to the date on which the Corporation
mailed its proxy statement for the previous year's Annual Meeting of
Shareholders. So long as the Corporation has a "40% Shareholder" (as defined
in the Articles of Incorporation), Article IX of the Articles of Incorporation
allows Disinterested Directors or persons beneficially owning shares of Voting
Stock having a Market Price of $250,000 or more to nominate one or more
candidates for election as a Director and to have information relating to such
nominees included in the Corporation's proxy statement, and provides that each
shareholder of VWR has cumulative voting rights in such election. No such
nomination was made for this year's Annual Meeting.
The Audit/Pension Committee met two times, the Compensation Committee three
times, the Nominating Committee one time, and the entire Board of Directors
six times during 1997.
EXECUTIVE COMPENSATION
REPORT OF COMPENSATION COMMITTEE
The Corporation's executive compensation program is administered by the
Compensation Committee ("Committee"), which is composed of four independent,
non-employee directors. Following review and approval by the Committee, all
issues pertaining to executive compensation are submitted to the full Board of
Directors for ratification.
Since its spinoff from Univar in 1986, the Corporation has maintained the
philosophy that compensation of its executive officers (including its Chief
Executive Officer) and management should be directly and materially linked to
value creation for shareholders. The objective is to make the annual incentive
bonus, which rewards executives for meeting financial targets based on the
relationship of the Corporation's return on capital to its cost of capital,
the largest component of an executive's compensation.
The Corporation's executive compensation program consists of four
components; base salary, annual incentive bonus, long-term equity-based
incentive compensation, and the Corporation's contributions to various savings
and stock ownership programs. The Committee has not yet deemed it necessary to
consider its policy with respect to the possible tax effect on the
Corporation, under the federal Revenue Reconciliation Act of 1993, of annual
compensation exceeding $1 million paid to any individual.
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BASE SALARY
Base salary is designed to be competitive, although generally conservative
as compared to equivalent positions at comparable companies, such as those
that are included in the Wholesale Trade Distributors Index shown in the
Performance Graph on page 12. Since 1986, the Corporation's philosophy is to
place a relatively greater emphasis on the annual incentive components of
compensation.
ANNUAL INCENTIVE COMPENSATION PLAN
The Corporation's Executive Bonus Plan (the "Bonus Plan") provides annual
cash and incentive stock awards, which are based upon the relationship of the
Corporation's return on "invested capital" to its "cost of capital" (as both
terms are defined in the Bonus Plan). Each year the Committee approves bonus
targets by salary grade. The Corporation determines an individual's potential
bonus award by multiplying that person's target bonus by a factor which is
calculated using the percentage which the Corporation's return on invested
capital bears to its cost of capital. No bonuses are earned if the
Corporation's return on invested capital is less than 60% of its cost of
capital. The potential awards may then be adjusted (from zero to 1.5 times the
potential award) by an assessment of the executive's performance, which is
determined by the Chief Executive Officer based on subjective factors and is
subject to the Committee's approval. The Committee assesses the Chief
Executive Officer's performance.
For 1997, the Corporation's pretax cost of capital as calculated in
accordance with the Bonus Plan was 13.27%.
In accordance with the Bonus Plan, bonus awards are paid as follows: an
award of up to 150% of a participant's target bonus is paid in cash; any
portion of the award in excess of 150% but less than 200% of target is paid in
unrestricted stock, and in excess of 200% of target is paid in restricted
stock. The Bonus Plan does not take into consideration an executive officer's
current stock ownership and options. For 1997, all bonuses were paid in cash
in accordance with the Bonus Plan.
LONG-TERM INCENTIVE STOCK PLAN
Additional stock incentives (incentive stock options, non-qualified stock
options, and restricted stock grants) have been provided under the 1986 Long-
Term Incentive Stock Plan (1986 LTIP) and the 1995 Stock Incentive Plan (1995
SIP). Restricted stock grants under the 1986 LTIP generally vest over four
years. Stock options under the 1986 LTIP were awarded with an exercise price
equal to the fair market value at the date of grant and have not been
repriced. These options generally vest over a seven-year period.
Stock options under the 1995 SIP are awarded at an exercise price not less
than the fair market value at the date of grant. Options awarded executive
officers to date vest at the earlier of nine years following issuance of the
grant or 50% when the closing price per common share is at least 150% of the
fair market value of the common shares on the date of grant for twenty
consecutive days and the remaining 50% when the closing price per common share
is at least 175% of the fair market value of the common shares on the date of
grant for twenty consecutive days. Exercise cannot occur within twelve months
of the grant date.
Restricted stock grants and stock options are intended to align an
executive's interests with those of shareholders. The Corporation will
periodically grant additional stock awards under the 1995 SIP. Such awards are
recommended by the Chief Executive Officer and are subject to Committee
approval. The size of previous awards and the number of options held are
considered by the Committee, but are not determinative.
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<PAGE>
OTHER PLANS
The Corporation maintains a 401(k) savings plan and an Employee Stock
Ownership Plan (ESOP). Under the 401(k) Plan, the Corporation contributes, in
VWR Common Shares only, up to 50% of the first 3% of each employee's earnings
as a matching contribution. Under the ESOP, the Corporation allocates VWR
Common Shares evenly among all eligible participants, irrespective of salary
or position in the Corporation. The ESOP shares vest equally over an
employment period of five years, at which point the employee is vested 100% in
the plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee's objective is to correlate Mr. Harris' remuneration with the
performance of the Corporation. The Committee believes Mr. Harris' base salary
is average as compared with the salaries of chief executive officers of
comparable companies such as those included in the Wholesale Trade
Distributors Index referred to above. Mr. Harris' base salary for 1997 did not
change from its 1996 level. Mr. Harris also participates in the same Bonus
Plan applicable to the other named executive officers.
The Compensation Committee
Dr. Harald J. Schroder, Chairman
James W. Bernard
Richard E. Engebrecht
Walter W. Zywottek
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SUMMARY COMPENSATION TABLE
The Summary compensation Table includes individual compensation information
on the Chief Executive Officer and the four other most highly paid executive
officers, for services rendered in all capacities for the three fiscal years
ended December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION
------------------ -----------------------
RESTRICTED SHARES ALL OTHER
NAME AND STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($)(1) OPTIONS ($)(2)
------------------ ---- --------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jerrold B. Harris...... 1997 $340,020 $350,677 -- -- $18,286
President and Chief 1996 331,020 140,162 -- -- 18,177
Executive Officer 1995 286,020 250,000 $510,792 80,000 16,245
Paul J. Nowak.......... 1997 165,000 97,284 -- -- 14,972
Executive Vice 1996 150,000 55,094 -- -- 15,587
President 1995 135,000 66,466 -- 50,000 16,263
David M. Bronson*...... 1997 155,010 91,297 -- -- 14,512
Senior Vice President 1996 150,000 45,984 -- -- 15,347
Finance, Chief 1995 29,803 5,000 -- 50,000 13,972
Financial Officer and
Corporate Secretary
David S. Barth*........ 1997 160,020 93,542 -- -- 15,913
Senior Vice President 1996 150,000 51,190 -- -- 15,396
1995 27,257 5,000 -- 50,000 4,312
Hal G. Nichter......... 1997 157,093 93,542 -- -- 13,663
Senior Vice President 1996 150,000 52,925 -- -- 13,852
1995 121,945 35,600 -- 40,000 13,048
</TABLE>
- --------
* Messrs. Bronson and Barth were employed by VWR in November and September
1995, respectively.
(1) Mr. Harris was awarded 42,566 shares of restricted stock with a value of
$510,792 on September 15, 1995.
(2) Includes Company matching contributions to the Investor Tax Savings Plan
and Company automobile allowance. The following named executive officers
received Company automobile benefits: Mr. Harris, $13,508 in 1997, $13,527
in 1996, and $13,313 in 1995; Mr. Nowak, $13,508 in 1997, $13,527 in 1996,
and $13,313 in 1995; Mr. Bronson, $13,508 in 1997, $13,491 in 1996, and
$2,142 in 1995; Mr. Barth, $14,153 in 1997, $14,236 in 1996, and $3,051 in
1995; Mr. Nichter, $13,508 in 1997, $13,527 in 1996, and $12,968 in 1995.
9
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following summary table details stock option exercises for the named
executive officers during 1997, including the aggregate value of gains on the
date of exercise. In addition, this table includes the number of shares
covered by both exercisable and unexercisable stock options as of December 31,
1997, and the values for "in-the-money" options, which represent the positive
spread between the exercise price of any such existing stock options and the
year-end price of common shares.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END (#) AT FY-END($)
------------------------- -------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harris.................. -- -- 154,170 -- $2,808,890 --
Nowak................... -- -- 64,522 6,000 1,075,706 $ 73,500
Bronson................. -- -- 50,000 -- 812,500 --
Barth................... -- -- 50,000 -- 812,500 --
Nichter................. -- -- 46,000 9,000 723,500 110,250
</TABLE>
DEFINED BENEFIT RETIREMENT PLAN
The table below shows the estimated annual benefits payable on retirement
under VWR's Retirement Plan ("Plan") to persons in specified compensation and
years-of-service classifications. The table applies to benefits payable on or
after January 1, 1998. The retirement benefits shown are based upon retirement
at normal retirement age.
<TABLE>
<CAPTION>
HIGHEST AVERAGE ANNUAL
COMPENSATION DURING ANY YEARS OF SERVICE
CONSECUTIVE FIVE --------------------------------------------
YEARS OF EMPLOYMENT 15 20 25 30 35
----------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000 $ 23,685 $ 31,580 $ 39,475 $ 47,370 $ 52,107
150,000 36,810 49,080 61,350 73,620 80,982
200,000 49,935 66,580 83,225 99,870 109,857
250,000 63,060 84,080 105,100 126,120 138,732
300,000 76,185 101,580 126,975 152,370 167,607
350,000 89,310 119,080 148,850 178,620 196,482
400,000 102,435 136,580 170,725 204,870 225,357
450,000 115,560 154,080 192,600 231,120 254,232
500,000 128,685 171,580 214,475 257,370 283,107
550,000 141,810 189,080 236,350 283,620 311,982
600,000 154,935 206,580 258,225 309,870 340,857
</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 $130,000. Additionally, Section 401 of
the Internal Revenue Code limits compensation which must be taken into account
in providing benefits under qualified plans to an annual limit of $160,000.
The Board of Directors, upon the recommendation of the Compensation Committee,
has authorized the establishment of supplemental benefits for executive
officers to whom the limits of Sections 415 and 401 apply, or will apply in
the future so that these executive officers will obtain retirement benefits
comparable to other retirement plan participants not impacted by the Sections
415 and 401 limits.
Under the terms of the agreement by which Momentum was spun off by the
Corporation (in 1990), the Corporation has agreed to pay two-thirds of all
supplemental benefits payable to Richard E. Engebrecht and PrimeSource
(successor to Momentum by merger) will pay the remaining one-third.
10
<PAGE>
The Corporation has guaranteed payment of the one-third payable by PrimeSource
and PrimeSource has guaranteed payment of the two-thirds payable by the
Corporation.
Compensation of executive officers for purposes of the Plan includes
salaries and bonuses as reported in the "Summary Compensation" table on page
9, above. The following are the approximate years of credited service (rounded
to the nearest year) of the persons named in that table under the Plan. J.
Harris, 34; P. Nowak, 19; D. Bronson, 2; D. Barth, 2; H. Nichter, 5.
Compensation of all non-executive officer employees for purposes of the Plan
includes salaries, commissions, and bonuses. All regular, full-time employees
not members of a collective bargaining unit (except for bargaining units
participating in all Corporation benefits), are eligible to participate in the
Plan.
AGREEMENTS WITH CERTAIN OFFICERS
On September 15, 1995, as a condition to the Common Share and Debenture
Purchase Agreement between VWR and EML, the Corporation entered into a five-
year employment agreement with Mr. Harris. This agreement replaced a previous
agreement which included change of control provisions. During the employment
period, Mr. Harris' base salary and bonus will be determined by the
Compensation Committee at its own discretion. In addition, the Corporation has
issued and granted to Mr. Harris 42,566 of the Corporation's common shares as
a restricted stock award. The restricted stock award vests based upon the
following schedule: 15% vests on the succeeding anniversary date of the
agreement through and including the fourth anniversary date of the employment
agreement and the remaining 40% will vest on the fifth anniversary date of the
employment agreement. If the Company were to terminate Mr. Harris without
cause (as defined), Mr. Harris would be paid beginning on the date of
termination and ending on the fifth anniversary of the date of the agreement,
at an annual rate equal to the greater of (i) the sum of Mr. Harris' most-
recent annual salary plus most-recent annual bonus or (ii) the average salary
and bonus earned by Mr. Harris during the term of the employment agreement. In
addition, effective upon any such termination, Mr. Harris would become fully
vested in the restricted stock award.
The estimated amount payable over the remaining term of the employment
agreement in the event the Company were to terminate Mr. Harris' employment
without cause would be approximately $1,871,000.
The Corporation is party to a change of control agreement (the "Agreement")
with one of its current executive officers, Paul J. Nowak. The Agreement
provides that Mr. Nowak would continue to receive compensation if his
employment is terminated (voluntarily or involuntarily) for any reason other
than gross misconduct, death, disability, or reaching age 65, provided such
termination occurs within 24 months after certain defined events which might
lead to a change in control of the Corporation. The term of the compensation
period decreases to a minimum of 12 months during the 24 months following the
change of control. The compensation would be paid at a rate equal to Mr.
Nowak's then-current salary and target bonus. The compensation is subject to a
minimum annual rate of not less than Mr. Nowak'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 Mr. Nowak's "annualized
includable compensation," as defined in Section 280G of the Internal Revenue
Code, for the Executive's most recent five taxable years. Mr. Nowak would also
continue to have "employee" status for the compensation period and would be
entitled to retain most employee benefits and rights during this period.
The estimated aggregate amounts presently payable in the event the
Corporation's obligations under the Agreement were triggered (assuming Mr.
Nowak receives payments for the maximum 24-month period) would be $620,000.
The foregoing does not include the value of any employee benefits which might
be payable to Mr. Nowak during the compensation period.
11
<PAGE>
Although the Corporation believes that the compensation or other benefits
payable or vesting upon Mr. Nowak's termination should not constitute "golden
parachute payments" under the Internal Revenue Code, the Agreement does
provide for indemnification against excise taxes payable by Mr. Nowak in the
event of such a determination. The Corporation may cease payments in the event
Mr. Nowak breaches certain noncompetition or confidentiality covenants. The
Corporation also has the right to terminate the Agreement upon a one-year
notice, except as to rights accruing as a result of an event which has
triggered the change of control provisions of the Agreement. The Board of
Directors believes that the terms and conditions of the Agreement are in the
best interest of the Corporation.
PERFORMANCE GRAPH
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG VWR SCIENTIFIC PRODUCTS CORPORATION,
MEDIA GENERAL COMPOSITE INDEX AND A PEER GROUP INDEX
FISCAL YEARS ENDING DEC. 31, 1992 - 1997
ASSUMES $100 INVESTED ON JAN. 1, 1993
ASSUMES DIVIDEND REINVESTED
LOGO
- --------
* The Media General Composite Index is a broad market index of 7,000 NASDAQ,
NYSE and AMEX issues.
** This index consists of Wholesale Trade Distributors: Durable Goods
(Standard Industry Code 50) and Nondurable Goods. (Standard Industry Code
51), and has been prepared by and is available from Media General, P.O. Box
85333, Richmond, VA, 23293.
12
<PAGE>
PROPOSED AMENDMENT TO INCREASE AUTHORIZED SHARES
The Board of Directors has unanimously proposed an amendment (the
"Amendment") to the Articles of Incorporation of the Company that would
increase the number of authorized Common Shares, par value $1.00 per share,
from 30,000,000 to 120,000,000 shares, and the number of authorized Preferred
Shares, par value $1.00 per share, from 1,000,000 to 25,000,000. At the
meeting, shareholders will be asked to approve the Amendment. Under the
proposed Amendment, the first sentence of the first paragraph of Article IV of
the Company's Amended and Restated Articles of Incorporation would be amended
to read in full as follows:
"FOURTH: The total number of shares of all classes which this Corporation
shall have authority to issue is 145,000,000 shares, divided into two
classes consisting of 120,000,000 common shares, par value $1.00 per share
(hereinafter designated "Common Shares") and 25,000,000 preferred shares,
par value $1.00 per share (hereinafter designated "Preferred Shares").
As of March 16, 1998, of the 30,000,000 Common Shares now authorized to be
issued under the Articles of Incorporation, 28,673,275 were issued (of which
28,668,297 were outstanding) and 1,235,742 shares were reserved for issuance
under the Company's stock option and restricted stock plans. No Preferred
Shares were outstanding.
PURPOSES AND EFFECTS OF AMENDMENT
The Board believes that the proposed increase in authorized shares is
desirable because it will provide the Company with more flexibility to issue
shares as the need may arise without the expense and delay of a special
shareholders' meeting, unless shareholder action is required by applicable law
or under the rules of the NASDAQ Stock Market or any exchange on which the
Company's shares may then be listed. Such shares could be issued by the Board
of Directors for proper corporate purposes, including in connection with
possible future stock dividends or stock splits, equity financings, strategic
investments or acquisitions, and grants of additional options or other equity
incentives to the Company's employees. Except for issuances under existing
option and restricted stock plans, and issuances under the Standstill
Agreement if required to maintain the beneficial ownership of Merck KGaA, the
Board of Directors has no present plans or commitments with respect to the
issuance of the proposed additional authorized Common or Preferred Shares.
Each additional Common Share authorized by the proposed Amendment will have
the same rights and privileges as each Common Share currently authorized.
Shareholders will have no statutory preemptive rights to receive or purchase
any of the Common or Preferred Shares authorized by the proposed Amendment and
the increase in authorized shares will not have any immediate effect on the
rights of existing shareholders. The 25,000,000 Preferred Shares which the
Company will be authorized to issue may be issued by the Board of Directors,
without further action or authorization by the Company's shareholders (unless
specifically required by applicable law or rules), in more than one series,
and generally may have such designations, preferences and relative rights,
qualifications and limitations as the Board of Directors may fix by resolution
at the time of issuance. To the extent that the additional authorized shares
are issued in the future, they could decrease existing shareholders'
percentage equity ownership and, depending on the price at which they are
issued, could be dilutive to existing shareholders.
OTHER CONSIDERATIONS
The increase in the authorized Common and Preferred Shares could increase
the Company's ability to resist a takeover attempt. Authorized but unissued
shares could (within the limits imposed by applicable law) be issued in one or
more transactions that would make a takeover of the Company more difficult and
therefore less likely. Any issuance of additional shares could have the effect
of diluting the
13
<PAGE>
earnings per share and book value per share of outstanding Common Shares, and
such additional shares could be used to dilute the ownership or voting rights
of persons seeking to obtain control of the Company.
Certain provisions of the Company's Articles of Incorporation and Bylaws and
of the Pennsylvania Business Corporation Law may already have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire control of the Company. For example the
Company's Articles of Incorporation contain provisions which: (i) classify the
Board of Directors into three classes, with one class being elected each year;
(ii) permit the Board of Directors to issue "blank check" preferred shares
without shareholder approval; and (iii) require supermajority shareholder
approvals for certain transactions specified in the Articles of Incorporation.
Under the Pennsylvania Business Corporation Law, because the Company's
Articles of Incorporation provide for a classified Board of Directors,
shareholders may only remove directors for cause.
In May 1988, the Company adopted a Shareholders Rights Agreement (the
"Rights Agreement"). The Rights Agreement, which expires in May 1998, is
intended to encourage potential acquirors to negotiate with the Company's
Board of Directors and to discourage coercive, discriminatory and unfair
proposals. The Rights Agreement has certain anti-takeover effects, including
the ability to cause substantial dilution to a person or group that attempts
to acquire the Company on terms not approved by the Board of Directors of the
Company. As a result, the Rights Agreement could add substantially to the cost
of acquiring the Company, and consequently could delay or prevent a change in
control of the Company.
In connection with the investments by Merck KGaA in the Company, the Board
of Directors: (i) approved an amendment to the Rights Agreement which has the
effect of excluding the application of the Rights Agreement as to Merck KGaA
and its affiliates (so long as they are not in default under the Standstill
Agreement); and (ii) approved EM Laboratories, Incorporated ("EML") as a "20%
Shareholder" (as that term is defined in the Corporation's Articles of
Incorporation) prior to its becoming such, thereby rendering inapplicable the
supermajority voting provision under Article VIII of the Corporation's
Articles of Incorporation. Absent a similar approval, under Article VIII of
the Corporation's Articles of Incorporation, any merger or sale of assets
between the Corporation and the beneficial owner of 20% or more of the
Corporation's voting securities would require the affirmative vote of (a) the
holders of 80% of the voting securities, including (b) the holders of more
than 50% of the outstanding voting securities not held by the 20% holder;
however, by reason of the prior action of the Board of Directors of the
Corporation, these provisions are no longer applicable to Merck KGaA and its
affiliates.
As a practical matter, the Company believes that the principal deterrent to
any party's seeking to gain control of the Company is the fact that Merck KGaA
is already the beneficial owner of 49.89% of the Company's outstanding Common
Shares and is itself subject to restrictions on its ownership of Company
Common Shares contained in its Standstill Agreement dated February 27, 1995.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon at the meeting is required for approval of the
proposed Amendment. Thus, an abstention or specified Non-Vote will have no
effect on the vote for adoption of the proposal. If the proposed Amendment is
approved by shareholders, it will become effective upon filing and recording
of a Certificate of Amendment as required by the Pennsylvania Business
Corporation Law.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION.
14
<PAGE>
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors requests that the shareholders ratify its selection
of Ernst & Young LLP as independent auditors for the Corporation for the year
ending December 31, 1998. If the shareholders do not ratify the selection of
Ernst & Young LLP, another firm of independent auditors will be selected as
independent auditors by the Board of Directors. Representatives of Ernst &
Young LLP will be present at the Annual Meeting and will be available to
respond to appropriate questions. They will also have the opportunity to make
a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF ITS
SELECTION OF ERNST & YOUNG LLP.
PROPOSALS OF SECURITY HOLDERS
Under Securities and Exchange Commission rules and the Corporation's Bylaws,
certain shareholder proposals may be included in the Corporation's proxy
statement. Any shareholder desiring to have such a proposal included in the
Corporation's proxy statement for the Annual Meeting to be held in 1998 must
cause a proposal in full compliance with Rule 14a-8 under the Securities
Exchange Act of 1934 to be received by the Corporation not later than December
5, 1998. The timing and procedure with respect to the submission by
shareholders of nominees for Directors are discussed in this Proxy Statement
under the caption "FEES TO DIRECTORS AND COMMITTEES OF THE BOARD."
OTHER BUSINESS
The Board of Directors has no knowledge of any other business to be acted
upon at this meeting. However, if any other business is presented at the
meeting, proxies will be voted in accordance with the judgment of the person
or persons voting such proxies.
BY ORDER OF THE BOARD OF DIRECTORS
LOGO
DAVID M. BRONSON
Senior Vice President Finance
Chief Financial Officerand
Corporate Secretary
15
<PAGE>
PROXY
[VWR SCIENTIFIC PRODUCTS LOGO APPEARS HERE]
1310 GOSHEN PARKWAY
WEST CHESTER, PA 19380
The undersigned hereby appoints Jerrold B. Harris and David M. Bronson, or
either of them, each with full power of substitution and revocation, as Proxies
to vote, as designated below, all Common Shares of VWR Scientific Products
Corporation which the undersigned would be entitled to vote if personally
present at the Annual meeting of the Corporation to be held at the Rittenhouse
Hotel, 210 West Rittenhouse Square, Philadelphia, Pennsylvania, on May 1, 1998
and at any adjournments thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholders. If no direction is made, this Proxy will
be voted FOR the nominees listed in Item 1 on the reverse side hereof (in equal
amounts or cumulatively as the proxies may determine) or, if any such nominee(s)
should be unable to serve, for such person(s) as may be recommended by the Board
of Directors; FOR the proposal set forth in Item 2; FOR the proposal set forth
in Item 3, and, in the Proxies' discretion, upon such other business as may
properly come before the Annual Meeting and any adjournments thereof. The
undersigned hereby revokes any proxy or proxies heretofore given to vote at said
Annual Meeting and any adjournments thereof.
(Continued and to be signed on reverse side)
FOLD AND DETACH HERE
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1. ELECTION OF DIRECTORS:
WITHHOLD *INSTRUCTIONS: To withhold authority
FOR all nominees AUTHORITY to vote for any individual nominee,
listed to the right to vote for all or to cumulate your votes for any
(except as marked nominees listed such nominee(s), so indicate in the
to the contrary) to the right space provided below.
[ ] [ ]
Jerrold B. Harris;
THE BOARD OF DIRECTORS RECOMMENDS A VOTE Donald P. Nielsen;
"FOR ALL NOMINEES" IN ITEM 1. Dr. Harald J. Schroder;
Walter W. Zywottek
----------------------------------
2. PROPOSAL: Amendment to the Company's FOR AGAINST ABSTAIN
Articles of Incorporation to increase the [ ] [ ] [ ]
total number of Common Shares which the
Corporation shall have authority to issue
to 120,000,000, par value $1.00 per share,
and increase the number of Preferred Shares
the Corporation shall have authority to issue
to 25,000,000, par value $1.00.
3. PROPOSAL: Ratification of the selection of FOR AGAINST ABSTAIN
Ernst & Young LLP as independent auditors [ ] [ ] [ ]
for the year ending December 31, 1998.
4. To vote in their discretion upon such other business as may properly come
before the meeting and any adjournments thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE(S) DATE , 1998
------------------------------------------ --------------
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give your 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 authorized person.
