<PAGE>
As filed with the Securities and Exchange Commission on October 6, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(D)(4) of the
Securities Exchange Act of 1934
----------------
BUSH BOAKE ALLEN INC.
(Name of Subject Company)
BUSH BOAKE ALLEN INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
123162109
(CUSIP Number of Class of Securities)
----------------
Dennis M. Meany, Esq.
Vice President, General Counsel and Secretary
Bush Boake Allen Inc.
7 Mercedes Drive
Montvale, New Jersey 07645
(201) 391-9870
----------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person filing Statement)
With a copy to:
Robert B. Schumer, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
[_] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
ITEM 1. Subject Company Information
(a) Name and Address.
The name of the subject company is Bush Boake Allen Inc., a Virginia
corporation (the "Company"). The address and telephone number of the principal
executive offices of the Company are 7 Mercedes Drive, Montvale, New Jersey
07645, (201) 391-9870.
(b) Securities.
The title of the class of equity securities to which this Statement (as
defined below) relates is common stock, par value $1.00 per share, of the
Company (the "Shares"). As of September 25, 2000, there were 19,351,063 Shares
outstanding.
ITEM 2. Identity and Background of Filing Person
(a) Name and Address.
This Solicitation/Recommendation Statement (this "Statement") is being filed
by the Company. The address and telephone number of the principal executive
offices of the Company are set forth in Item 1, above.
(b) Tender Offer.
This Statement relates to the offer by B Acquisition Corp., a Virginia
corporation ("Offeror") and a wholly-owned subsidiary of International Flavors
& Fragrances Inc., a New York corporation ("Parent" or "IFF"), to purchase all
of the outstanding Shares at a price of $48.50 per Share, net to the seller in
cash (the "Offer Price"), upon the terms and subject to the conditions set
forth in the offer to purchase, dated October 6, 2000 (the "Offer to
Purchase"), and the related letter of transmittal and transmittal documents
(which, together with the Offer to Purchase, and any amendments or supplements
thereto constitute the "Offer"). The Offer is disclosed in a Schedule TO,
dated October 6, 2000 (the "Schedule TO"), filed by Parent and Offeror. The
address of the Parent and Offeror, as set forth in the Schedule TO, is 521
West 57th Street, New York, New York 10019.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 25, 2000 (the "Merger Agreement"), among the Company, Parent
and Offeror. The Merger Agreement provides, among other things, that as soon
as practicable following the satisfaction or waiver of the conditions set
forth in the Merger Agreement, Offeror shall be merged with and into the
Company (the "Merger"), and the Company shall continue as the surviving
corporation (the "Surviving Corporation"). The Merger Agreement further
provides that those Shares that are not acquired in the Offer shall be
converted in the Merger into the right to receive $48.50 per Share in cash
(the "Merger Consideration").
ITEM 3. Past Contacts, Transactions, Negotiations and Agreements
(a) Conflicts of Interests.
Certain contracts, agreements, arrangements or understandings between the
Company and its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Schedule 14f-1 which is attached as Annex B hereto and is incorporated herein
by reference. Except as described in this Statement (including in the Exhibits
and in Annex B hereto) or incorporated by reference herein, to the knowledge
of the Company, as of the date hereof there exists no material agreement,
arrangement or understanding and no actual or potential conflict of interest
between the Company or its affiliates and (i) the Company's executive
officers, directors or affiliates or (ii) Parent, Offeror or their respective
executive officers, directors or affiliates.
The Merger Agreement. The summary of the Merger Agreement contained in the
Offer to Purchase, which has been filed with the Securities and Exchange
Commission (the "Commission") as an exhibit to the Schedule
2
<PAGE>
TO and a copy of which is enclosed with this Schedule 14D-9, is incorporated
herein by reference. Such summary should be read in its entirety for a more
complete description of the terms and provisions of the Merger Agreement. A
copy of the Merger Agreement has been filed as Exhibit 3 hereto and is
incorporated herein by reference.
Interests of Certain Persons in the Transaction. Certain members of the
Company's Board of Directors (the "Board") and management may be deemed to
have certain interests in the Offer and the Merger that are in addition to
their interest as shareholders of the Company generally. The Board was aware
of and discussed these interests in connection with its consideration and
approval of the Merger Agreement. In considering the recommendation of the
Board with respect to the Offer and the Merger, the shareholders should be
aware of these interests which may present actual or potential conflicts of
interest.
Employment Arrangements. During the negotiations with Parent which resulted
in the execution of the Merger Agreement, Parent discussed with Mr. Julian W.
Boyden, Chairman, President and Chief Executive Officer of the Company, the
possibility of Mr. Boyden being employed by Parent following the consummation
of the Merger. No employment agreement has been entered into and no specific
terms of employment have otherwise been offered or finalized.
Options. Pursuant to the Merger Agreement, immediately following the
acceptance for payment and purchase of Shares by Offeror pursuant to the
Offer, each outstanding option to purchase Shares granted under the Company's
1994 Stock Option and Stock Award Plan and the Company's 1998 Directors' Stock
Option Plan (together, the "Company Option Plans") shall become fully
exercisable and vested. Thereafter, until the date on which the Merger is
consummated (the "Effective Time"), each holder of an outstanding option may
surrender the option to the Company in exchange for payment by Parent or
Offeror of an amount equal to the excess of the Offer Price over the per Share
exercise price of such option (the "Option Consideration"). All options
surrendered to the Company will be cancelled. Immediately prior to the
Effective Time, the Company will terminate the Company Option Plans and each
option which remains outstanding will be cancelled in exchange for the payment
of the Option Consideration. Holders of options include executive officers and
directors of the Company.
Agreement to Maintain Benefits. For a period of one year after the Effective
Time, Parent will cause to remain in effect for the benefit of the employees
of the Company and its subsidiaries (and, to the extent applicable, former
employees) all Employee Plans in effect on September 25, 2000 or provide each
employee (and, to the extent applicable, former employees) of the Surviving
Corporation and its subsidiaries who was an employee prior to the Effective
Time with benefits that are at least substantially equivalent to the benefits
to which they were entitled under the Employee Plans. Please see the
discussion under the heading "Employee Benefits Matters" in Item 10 of the
Schedule TO for a more complete description of the terms and provisions of
Parent's agreement with respect to the Employee Plans.
Indemnification and Insurance. Pursuant to the Merger Agreement, the
articles of incorporation and bylaws of the Surviving Corporation will contain
indemnification provisions substantially the same as those set forth in the
articles of incorporation and the bylaws of the Company at the date of the
Merger Agreement. The indemnification provisions are not to be amended,
modified or otherwise repealed for a period of six years after the Effective
Time in any manner that would adversely affect the rights of individuals who
at the time of the Merger were directors, officers, employees or agents of the
Company. The Merger Agreement also provides that the Surviving Corporation
will, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer or employee of the Company
or any of its subsidiaries (collectively, the "Indemnified Parties") against
any costs or expenses (including reasonable attorney's fees), judgments,
fines, losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to the transactions contemplated by the Merger Agreement or otherwise with
respect to any acts or omissions occurring at or prior to the Effective Time,
to the same extent as provided in the Company's articles of incorporation or
bylaws or any applicable contract or agreement as in effect on the date of the
Merger
3
<PAGE>
Agreement, in each case for a period of six years after the date of the Merger
Agreement. Parent has also agreed to provide, or cause the Surviving
Corporation to provide, for a period of at least six years after the Effective
Time, the Company's current directors and officers with an insurance and
indemnification policy that provides coverage for events occurring at or prior
to the Effective Time (the "D&O Insurance") that is no less favorable than the
existing policy under which such directors and officers are covered or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage. However, Parent and the Surviving Corporation shall not be required
to pay an annual premium for the D&O Insurance in excess of 200% of the annual
premium currently paid by the Company for such insurance.
Voting and Tender Agreement. The summary of the voting and tender agreement,
dated as of September 25, 2000 (the "Voting and Tender Agreement"), among
Parent, the Company, Offeror and International Paper Company, a New York
corporation ("IP"), contained in the Offer to Purchase, which has been filed
with the Commission as an exhibit to the Schedule TO and a copy of which is
enclosed with this Schedule 14D-9, is incorporated herein by reference. Such
summary should be read in its entirety for a more complete description of the
terms and provisions of the Voting and Tender Agreement. A copy of the Voting
and Tender Agreement has been filed as Exhibit 4 hereto and is incorporated
herein by reference.
Success Bonuses. In June 2000, as the Company began to explore the
possibility of a sale, the Company adopted a Success Bonus Incentive
Arrangement, effective August 2, 2000, which was designed to provide further
incentives to management to secure the highest price available for
shareholders in a sale of the Company. Once the Offer is completed, four
senior executives of the Company, including Julian W. Boyden who serves on the
Company's Board, will be entitled to success bonus payments equal to
approximately 202% of their current annual salaries. In addition, five other
executives will be entitled to success bonus payments equal to approximately
101% of their current annual salaries upon completion of the Offer. These
payments will be made in two equal installments to be paid on the first and
second anniversaries of the closing of the Offer. A copy of the Success Bonus
Incentive Arrangement has been filed as Exhibit 5 hereto and is incorporated
herein by reference.
ITEM 4. The Solicitation or Recommendation
(a) Recommendation of the Board of Directors.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY (1) DETERMINED THAT THE
TERMS OF THE OFFER AND THE MERGER ARE ADVISABLE AND IN THE BEST INTERESTS OF
THE COMPANY AND ITS SHAREHOLDERS, (2) APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND (3)
RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER.
A letter to the Company's shareholders communicating the Board's
recommendations and the press release announcing the Merger Agreement and
related transactions are filed as Exhibits 6 and 7 hereto, respectively, and
are incorporated herein by reference.
(b)(i) Background of the Offer; Contacts with Parent.
As part of their ongoing efforts to develop the business of the Company, the
Company's senior management and the Board have from time to time considered
various strategic transactions, including a possible sale or merger of the
Company. In connection with these efforts, the Company consulted with Credit
Suisse First Boston Corporation ("CSFB"), in late May and early June 2000.
Throughout this period, various press reports indicated that IP, which owns
approximately 68% of the Company's Shares, was considering selling certain of
its non-core assets.
On June 16, 2000, Parent contacted Mr. Julian W. Boyden, Chairman,
President, and Chief Executive Officer of the Company, and expressed interest
in acquiring all of the Shares of the Company for up to
4
<PAGE>
approximately $40 per Share. As the Company was still in the process of
considering its options, extensive discussions were not pursued with Parent at
that time.
On June 20, 2000, the Company publicly announced that it had retained CSFB
to explore strategic alternatives, including a possible merger or sale of the
Company. After evaluating with senior management of the Company the likely
interest of various strategic buyers in such a transaction, CSFB contacted, on
behalf of the Company, approximately 27 parties. Those parties who indicated a
general interest in pursuing a transaction were asked to enter into a
confidentiality agreement with the Company and 19 of these potential buyers,
including Parent, executed confidentiality agreements.
Between June 2000 and July 2000, the parties, including Parent, that
executed confidentiality agreements were sent information concerning the
Company and were asked to submit non-binding and preliminary indications of
the level of their interest by July 28, 2000. On July 28, 2000, five parties,
including Parent, submitted indications of interest. The values indicated in
the preliminary bids ranged from $30.53 per Share to approximately $47.55 per
Share.
Following the receipt of the indications of interest, a meeting of the
Company's Board was convened to review the sale process and the indications of
interest with CSFB. After the meeting, four of the five potential bidders,
including Parent, were provided with access to additional information
regarding the Company, including presentations by the management of the
Company, access to financial and other information of the Company, tours of
certain of the Company's operating facilities and plants and interviews with
certain of the Company's management. One bidder was eliminated from the
process prior to this stage because the price it had preliminarily indicated
it was prepared to pay was significantly lower than that of the other bidders.
The due diligence process described above was conducted by Parent and the
three other potential bidders throughout August and early September 2000. The
Company's legal and financial advisors also had discussions with these bidders
about issues that had arisen in due diligence and possible transaction
structures. The bidders were invited to submit, by not later than September
15, 2000, definitive offers to acquire the Company (together with comments on
proposed acquisition agreements).
On September 15, 2000, two final bids were received. Parent submitted a cash
offer of $46.15 per Share and a second bidder ("Second Bidder") submitted a
cash offer of approximately $43.70 per Share. The offers received from Parent
and Second Bidder were both fully-financed and subject to customary
conditions. Second Bidder's offer was, however, subject to approval by its
board of directors (which was not expected to meet until September 22, 2000).
Parent and Second Bidder each requested an option to purchase IP's Shares (the
"Option") as a condition to entering into a transaction with the Company.
On September 18, 2000, senior executives of the Company met with their legal
and financial advisors to discuss the final bids. After the meeting, CSFB
contacted, on behalf of the Company, Second Bidder and Parent to invite each
party to raise the price of its offer and submit its best price.
Second Bidder responded on September 19, 2000 by orally raising its offer
from $43.70 to approximately $45.50 per Share, subject to approval by its
board of directors. The Company responded that a higher price would be
required to win the auction. On September 20, 2000, Second Bidder conveyed its
interest in acquiring the Company at a price per Share of somewhere in the
range between $46 and $47 and expressed strong doubts about any interest
beyond that range.
On September 20, 2000, Parent increased its offer to $47.15 per Share,
subject to obtaining the Option. The Company consulted with IP, and responded
that at a price of $47.50, the Company would consent to, and IP would be
prepared to grant, the Option, subject to agreement on transaction terms that
were acceptable to the Company's Board. Parent agreed orally to raise its bid
to $47.50 per Share, subject to reaching an agreement with Company to
negotiate exclusively for a period of time sufficient to allow the Company's
Board to consider the transaction and IP's board of directors to consider the
Option and the Voting and Tender Agreement and, if satisfied, give the
necessary approval.
5
<PAGE>
On September 21, 2000, the legal advisors of Parent and Company met to
negotiate the terms of the Merger Agreement, the Voting and Tender Agreement
and an exclusivity agreement (the "Exclusivity Agreement"). After extensive
negotiations and significant progress with respect to the resolution of the
outstanding issues (other than the offer price), the Exclusivity Agreement was
executed. IP executed a similar exclusivity agreement with Parent at that
time. Also on September 21, the Second Bidder orally notified the Company that
it was prepared to recommend to its own board of directors that it make an
offer to the Company of up to $48.50 per Share.
On the morning of September 22, 2000, the Company received an unsolicited
bid of $48.50 per Share from Second Bidder which indicated that its board of
directors had approved the bid. The Company did not respond to the bid in
accordance with the Exclusivity Agreement entered into with Parent.
On the afternoon of September 22, 2000, the board of directors of the
Company had a meeting by telephone at which they were informed of the progress
that had been made in negotiations with Parent and that Second Bidder had
subsequently submitted a bid of $48.50 per Share.
The Company and its legal advisors had various discussions with Parent and
its legal advisors on September 23 and 24, 2000.
On September 24, 2000, a meeting of the Board was held at the Company's
offices. The Board discussed the specifics of the proposed transaction with
Parent, and agreed to reconvene the following day.
On the morning of September 25, Parent advised the Company that it would
raise its offer price to $48.50 per Share if the Company and IP were prepared
to approve and enter into the transaction promptly that day.
At the Company's Board meeting later that morning, CSFB reviewed with the
Board and delivered its oral opinion, which opinion was confirmed by delivery
of a written opinion dated September 25, 2000, to the effect that, as of the
date of the opinion and based upon and subject to the matters stated in such
opinion, the $48.50 per Share cash consideration to be received in the Offer
and the Merger by holders of Shares was fair, from a financial point of view,
to such holders (other than Parent and its affiliates). After deliberation,
the Board approved the Voting and Tender Agreement. Members of the Board
affiliated with IP abstained from voting with respect to the approval of the
Voting and Tender Agreement because IP was a party to that agreement. The
Board then unanimously approved the Merger Agreement and related agreements,
the Offer and the Merger and authorized the execution of the Merger Agreement
and related agreements. IP, the Company, Parent and Offeror executed the
Voting and Tender Agreement and the Company, Parent and Offeror executed the
Merger Agreement on September 25, 2000. Immediately thereafter the Company and
Parent issued press releases announcing the execution of the Merger Agreement.
On October 6, 2000, Parent and Offeror commenced the Offer.
(b)(ii) Reasons for the Recommendation by the Board of Directors.
In reaching its conclusions and recommendations described above, the Board
considered a number of factors, including, without limitation, the following
material factors:
1. The Board considered the financial and other terms and conditions of
the Merger Agreement and related agreements and transactions.
2. The Board considered the current and historical financial condition
and results of operations of the Company, as well as the prospects and
strategic objectives of the Company, current economic and market conditions
(including current conditions in the industry in which the Company
operates) and the familiarity of the Board with the business and prospects
of the Company and the industry in which it operates.
3. The Board considered the fact that IP, which holds approximately 68%
of the outstanding Shares, had informed the Company of its desire to sell
its Shares.
6
<PAGE>
4. The Board considered possible alternatives to the Offer and the
Merger, including possible acquisitions and continuing to operate the
Company as an independent entity. The Board also considered the risks
associated with these alternatives, particularly in light of the size of
the Company in the flavors, fragrances and aroma chemicals industries.
5. The Board considered the historical and recent market prices of, and
trading activity in, the Shares, including the limited liquidity and low
trading volume in the Shares. The Board considered the fact that the Offer
Price was both above market prices for the Shares during the preceding
weeks and represented a significant premium over the historical market
prices of the Shares and a premium of approximately 42% over the market
price prevailing on June 20, 2000, the date on which the Company announced
its exploration of a possible sale transaction.
6. The Board considered the process conducted to solicit acquisition
proposals and the number, nature and terms of the indications and proposals
received by the Company during the process from persons other than Parent.
7. The Board considered the opinion of CSFB dated September 25, 2000 to
the effect that, as of such date and based upon and subject to certain
matters stated in such opinion, the $48.50 per Share cash consideration to
be received in the Offer and the Merger by holders of Shares was fair, from
a financial point of view, to such holders (other than Parent and its
affiliates). The full text of CSFB's written opinion dated September 25,
2000, which sets forth the assumptions made, matters considered and
limitations on the review undertaken by CSFB, is attached hereto as Annex A
and is incorporated herein by reference. CSFB's opinion is directed only to
the fairness, from a financial point of view, of the $48.50 per Share cash
consideration to be received in the Offer and the Merger by holders of
Shares (other than Parent and its affiliates) and is not intended to
constitute, and does not constitute, a recommendation to any shareholder as
to whether such shareholder should tender Shares pursuant to the Offer or
as to any other matters relating to the Offer or the Merger. HOLDERS OF
SHARES ARE URGED TO READ CSFB'S OPINION CAREFULLY IN ITS ENTIRETY.
8. The Board considered the fact that the Merger Agreement provides for a
first-step cash tender offer for all outstanding Shares, thereby enabling
shareholders who tender their Shares to receive promptly the Offer Price in
cash, and that shareholders who do not tender their Shares will receive the
same cash price in the subsequent Merger.
9. The Board considered the fact that Parent had requested the Option and
had agreed to raise the per Share consideration payable to the public in
exchange for the Board's approval of the Option. In addition, the Board
considered that IP was prepared to grant the Option to Parent and enter
into the Voting and Tender Agreement with Parent, thereby agreeing to
tender all of its Shares in the Offer.
10. The Board considered the limited conditions to Offeror's obligations
to consummate the Offer and the Merger and the likelihood that the Offer
and the Merger will be consummated promptly. In particular, the Board
considered that the Offer is not conditioned upon the receipt of financing.
The Board also considered the financial condition and business reputation
of Parent and Parent's ability to complete the Offer and the Merger in a
timely manner.
11. The Board considered the fact that Parent had raised its offer price
to match the offer price of Second Bidder, and the fact that a merger
agreement had been substantially negotiated with Parent but not with the
Second Bidder.
12. The Board considered the fact that, based on the thorough nature of
the auction process, $48.50 represented the highest price reasonably
available to the Company at the time.
13. The Board considered the potential adverse effects to the Company's
business and stock price of not consummating a transaction.
The foregoing discussion of the information and factors considered and
given weight to by the Board is not intended to be exhaustive. The Board
did not find it practicable and did not quantify or otherwise
7
<PAGE>
assign relative weights to the specific factors considered in reaching its
determination. Rather, the Board viewed its determinations and
recommendations as being based on the totality of the information presented
to, and considered by, the Board. In addition, individual members of the
Board may have given different weights to different factors. For a
discussion of the interests of certain persons (including members of the
Board) in this transaction please see Item 3 (including all Exhibits and
Annexes incorporated by reference in Item 3). The Board recognized these
interests and determined that they neither supported nor detracted from the
advisability of the Offer and the Merger to the Company's shareholders.
(c) Intent to Tender.
After reasonable inquiry and to the best of the Company's knowledge, each
executive officer, director and affiliate of the Company currently intends to
tender all Shares, held of record or beneficially owned by such person, to
Offeror as of the expiration date of the Offer.
ITEM 5. Persons/Assets, Retained, Employed Compensated or Used
The Company has retained CSFB as its exclusive financial advisor in
connection with the Offer and the Merger. Pursuant to the terms of CSFB's
engagement, the Company has agreed to pay CSFB for its services an aggregate
financial advisory fee of approximately $6 million. The Company also has
agreed to reimburse CSFB for reasonable out-of-pocket expenses, including the
fees and expenses of legal counsel and any other advisor retained by CSFB, and
to indemnify CSFB and certain related parties against certain liabilities,
including liabilities under the federal securities laws, arising out of CSFB's
engagement. CSFB and its affiliates have in the past provided, and currently
are providing, financial services to certain affiliates of the Company
unrelated to the Offer and the Merger, for which services CSFB has received
and will receive compensation. In the ordinary course of business, CSFB and
its affiliates may actively trade or hold the securities of the Company,
Parent and their affiliates for CSFB's and its affiliates' account or for the
account of customers and, accordingly, may at any time hold a long or short
position in such securities.
Neither the Company nor any person acting on its behalf currently intends to
employ, retain or compensate any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer or the
Merger.
ITEM 6. Interest in Securities of the Subject Company
During the past 60 days, no transactions in Shares have been effected by the
Company or, to the best of the Company's knowledge, by any of its executive
officers, directors, affiliates or subsidiaries.
ITEM 7. Purposes of the Transaction and Plans or Proposals
(a) Except as set forth in this Statement, the Company is not engaged in any
negotiation in response to the Offer that relates to or would result in (i) an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the Company, (ii) a purchase, sale
or transfer of a material amount of assets by the Company or any subsidiary of
the Company, (iii) a tender offer for or other acquisition of securities by or
of the Company or (iv) any material change in the present dividend policy or
indebtedness or capitalization of the Company.
(b) Except as described in Items 3 or 4 above (the provisions of which are
hereby incorporated by reference), there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to
in Item 7(a) above.
ITEM 8. Additional Information
(a) Antitrust.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act") and the rules that have been promulgated thereunder by the
Federal Trade Commission ("FTC"), certain acquisition
8
<PAGE>
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The acquisition of Shares pursuant to the Offer is subject to
such requirements.
Parent filed on October 6, 2000 and IP filed, on behalf of the Company, on
October 6, 2000 with the FTC and the Antitrust Division a Notification and
Report Form with respect to the Offer and the Merger. Under the provisions of
the HSR Act applicable to the Offer, the purchase of Shares pursuant to the
Offer may not be consummated until the expiration of a 15-calendar day waiting
period following the filing by Parent. Accordingly, the waiting period with
respect to the Offer would expire at 11:59 p.m., New York City time, on
October 21, 2000, unless either the Antitrust Division or the FTC request
additional information or documentary material or terminate the waiting period
before such time. If, within such 15-calendar day waiting period, either the
Antitrust Division or the FTC requests additional information or documentary
material from Parent, the waiting period would be extended for an additional
10 calendar days following substantial compliance by Parent with such request.
Only one extension of the waiting period pursuant to a request for additional
information is authorized by the HSR Act. Thereafter, such waiting period may
be extended only by court order or with Parent's consent. Any such extension
of the waiting period will not give rise to any withdrawal rights not
otherwise provided for by applicable law.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares
by Offeror pursuant to the Offer. At any time before or after the purchase by
Offeror of Shares pursuant to the Offer, either of the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase
of Shares pursuant to the Offer or seeking the divestiture of Shares purchased
by Offeror or the divestiture of substantial assets of Parent, its
subsidiaries or the Company. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances.
In addition, Parent, IP and the Company will be required to make antitrust
and similar filings in various jurisdictions outside of the United States in
which the Company and Parent operate. These filings are currently in process.
Although the Company believes that Offeror's acquisition of Shares pursuant
to the Offer would not violate any antitrust laws, there can be no assurance
that a challenge to the Offer on antitrust grounds will not be made or, if
such challenge is made, what the outcome will be.
(b) The Virginia Affiliated Transactions Statute.
The Company is also subject to Article 14 (the "Affiliated Transactions
Statute") of the Virginia Stock Corporation Act (the "VSCA"). The Affiliated
Transactions Statute generally prohibits a publicly-held Virginia corporation
from engaging in an "affiliated transaction" with an "interested shareholder"
for a period of three years after the date of the transaction in which the
person became an interested shareholder, unless (i) a majority of
disinterested directors approved in advance the transaction in which the
interested shareholder became an interested shareholder, or (ii) before
consummation of the affiliated transaction, it is approved by the affirmative
vote of a majority of the disinterested directors and by the affirmative vote
of the holders of two-thirds of the voting shares other than the shares
beneficially owned by the interested shareholder. A Virginia corporation may
engage in an affiliated transaction with an interested shareholder beginning
three years after the date of the transaction in which the person became an
interested shareholder if (A) the transaction is approved by a majority of the
disinterested directors or by the affirmative vote of the holders of two-
thirds of the voting shares other than the shares beneficially owned by the
interested shareholder, or (B) the transaction complies with certain statutory
fair price provisions.
Subject to certain exceptions, under the VSCA an "interested shareholder" is
a person who beneficially owns more than 10% of any class of a Virginia
corporation's outstanding voting securities or an affiliate or associate of a
Virginia corporation that was an interested shareholder at any time within the
preceding three years.
9
<PAGE>
In general terms, an "affiliated transaction" includes: (i) any merger or
share exchange with an interested shareholder; (ii) the transfer to any
interested shareholder of corporate assets with a fair market value greater
than 5% of a Virginia corporation's consolidated net worth; (iii) the issuance
to any interested shareholder of voting shares with a fair market value
greater than 5% of the aggregate fair market value of all outstanding voting
shares of a Virginia corporation; (iv) any reclassification of securities or
corporate reorganization that will have the effect of increasing the
outstanding voting shares of a Virginia corporation beneficially owned by any
interested shareholder by more than 5%; and (v) the dissolution of a Virginia
corporation if proposed by or on behalf of any interested shareholder.
The Board has approved the Voting and Tender Agreement, the Merger Agreement
and the transactions contemplated thereby for the purposes of the Affiliated
Transactions Statute. Accordingly, the Company believes that the Affiliated
Transactions Statute is inapplicable to the acquisition of Shares pursuant to
any of the transactions contemplated by the Merger Agreement or the Voting and
Tender Agreement.
(c) The Virginia Control Share Acquisition Statute.
The Company is also subject to Article 14.1 (the "Control Share Acquisition
Statute") of the VSCA. The Control Share Acquisition Statute provides that
shares of a publicly-held Virginia corporation that are acquired in a "control
share acquisition" generally thereafter will have no voting rights unless the
holders of a majority of all the outstanding shares, excluding interested
shares, vote to confer voting rights on such shares. A control share
acquisition is defined, with certain exceptions, as the acquisition of the
beneficial ownership of voting shares which would cause the acquirer to have
voting power within the following ranges or to move upward from one range into
another (i) 20% to 33 1/3%; (ii) 33 1/3% to 50%; or (iii) more than 50%, of
such votes.
The Control Share Acquisition Statute does not apply to certain "excepted
acquisitions" of shares of a publicly-held Virginia corporation. The Control
Share Acquisition Statute defines "excepted acquisitions" as share
acquisitions that are accomplished (i) pursuant to a merger or share exchange
effected in compliance with the VSCA if the issuing public corporation is a
party to the merger or share exchange agreement, (ii) pursuant to a tender or
exchange offer that is made pursuant to an agreement to which the issuing
public corporation is a party, or (iii) directly from the issuing public
corporation, or from any other corporation that, before such share
acquisition, beneficially owns shares having at least a majority of the votes
entitled to be cast in the election of directors of the issuing corporation.
The Company believes that the acquisition of beneficial ownership of the
Shares pursuant to the Offer, the Merger and the Voting and Tender Agreement
will be excepted acquisitions for purposes of the Control Share Acquisition
Statute.
10
<PAGE>
ITEM 9. Exhibits (*)
<TABLE>
<C> <S>
Exhibit 1 Offer to Purchase, dated as of October 6, 2000.(1)(2)
Exhibit 2 Form of Letter of Transmittal.(1)(2)
Exhibit 3 Agreement and Plan of Merger, dated as of September 25, 2000, among
Bush Boake Allen Inc., International Flavors & Fragrances Inc. and B
Acquisition Corp.(1)
Exhibit 4 Voting and Tender Agreement, dated as of September 25, 2000, among
International Paper Company, Bush Boake Allen Inc., International
Flavors & Fragrances Inc., and B Acquisition Corp.(1)
Exhibit 5 Success Bonus Incentive Arrangement.
Exhibit 6 Letter to Shareholders of Bush Boake Allen Inc., dated October 6,
2000.(2)
Exhibit 7 Press Release of Bush Boake Allen Inc., issued on September 25,
2000.(3)
Exhibit 8 Press Release of Bush Boake Allen Inc. and International Flavors &
Fragrances Inc., issued on October 6, 2000.(1)
</TABLE>
--------
*(1) Filed as an exhibit to the Tender Offer Statement on Schedule TO, dated
October 6, 2000, filed by International Flavors & Fragrances Inc. and B
Acquisition Corp. and is incorporated herein by reference.
(2) Included in copies mailed to shareholders.
(3) Previously filed on September 25, 2000, as an exhibit to Bush Boake Allen
Inc.'s Schedule 14D-9-C.
11
<PAGE>
Signature
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Statement is true, complete and correct.
Bush Boake Allen Inc.
/s/ Dennis M. Meany
By: _________________________________
Name: Dennis M. Meany
Title: Vice President, General
Counsel and Secretary
Dated: October 6, 2000
12
<PAGE>
ANNEX A
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
September 25, 2000
The Board of Directors
Bush Boake Allen Inc.
7 Mercedes Drive
Montvale, New Jersey 07645
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock of Bush Boake
Allen Inc. ("BBA"), other than International Flavors & Fragrance Inc. ("IFF")
and its affiliates, of the Cash Consideration (as defined below) set forth in
the Agreement and Plan of Merger, dated as of September 25, 2000 (the "Merger
Agreement"), among IFF, B Acquisition Corp., a wholly owned subsidiary of IFF
("Sub"), and BBA. The Merger Agreement provides for, among other things, (i) a
tender offer by Sub to purchase all outstanding shares of the common stock,
par value $1.00 per share, of BBA ("BBA Common Stock") at a purchase price of
$48.50 per share, net to the seller in cash without interest (the "Cash
Consideration" and, such tender offer, the "Tender Offer") and (ii) subsequent
to the Tender Offer, the merger of Sub with and into BBA (the "Merger" and,
together with the Tender Offer, the "Transaction") pursuant to which each
outstanding share of BBA Common Stock not acquired in the Tender Offer will be
converted into the right to receive the Cash Consideration.
In arriving at our opinion, we have reviewed the Merger Agreement and
certain publicly available business and financial information relating to BBA.
We have also reviewed certain other information relating to BBA, including
financial forecasts, provided to or discussed with us by BBA, and have met
with the management of BBA to discuss the business and prospects of BBA. We
have also considered certain financial and stock market data of BBA, and we
have compared those data with similar data for other publicly held companies
in businesses similar to BBA, and we have considered, to the extent publicly
available, the financial terms of certain other business combinations and
other transactions which have recently been effected. We also considered such
other information, financial studies, analyses and investigations and
financial, economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied
on such information being complete and accurate in all material respects. With
respect to the financial forecasts, we have been advised, and have assumed,
that such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of BBA as to the
future financial performance of BBA. In addition, we have not been requested
to make, and we have not made, an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of BBA, nor have we been
furnished with any such evaluations or appraisals. Our opinion is necessarily
based upon information available to us, and financial, economic, market and
other conditions as they exist and can be evaluated, on the date hereof. In
connection with our engagement, we were requested to solicit indications of
interest from, and held discussions with, third parties regarding the possible
acquisition of all or a part of BBA.
We have acted as financial advisor to BBA in connection with the Transaction
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Transaction. We and our
A-1
<PAGE>
The Board of Directors
Bush Boake Allen Inc.
September 25, 2000
Page 2
affiliates in the past have provided, and currently are providing, financial
services to certain affiliates of BBA unrelated to the proposed Transaction,
for which services we have received and will receive compensation. In the
ordinary course of business, we and our affiliates may actively trade the debt
and equity securities of BBA, IFF and their affiliates for our and our
affiliates' accounts and for the accounts of customers and, accordingly, may
at any time hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of BBA in connection with its evaluation of the Transaction and does
not constitute a recommendation to any stockholder as to whether such
stockholder should tender shares of BBA Common Stock pursuant to the Tender
Offer or how such stockholder should vote with respect to any matter relating
to the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Cash Consideration is fair, from a financial point of view,
to the holders of BBA Common Stock, other than IFF and its affiliates.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
A-2
<PAGE>
ANNEX B
INFORMATION STATEMENT
BUSH BOAKE ALLEN INC.
7 MERCEDES DRIVE
MONTVALE, NEW JERSEY 07645
-------------------------------------------------------------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14F
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, AND RULE 14F-1 THEREUNDER
-------------------------------------------------------------------------------
This Information Statement is being furnished to the holders of the common
stock, par value $1.00 per share ("Common Stock" or the "Shares"), of Bush
Boake Allen Inc., a Virginia corporation (the "Company"), in connection with
the possible designation by B Acquisition Corp., a Virginia corporation
("Offeror") and wholly-owned subsidiary of International Flavors & Fragrances
Inc., a New York corporation ("Parent"), of certain persons as directors of
the Company pursuant to the terms of an Agreement and Plan of Merger, dated as
of September 25, 2000 (the "Merger Agreement"), among the Company, Offeror and
Parent. This Information Statement is part of the Solicitation/Recommendation
Statement on Schedule 14D-9 (as amended from time to time, the "Schedule 14D-
9") of the Company. Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Schedule 14D-9. THIS
INFORMATION IS BEING PROVIDED SOLELY FOR INFORMATIONAL PURPOSES AND NOT IN
CONNECTION WITH A VOTE OF THE COMPANY'S SHAREHOLDERS.
Pursuant to the Merger Agreement, after Offeror has accepted for payment,
and paid for, Shares pursuant to the Offer, Parent has the right to designate
such number of directors, rounded up to the next whole number, to serve on the
Board as will give Offeror representation on the Board equal to at least that
number of directors which equals the product of (i) the total number of
directors on the Board and (ii) a fraction, the numerator of which shall be
the number of Shares beneficially owned by Parent and/or Offeror (including
Shares accepted for payment and paid for pursuant to the Offer) and the
denominator of which shall be the number of Shares then outstanding. The
Merger Agreement provides that the Company, upon request of Parent, will take
all reasonable actions to cause Parent's designees to be elected or appointed
to the Board, including, without limitation, increasing the size of the Board
and/or securing the resignations of incumbent directors. The Company will also
take all actions reasonably necessary to cause persons designated by Parent to
constitute at least the same percentage (rounded up to the next whole number)
as is on the Board of (i) each committee of the Board and (ii) each board of
directors and committee of each subsidiary of the Company. After the election
or appointment of Parent's designees and until the consummation of the Merger,
the Company, Parent and Offeror will use their respective reasonable best
efforts to ensure that the Board will have at least two directors who were
directors on the date of the Merger Agreement and who are not officers of the
Company (the "Continuing Directors"). The approval of a majority of the
directors who are not designated by Parent is required to authorize (i) any
termination of the Merger Agreement by the Company, (ii) any amendment of the
Merger Agreement or the Voting and Tender Agreement, (iii) any extension of
time for performance of any obligation of or action by Parent or Offeror under
the Merger Agreement, (iv) any enforcement of or any waiver of compliance with
any of the agreements or conditions contained in the Merger Agreement for the
benefit of the Company and (v) any amendment to the Company's articles of
incorporation or bylaws that adversely affects the Company's shareholders.
The information contained in this Annex B concerning Offeror and Parent has
been furnished to the Company by Offeror and Parent, and the Company assumes
no responsibility for the accuracy or completeness of any such information.
VOTING SECURITIES OF THE COMPANY
As of September 25, 2000, 19,351,063 shares of Common Stock were issued and
outstanding, each of which entitles the holder thereof to one vote, and no
shares of Preferred Stock were issued and outstanding.
B-1
<PAGE>
BOARD OF DIRECTORS, OFFEROR DESIGNEES
AND EXECUTIVE OFFICERS
Board Biographical Information
The persons named below are the current members of the Board. The following
sets forth as to each director, his age, principal occupation and business
experience, the period during which he has served as a director, and any
family relationships with any other director or executive officer of the
Company and the directorships currently held by him in corporations whose
shares are publicly registered.
<TABLE>
<CAPTION>
Served as
Name Age Position with Company Director Since
---- --- --------------------- --------------
<S> <C> <C> <C>
Julian W. Boyden........ 56 Chairman of the Board, President and Chief 1994
Executive Officer
Peter L. Acton.......... 54 Director 1994
C. Cato Ealy............ 43 Director 1999
L. Robert Pfund......... 63 Director 1995
James M. Reed........... 67 Vice Chairman of the Board 1994
C. Wesley Smith......... 61 Director 1999
William H. Trice........ 67 Director 1994
</TABLE>
PETER L. ACTON, 54, has been a Director of the Company since November 1994.
Mr. Acton is General Manager--Commercial Business Operations of Arizona
Chemical Company (a manufacturer of resins, polymer additives, coating
chemicals, fatty acids and related products), a subsidiary of International
Paper Company ("IP"). Before that he was Vice President and General Manager of
the Chemical Products Division of Union Camp Corp (a manufacturer of paper,
paperboard, packaging, and wood and chemical products) ("Union Camp") from
December 1995 until April 30, 1999 and prior to that he was General Manager of
the Chemical Products Division.
JULIAN W. BOYDEN, 56, has been President, Chief Executive Officer and a
Director of the Company since February 1994 and Chairman of the Board of the
Company since January 1, 1997. Prior to February 1994, Mr. Boyden had been a
Vice President of Union Camp since January 1991 and the General Manager of the
Company since January 1989. Mr. Boyden has been associated with the Company
since 1968.
C. CATO EALY, 43, has been Vice President of Business Development and
Planning for IP (a manufacturer of paper, paperboard, packaging, and wood and
chemical products) since June 1996. Before that he was Director of Corporate
Development from the time he joined IP in April 1993.
L. ROBERT PFUND, 63, has been a Director of the Company since July 1995 and
is a member of the Audit Committee and the Compensation Committee. Mr. Pfund
retired in 1993 from the position of Corporate Group Vice President of Avon
Products, Inc. (a manufacturer and marketer of fragrances and cosmetics),
which position he held since 1990. Mr. Pfund is also a Director of Techart,
Inc. and a Trustee on the Board of The Valley Hospital in Ridgewood, New
Jersey.
JAMES M. REED, 67, has been a Director and Vice Chairman of the Board of the
Company since February 1994 and is Chairman of the Audit Committee and a
member of the Compensation Committee. He was the Vice Chairman of the Board
and the Chief Financial Officer of Union Camp from April 1993 until June 1997
and Vice Chairman and Chief Administrative Officer from June 1997 until his
retirement from active employment with Union Camp in November 1997. Mr. Reed
is also a Director of Martin Marietta Materials, Inc.
C. WESLEY SMITH, 61, has been Executive Vice President of the Operating
Group of International Paper since 1998. Prior thereto, he was Executive Vice
President of Printing Papers from 1992 and President of International Paper
Europe from 1989 to 1992. Mr. Smith is also a Director of IP.
B-2
<PAGE>
WILLIAM H. TRICE, 67, has been a Director of the Company since February 1994
and was Chairman of the Board from that time until December 31, 1996. He is
Chairman of the Compensation Committee and a member of the Audit Committee.
Mr. Trice was Executive Vice President of Union Camp from 1985 until his
retirement from active employment on December 31, 1996.
OFFEROR DESIGNEE BIOGRAPHICAL INFORMATION
Parent has informed the Company that it will choose the Parent designees
from the individuals shown in the table below to serve on the Board. The
information contained herein has been furnished to the Company by Parent, and
the Company assumes no responsibility for the accuracy or completeness of such
information. None of the Parent designees is a director of, or holds any
position with the Company. To the best of Parent's knowledge, no Parent
designee or any of its respective associates beneficially owns any equity
securities or rights to acquire securities of the Company, nor has any such
person been involved in any transaction with the Company or any of its
directors, executive officers or affiliates that is required to be disclosed
pursuant to the rules and regulations of the Commission. The name, age,
present principal occupation and five-year employment history, except with
respect to Offeror, of each of the following individuals are set forth below.
PROPOSED DIRECTOR LIST
<TABLE>
<CAPTION>
Name Age Present Occupation or Employment and Directorships
---- --- --------------------------------------------------
<S> <C> <C>
Richard A. Goldstein.. 58 Chairman and Chief Executive Officer of Parent since
June 2000. Member, Board of Directors and President
of Offeror. Member, Board of Directors of Legacy
Hotels and Fiduciary Trust Company International.
President and Chief Executive Officer of Unilever
United States, Inc., and Business Group President of
Unilever North American Foods prior thereto.
Douglas J. Wetmore.... 43 Member, Board of Directors since 1998 and Senior
Vice President and Chief Financial Officer of Parent
since September 2000. Vice President and Chief
Financial Officer of Parent from April 1998 to
September 2000. Member, Board of Directors and Vice
President of Offeror. Controller of Parent prior
thereto.
Carlos A. Lobbosco.... 61 Member, Board of Directors since December 1999,
Executive Vice President since September 2000 and
President, Fragrance Division, of Parent since
February 1999. Vice President of Parent prior
thereto. Citizen of Argentina.
D. Wayne Howard....... 44 Executive Vice President of Parent since September
2000. Vice President, Supply Chain Strategy of
Nordstrom, Inc. from January 2000 to August 2000.
Vice President, Strategic Sourcing Foods North
America, of Unilever from March 1999 to January
2000. Vice President, Sourcing of Lipton from
February 1997 to March 1999. Vice President, Supply
Chain of Lipton Canada, a division of Unilever, from
June 1999 to January 1997. Vice President, Finance
and Operations of Lipton-Monarch, a division of
Unilever, prior thereto.
Stephen A. Block...... 55 Senior Vice President, General Counsel and Secretary
of Parent since February 2000. Member, Board of
Directors, Vice President, Secretary and Treasurer
of Offeror. Senior Vice President, Law & Regulatory
Affairs and Secretary of Parent from May 1999 to
February 2000. Vice President, Law & Regulatory
Affairs and Secretary of Parent prior thereto.
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
Name Age Present Occupation or Employment and Directorships
---- --- --------------------------------------------------
<S> <C> <C>
William S. Kane............. 41 Vice President of Parent since September 1999.
Senior Vice President Human Resources of Channel One
Network from 1997 to 1999. Director of Human
Resources, Frigidaire Division of Electrolux, prior
thereto.
Bruce S. Leskanic........... 41 Controller of Parent since June 1998. General
Auditor of Ingersoll Rand Company prior thereto.
James P. Huether............ 44 Treasurer of Parent since May 1996. Employed by
Parent in other positions prior thereto.
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board. The
Board meets on a regularly scheduled basis to review significant developments
affecting the Company and to act on matters requiring approval by the Board.
It also holds special meetings, including telephonic meetings, and acts by
written consent when important matters require Board action between scheduled
meetings. In 1999, the Board held four meetings. During such period, all
current members of the Board participated in at least 75% of the aggregate of
all meetings of the Board and any committees on which they serve.
The Audit Committee held two meetings during 1999. Generally, the Audit
Committee (i) recommends to the Board the independent auditors to be appointed
for the Company, (ii) meets with the independent auditors, the chief internal
auditor and corporate officers to review matters relating to corporate
financial reporting and accounting procedures and policies, adequacy of
financial, accounting and operating controls and the scope of the audit to be
performed by the independent auditors, (iii) reviews and reports on the
results of such audits to the Board and (iv) submits to the Board its
recommendations relating to financial reporting and accounting practices and
policies and financial accounting and operating controls.
On December 15, 1999, the Commission approved a change in the rules of the
New York Stock Exchange ("NYSE") relating to the operations of audit
committees and outside auditors of public companies. One particular provision
relates to the independence of directors named to an audit committee and
requires, among other things, that audit committee members have not had an
employment relationship with a former parent of the Company for three years.
However, recognizing that it might be in a company's best interest to retain
on its audit committee a director who does not meet this three year
restriction, the rules permit one such director to remain on the audit
committee if the company's board of directors determines that membership by
that director on the audit committee is in the best interests of the company
and its shareholders. On February 15, 2000, the Board made such a
determination concerning James M. Reed, who was actively employed by Union
Camp, a former parent of the Company, until November 1997, approximately eight
months less than the three year period. Union Camp no longer exists as an
independent operating entity, having been acquired by IP. The reason for the
Board's decision is the exceptional character and financial experience of Mr.
Reed, who, among other financial positions, has been the chief financial
officer of a Fortune 250 company and has had extensive experience in dealing
with internal and external auditors and with the banking community. Over the
years, he has served on and chaired the audit committees of the board of
directors of several public companies. Mr. Reed will be fully qualified under
the new NYSE rules prior to the end of 2000.
The Compensation Committee held three meetings during 1999. Generally, the
Compensation Committee (i) reviews the compensation plans and establishes the
compensation for executive officers of the Company, (ii) authorizes awards of
incentive compensation and bonuses to executive officers of the Company and
(iii) administers the Company's stock option and stock award plan and
authorizes awards of options, restricted stock, stock appreciation rights and
bonuses payable in stock.
B-4
<PAGE>
COMPENSATION OF DIRECTORS
The directors who were not officers or employees of the Company or IP
received as compensation for their services in 1999 an annual retainer of
$15,000 and fees of $1,000 for each Board meeting and $750 for each Committee
meeting attended. A $1,000 annual Committee Compensation retainer was also
paid. A stock option grant valued at $10,000 was made to non-employee
directors. Directors who are officers or employees of the Company or IP, do
not receive any compensation (and are not eligible to receive options under
the Directors' Stock Option Plan) by reason of their service as a director of
the Company.
MANAGEMENT
Executive Officers
The following table sets forth, as of September 25, 2000, certain
information regarding the Company's senior executive officers, each of whom is
expected to serve in such capacity until consummation of the Merger. Officers
are elected annually by the Board and serve at its discretion.
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <C>
Julian W. Boyden........ 56 Chairman of the Board, President and Chief Executive Officer
James H. Dunsdon........ 53 Executive Vice President
Chia Siang Ee........... 52 Vice President, Asia Pacific
P.C. Mathew............. 50 Vice President, Aroma and Terpene Chemicals
Peter A. Thorburn....... 57 Vice President, Chemical Sales
</TABLE>
Business Experience
See "Board Biographical Information" above for biographical information
regarding Mr. Julian W. Boyden.
James H. Dunsdon has been Executive Vice President, Americas Region of the
Company since May 1999. Prior to that he was Executive Vice President since
August 1996 and before that was Vice President, Europe Region since July 1990.
Mr. Dunsdon has been associated with the Company since 1969.
Chia Siang Ee has been Vice President, Asia Pacific Region since May 1998.
Prior to that he was a Senior Vice President of Albright & Wilson Asia Pacific
Pte Ltd. with various sales and general management responsibilities since
1987. Mr. Chia was associated with Albright & Wilson from 1974 until 1998.
P.C. Mathew has been Vice President, Aroma and Terpene Chemicals since
January 1994. From April 1989 to January 1994 he was Vice President,
Administration. Prior to that time he was Managing Director of BBA India. Mr.
Mathew has been associated with the Company since 1984.
Peter A. Thorburn has been Vice President, Global Chemical Sales and
Marketing since January 1994. From January 1992 to December 1993 he was Vice
President, International Region. Mr. Thorburn has been associated with the
Company since 1981.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock of the Company for (i) each person who is
known by the Company to beneficially own more than 5% of Common Stock; (ii)
each named executive officer listed in the Summary Compensation Table below;
(iii) each director of the Company; and (iv) all directors and executive
officers as a group.
B-5
<PAGE>
Certain Beneficial Owners. The following sets forth certain information as
to beneficial ownership of each person known to the Company to own
beneficially more than 5% of the Common Stock of the Company as of October 2,
2000.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Number of Shares Percent of Class
------------------------------------ ---------------- ----------------
<S> <C> <C>
International Paper Company................ 13,150,000 68
Two Manhattanville Road
Purchase, NY 10577
</TABLE>
Stock Ownership of Directors and Executive Officers. The following table
sets forth certain information as to beneficial ownership of the outstanding
Common Stock of the Company and of IP as of October 2, 2000, by each director
and nominee of the Company, by each of the named executive officers listed in
the Summary Compensation Table, and by all executive officers and directors of
the Company as a group. Except as otherwise indicated, all persons listed
below have sole voting and investment power with respect to such shares. No
director, nominee or executive officer beneficially owns more than one percent
of the total outstanding Common Stock of the Company or IP and all directors
and executive officers as a group own 2.6% of the total outstanding Common
Stock of the Company and less than one percent of the outstanding Common Stock
of IP.
<TABLE>
<CAPTION>
Number of Shares
-------------------------
Company IP
Name and Address of Beneficial Owner(1) Common(2)(3) Common(4)(5)
--------------------------------------- ------------ ------------
<S> <C> <C>
Peter L. Acton................................... 2,900 25,780
Julian W. Boyden................................. 129,726 0
Chia Siang Ee.................................... 8,150 0
James H. Dunsdon................................. 59,970 0
C. Cato Ealy..................................... 0 39,087
P.C. Mathew...................................... 49,980 0
L. Robert Pfund.................................. 3,370 0
James M. Reed.................................... 7,880 173,931
C. Wesley Smith.................................. 0 326,686
Peter A. Thorburn................................ 45,520 74
William H. Trice................................. 7,370 52,878
Directors and Executive Officers as a Group (18
Persons)........................................ 508,825 622,290
</TABLE>
--------
(1) Unless otherwise indicated, the address of each such person is c/o Bush
Boake Allen Inc., 7 Mercedes Drive, Montvale, New Jersey 07645.
"Beneficial owner" means generally any person who, directly or indirectly,
has or shares voting power or investment power with respect to a security.
All information with respect to the beneficial ownership of any
shareholder has been furnished by such shareholder and the Company
believes that all persons listed have sole voting and investment power
with respect to their shares unless otherwise indicated.
(2) Company Common Stock.
(3) The shares shown as beneficially owned include shares of Company Common
Stock that such persons had the right to acquire on or within 60 days
after December 25, 1999 pursuant to unexercised options under Company
Option Plans as follows: 124,726 shares for Mr. Boyden, 8,150 shares for
Mr. Chia, 59,970 shares for Mr. Dunsdon, 47,380 shares for Mr. Mathew,
1,370 shares for Mr. Pfund, 1,380 shares for Mr. Reed, 44,720 shares for
Mr. Thorburn, 1,370 shares for Mr. Trice and 459,105 shares for all
directors and executive officers as a group (18 persons).
(4) IP Common Stock.
(5) The shares shown as beneficially owned include shares of IP Common Stock
that such persons had the right to acquire on or within 60 days after
December 25, 1999 pursuant to unexercised options under IP stock option
plans as follows: 20,734 shares for Mr. Acton, 26,400 shares for Mr. Ealy,
170,700 shares for Mr. Smith, 158,353 shares for Mr. Reed, 52,874 shares
for Mr. Trice and 429,061 for all directors and executive officers as a
group (18 persons).
B-6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to the Company and its
subsidiaries for each of the fiscal years ended December 25, 1999, 1998 and
1997 of those persons who were, at December 25, 1999, (i) the Chief Executive
Officer and (ii) the other four most highly compensated executive officers of
the Company for the fiscal year ended December 25, 1999 (the "named executive
officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
-------------
Annual Compensation Awards
------------------------------------ -------------
Other Annual All Other
Name and Principal Salary Bonus Compensation Options Compensation
Position Year ($) ($) ($) (# of Shares) ($)(2)
------------------ ---- ------- ------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Julian W. Boyden........ 1999 456,800 0 0 35,420 18,525
Chairman, President and
Chief 1998 435,000 285,900 0 35,910 17,507
Executive Officer 1997 410,000 255,400 0 25,740 21,897
James H. Dunsdon........ 1999 274,800 59,300 0 17,630 8,371
Executive Vice
President 1998 259,200 103,100 0 17,880 7,887
1997 240,000 120,800 0 12,090 3,600
Chia Siang Ee........... 1999(1) 200,482 60,900 0 8,040 12,407
Vice President, Asia
Pacific 1998(1) 131,783 46,453 0 8,150 13,632
P.C. Mathew............. 1999 247,400 0 0 9,930 8,994
Vice President, Aroma
and Terpene 1998 236,580 83,500 0 10,070 9,053
Chemicals 1997 227,700 94,000 0 7,310 11,254
Peter A. Thorburn 1999 233,900 0 0 8,040 9,708
Vice President,
Chemical Sales 1998 224,900 78,100 0 8,150 9,198
1997 217,300 94,000 0 6,570 11,892
</TABLE>
--------
(1) Compensation was converted into U.S. dollars from Singapore dollars at a
rate of U.S. $0.60/Singapore $ for 1999 and U.S. $0.58/Singapore $ for
1998. Chia Siang Ee joined the Company on March 16, 1998.
(2) The compensation reported for Messrs. Boyden, Dunsdon, Mathew and Thorburn
represents (i) Company contributions under the Union Camp Salaried
Employees Savings and Investment Plan from December 25, 1996 through June
30, 1997 and, thereafter, under its replacement, the Bush Boake Allen Inc.
Employees Savings and Investment Plan and (ii) amounts imputed or credited
to the named executive officer for premiums paid for group life insurance.
The compensation reported for Mr. Chia represents Company contributions to
the Singapore Central Provident Fund, a Singapore government savings
scheme applicable to all Singapore citizens and permanent residents. The
Company contributions for 1999 pursuant to the Employee Savings and
Investment Plan were as follows: $14,308 for Mr. Boyden, $8,371 for Mr.
Dunsdon, $7,571 for Mr. Mathew, and $7,064 for Mr. Thorburn. The amounts
imputed or credited for life insurance premiums for 1999 were as follows:
$4,217 to Mr. Boyden, $1,423 to Mr. Mathew, and $2,644 to Mr. Thorburn.
The Company contribution for Mr. Chia in 1999 to the Central Provident
Fund was $12,407.
B-7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information with respect to the options to purchase Common
Stock granted to the Chief Executive Officer and the executive officers named
in the Summary Compensation Table above, during the fiscal year ended December
25, 1999:
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------
Number of % of Total Potential Realizable
Securities Options Value at Assumed
Underlying Granted to Exercise or Annual Rates of Stock
Options Employees Base Price Expiration Price Appreciation for
Name Granted(1) in 1999 ($/SH)(2) Date Option Term ($)(3)
---- ---------- ---------- ----------- ---------- -----------------------
5%(4) 10%(5)
---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Julian W. Boyden........ 35,420 14.2 29.9375 5/4/09 $ 667,047 $ 1,689,977
James H. Dunsdon........ 17,630 7.1 29.9375 5/4/09 332,017 841,171
Chia Siang Ee........... 8,040 3.2 29.9375 5/4/09 151,413 383,609
P.C. Mathew............. 9,930 4.0 29.9375 5/4/09 187,007 473,785
Peter A. Thorburn....... 8,040 3.2 29.9375 5/4/09 151,413 383,609
</TABLE>
--------
(1) The options become exercisable three years from the date of grant, i.e., on
May 4, 2002.
(2) The exercise price is the fair market value of the underlying stock on the
date of option grant.
(3) The dollar amounts under these columns are the result of calculations at an
annual rate of 5% and 10%, and are not intended to forecast possible future
appreciation of Company Common Stock.
(4) Company Common Stock would be trading at $48.77 per share for the values
shown to be realizable, an increase in stock price which would benefit all
shareholders.
(5) Company Common Stock would be trading at $77.65 per share for the values
shown to be realizable, an increase in stock price which would benefit all
shareholders.
Option Exercises and Fiscal Year-End Values
Shown below is information with respect to the exercise of options to
purchase Common Stock by the Chief Executive Officer and the executive officers
named in the Summary Compensation Table above and unexercised options to
purchase shares of Common Stock granted to the Chief Executive Officer and such
named executive officers.
Aggregated Option Exercises in Fiscal Year
Ended December 25, 1999 and December 25, 1999 Option Value
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-The-Money
Acquired Value Options at Options at Fiscal
on Exercise Realized Fiscal Year-End (#) Year-End ($)
Name (#) ($) Exercisable/Unexercisable(1) Exercisable/Unexercisable(2)
---- ----------- -------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Julian W. Boyden........ 0 0 124,726/35,420 510,000/0
James H. Dunsdon........ 0 0 59,970/17,630 255,000/0
Chia Siang Ee........... 0 0 8,150/8,040 0/0
P.C. Mathew............. 0 0 47,380/9,930 255,000/0
Peter A. Thorburn....... 0 0 44,720/8,040 255,000/0
</TABLE>
--------
(1) On April 30, 1999, all then outstanding options become vested and
exercisable due to the change in control occasioned by the merger of Union
Camp with and into IP.
(2) Value is the difference between the market value of the Company's Common
Stock on December 25, 1999, i.e., $24.50 per Share, and the exercise price.
B-8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Committee's Function
The Compensation Committee (the "Committee") is composed entirely of
independent, non-employee directors. The Committee reviews and approves each
element of the Company's executive compensation program and assesses the
effectiveness of the program as a whole. The Committee approves the salaries
of the Company's Chief Executive Officer (the "CEO") and its other executive
officers, makes awards to the CEO and other executive officers under the Bush
Boake Allen Annual Executive Incentive Plan (the "Annual Incentive Plan") and
grants stock options under the 1994 Stock Option and Stock Award Plan (the
"Stock Option Plan").
Objectives of the Executive Compensation Program
The executive compensation program is designed to: (a) attract, retain and
motivate talented executives to work on behalf of shareholders, the Company's
employees, customers and the communities within which the Company operates;
(b) provide compensation at levels that are competitive with those provided in
the various markets where the Company competes for executive resources; (c)
place a significant portion of executive pay at risk; and (d) recognize and
reward exceptional individual accomplishments. The Company's CEO participates
in the same programs and receives compensation based on the same factors as
the other executive officers.
Under Section 162(m) of the Internal Revenue Code, beginning in 1994 a
publicly held corporation may not deduct compensation in excess of one million
dollars per year paid to the CEO or to any of the other four most highly
compensated executive officers except to the extent the compensation was paid
under compensation programs meeting tax code requirements to be considered
performance-based. The Committee believes that all of the compensation paid in
1999 to its CEO and other named executive officers was within the deduction
limits of Section 162(m). In reviewing the design of and administering the
executive compensation program, the Committee will attempt to preserve the
Company's tax deductions for executive compensation under Section 162(m)
unless this goal conflicts with the primary objectives of the Company's
compensation program.
The Committee also seeks an appropriate balance among program objectives.
Particular attention is paid to the two key objectives discussed below.
Providing Competitive Levels of Compensation
The Committee intends to provide the Company's CEO and its executives with
total compensation that, at targeted levels of performance, according to an
independent compensation consultant retained by the Company, is competitive
with the average total compensation earned by executives who hold comparable
positions or have similar qualifications and responsibilities in the flavor
and fragrance and the aroma chemical industry and within general industry for
companies of comparable size. Those companies include some of the companies in
the peer group in the Performance Graph below, but they also include companies
in other businesses because competition for executives extends beyond such
companies. To determine average competitive levels of base salary and target
incentive compensation, the Committee regularly reviews information drawn from
various sources, including public filings and industry surveys which are
presented by an independent compensation consultant. The Committee then
examines specific salary and target incentive recommendations for the CEO and
other executive officers, considering each position's relative content,
accountability, scope of responsibility as well as the individual's
performance and experience. While the targeted value of an executive's total
compensation is generally set at average competitive levels, a large portion
of an executive's compensation is at risk and may exceed or fall below
targeted levels depending on actual performance measured against predetermined
objectives.
Ensuring That Incentive Compensation Varies With Performance
The Company's Annual Incentive Plan is designed to ensure that incentive
compensation is predictable with the financial and strategic performance of
the Company and/or its business units as measured against predetermined
objectives which are approved annually by the Committee.
B-9
<PAGE>
Overview of Executive Compensation and 1999 Actions
The Company's executive compensation program for its CEO and its executive
officers including the four most highly compensated executive officers shown in
the Summary Compensation Table has three principle elements: base salary, the
Annual Incentive Plan and the Stock Option Plan. Following is an overview of
each program element and actions taken in 1999.
Base Salary
Base salaries are intended to be externally competitive and internally
equitable. They reflect an individual's performance, level of responsibilities
and length of time in the position. Base salary levels are adjusted
periodically based on an individual's performance and the external market for
positions of similar scope and responsibility. Base salaries are annually
targeted at average base salary levels for similar positions in the flavor and
fragrance and aroma chemical industry and within general industry for companies
of comparable size as generally determined in connection with an independent
compensation consultant. Base salaries may be less than or exceed the targeted
averages if warranted by sustained performance.
1999 Action: The base salary for executive officers for 1999 was considered
and established by the Committee at its November 18, 1998 meeting.
Recommendations for the 1999 base salaries for the executive officers other
than the CEO were made by the CEO to the Committee based on his evaluation of
the 1998 performance of each such officer. The base salary for the CEO for 1999
was determined by the Committee based on its evaluation of his performance as
chief executive officer in 1998. The recommended base salaries for both the CEO
and the other executive officers were also based on the salaries paid to other
chief executive officers and executive officers at other companies as described
under this caption "Base Salary" as well as, where appropriate, differing pay
scales in different areas of the world. This data was presented by and
discussed with an independent compensation consultant at the November 18, 1998
Committee meeting.
Bush Boake Allen Annual Executive Incentive Plan
The amount of the incentive targeted for the CEO and the Company's executive
officers including the named executive officers under the Annual Incentive Plan
was the average competitive annual incentive recommended by an independent
compensation consultant based on the average annual incentive compensation paid
to individuals in comparable positions by the comparable group referred to
under the caption "Providing competitive levels of compensation". The targeted
incentive compensation was based on (i) the Company and/or key business units
achieving their annual financial plan and (ii) the CEO and the named executive
officers achieving predetermined operating or strategic goals that are
established as part of the Company's annual planning and budgetary process. At
the beginning of each year the Committee reviews the operating and strategic
goals established by the CEO and the named executive officers and the financial
performance measures of the Company and its key business units.
Executives' awards are tied to the financial performance measures most
appropriate to their responsibilities. To reinforce the need for teamwork and
focus attention on overall corporate objectives, all executives have a portion
of their award tied to the financial performance measures for the Company as a
whole. While the portion of the award based on financial performance measures
for Mr. Boyden and other executive staff officers is determined solely by
corporate earnings results, the other named executive officers have a portion
of their awards based on financial performance measures linked to the
performance of the key business units for which they are responsible.
1999 Action: Incentive compensation for 1999 performance by the CEO and the
Company's executive officers was awarded by the Committee in early 2000. The
award process began in early 1999 when the Committee established financial
performance measures for the CEO and the other executive officers. Since the
Company as a whole did not achieve the minimal level (75%) of its financial
performance measure, the CEO and executive officers whose award was based
solely on Company earnings results received no award for 1999
B-10
<PAGE>
performance under the Annual Executive Incentive Plan, and the portion of the
targeted incentive based on Company financial performance measure for all other
executive officers decreased. The earnings results of the key business units
varied and executive officers responsible for these key business units had
their targeted incentives adjusted accordingly.
In addition, at the beginning of 1999, a number of specific operational and
strategic goals were established and approved by the Committee. These goals
were weighted and the CEO and the executive officers had to accomplish these
goals in order to receive the targeted awards after those targeted awards were
adjusted for achievement of the financial performance measure. The Committee
regards the specific operational and strategic goals as competitively sensitive
information. Since those executive officers who had achieved their minimal
financial performance measure met some but not all of these goals, the
Committee approved further adjustments of their incentives in accordance with
each's performance.
1994 Stock Option and Stock Award Plan
Stock options are the final element of the Company's compensation for its CEO
and executive officers. The primary objective of issuing stock options is to
encourage the CEO and the officers of the Company to maintain an equity
interest in the Company and provide financial incentives linked to the future
performance of the Company's Common Stock.
1999 Action: Stock option award levels are based on a present value
represented by a percentage of the midpoint of the pay grade of recipients,
including the CEO and the executive officers. Present value is then converted
to stock options by a calculation using a version of the Black-Scholes formula.
The present value amount is intended to (1) yield a competitive total
compensation package, when combined with base salary and incentive targets, for
comparable positions as recommended by the independent consultant, and (2)
place at risk an appropriate portion of the CEO's and executive officer's total
compensation by linking its eventual value to the future performance of the
Company's Common Stock. The Committee approved stock option grants in May 1999
based on this methodology and the recommendation of the independent consultant.
The Committee reviews this methodology each year it grants options and does not
consider the amount of stock options previously awarded in determining the size
of a grant of stock options under the Stock Option Plan. The stock options
granted to the CEO and the named executive officers in 1999 are shown in the
Option Grants in Last Fiscal Year table.
Conclusion
The Committee believes that the Company's emphasis on variable pay and the
compensation programs' direct link to both short and long-term financial
performance, as well as stock performance, tie executive pay to critical
measures of corporate performance.
Compensation Committee:
William H. Trice
L. Robert Pfund
James M. Reed
RETIREMENT PLANS
Mr. Boyden and the other named executives, except Mr. Chia, participate in
the BBA Pension Scheme and the BBA Executive Pension Scheme as deferred
members. As of February 1997, the BBA Executive Pension Scheme was merged with
the larger BBA Pension Scheme (collectively the "BBA Pension Scheme"). The
years of pensionable service credited under the BBA Pension Scheme are 31 for
Mr. Boyden, 29 for Mr. Dunsdon, 18 for Mr. Thorburn and 14 for Mr. Mathew.
B-11
<PAGE>
The BBA Pension Scheme is a defined benefit arrangement, funded solely by
company contributions, and is exempt approved under the United Kingdom Income &
Corporation Taxes Act 1988. An enhanced level of benefit is granted, at the
discretion of the company, to a limited number of executives who have attained
a predetermined employment grade based primarily on the level of job
responsibility. The participants who have been granted enhanced benefits are
Mr. Boyden and the other named executives, except Mr. Chia, and three other
executives based in the United Kingdom.
The calculation of benefits under the BBA Pension Scheme is directly linked
to pensionable service and final average compensation, which includes base
salary and bonuses (see "Summary Compensation Table" above), as well as certain
ancillary benefits in kind, received by the member during the 36 consecutive
most highly compensated months of the 120 months preceding retirement ("Final
Pensionable Salary").
The amount of benefit provided for participating members is 1.6667% of Final
Pensionable Salary for each year, and completed months of pensionable service,
subject to the benefits payable not exceeding limits imposed by the UK Inland
Revenue regulations, which are reflected in the table shown below.
The table shows the approximate pension payable under the BBA Pension Scheme
and assumes retirement at age 65 and Final Pensionable Salary and years of
pensionable service in the classification indicated. Such benefits are not
subject to deduction for social security benefits or other offset amounts.
Company Pension Scheme
Approximate Annual Pension at Age 65
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------------
Final Pensionable Salary 15 20 25 30 35 40
------------------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000................. $ 25,000 $ 33,300 $ 41,700 $ 50,000 $ 58,300 $ 66,700
200,000................. 50,000 66,700 83,300 100,000 116,700 133,300
300,000................. 75,000 100,000 125,000 150,000 175,000 200,000
400,000................. 100,000 133,300 166,700 200,000 233,300 266,700
500,000................. 125,000 166,700 208,300 250,000 291,700 333,300
600,000................. 150,000 200,000 250,000 300,000 350,000 400,000
700,000................. 175,000 233,300 291,700 350,000 408,300 466,700
800,000................. 200,000 266,700 333,300 400,000 466,700 533,300
900,000................. 225,000 300,000 375,000 450,000 525,000 600,000
</TABLE>
The calculation of the amounts shown above assumes that employees remain in
the service of the company until age 65 and that the BBA Pension Scheme
continues in its present form. The employee receives the benefit shown for life
and a surviving spouse receives a benefit of fifty percent of such amount for
life following the employee's death after retirement.
The Pension Plan for Eligible Employees of BBA in the United States (the
"Retirement Plan") in which Messrs. Boyden, Dunsdon, Mathew and Thorburn
participate is a defined benefit plan and is funded solely by Company
contributions. The calculation of benefits under the Retirement Plan is based
upon final average earnings. Final average earnings are determined by dividing
by five the sum of all compensation, including base salary and bonuses (see
"Summary Compensation Table" above), as well as any ancillary benefits in kind
and certain vacation payments, received by the member during the 60 consecutive
most highly compensated months of the 120 months preceding retirement (the
"Final Average Earnings"). The amount of the retirement benefit provided to a
participating employee under the Retirement Plan equals the product of the sum
of 1.05% of the participating employee's Final Average Earnings plus .45% of
those Final Average Earnings in excess of the average applicable Social
Security wage base at the date of retirement, multiplied by the number of years
of credited service of the employee with the Company. Benefits under the
Retirement Plan are not subject to any
B-12
<PAGE>
deduction for Social Security benefits or other offset amounts. To the extent
that retirement benefits payable exceed limitations imposed by the Internal
Revenue Code of 1986, as amended (the "Code"), with respect to payments from
tax qualified trusts, such excess amounts will not be paid from a qualified
trust fund, but will be paid by the Company under its supplemental retirement
plan on an unfunded basis out of its general assets.
The following table shows the approximate annual pension payable under the
Retirement Plan to Messrs. Boyden, Dunsdon, Mathew and Thorburn assuming
retirement at age 65 and Final Average Earnings and years of service in the
classifications indicated.
Company Retirement Plan
Approximate Annual Pension at Age 65
<TABLE>
<CAPTION>
Years of Service
-------------------------------------------------------
Final Average Earnings 10 15 20 25 30 35 40
---------------------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000................ 13,400 20,100 26,800 33,600 40,300 47,000 53,700
200,000................ 28,400 42,600 56,800 71,100 85,300 99,500 113,700
300,000................ 43,400 65,100 86,800 108,600 130,300 152,000 173,700
400,000................ 58,400 87,600 116,800 146,100 175,300 204,500 233,700
500,000................ 73,400 110,100 146,800 183,600 220,300 257,000 293,700
600,000................ 88,400 132,600 176,800 221,100 265,300 309,500 353,700
700,000................ 103,400 155,100 206,800 258,600 310,300 362,000 413,700
800,000................ 118,400 177,600 236,800 296,100 355,300 414,500 473,700
900,000................ 133,400 200,100 266,800 333,600 400,300 467,000 533,700
</TABLE>
The calculation of the amounts shown above assumes that these executives
remain in the service of the Company until age 65, that the retirement
programs are continued in their present form and that each of them receives
the benefits in the form of a single life annuity. As of December 25, 1999,
Messrs. Boyden and Thorburn were each credited with 5 years, Mr. Mathew
credited with 4 years, and Mr. Dunsdon credited with 3 years, of vested
service under the Retirement Plan.
Relocation Retirement Plan
The Bush Boake Allen Inc. Relocation Retirement Income Plan for Executives
(the "Relocation Plan"), in which Messrs. Boyden, Dunsdon, Mathew and Thorburn
participate, is a non-qualified defined benefit plan funded solely by Company
contributions. The Relocation Plan is designed, in part, to provide
participants who have worked for the Company outside the United States, and
who then transferred to the Company in the United States, with pension
benefits calculated as if they worked for their entire careers in the United
States.
Benefits under the Relocation Plan equal (1) the amount that a covered
participant would have received under the Retirement Plan (without regard to
limitations imposed by the Code) had the participant served all years of
employment with the Company in the United States, minus (2) the participant's
actual benefits payable at retirement under the Retirement Plan (without
regard to limitations imposed by the Code) and the BBA Pension Scheme.
Benefits payable under the Relocation Plan will be paid by the Company on an
unfunded basis out of its general assets, and will be paid at the same time
and in the same form as the participant is paid under the Retirement Plan.
Messrs. Boyden, Dunsdon, Mathew and Thorburn were granted, respectively,
26.5, 27.4, 11.2 and 13.5 years of foreign service for purposes of the
Relocation Plan.
The estimated annual benefits payable under the Relocation Plan upon
retirement at age 65 to Messrs. Boyden and Dunsdon are, respectively, $144,272
and $48,968. Estimated payouts to Messrs. Mathew and Thorburn are zero. This
calculation assumes that the participants remain in service with the Company
until age 65 at their present compensation and that the Relocation Plan,
Retirement Plan and BBA Pension Scheme all continue in their present forms.
B-13
<PAGE>
Severance Arrangements
The individuals named in the Summary Compensation Table and five other
executive officers have agreements with the Company which provide that if,
following a "change in control" of the Company or Union Camp, the Company
terminates the executive's employment without "cause" (other than for
disability) or the executive terminates his employment for "good reason" (as
such terms are defined in the severance agreements), the executive will
receive from the Company as a severance benefit a lump sum payment equal to
two and one-half times the sum of such executive's annual salary and two and
one-half times the amount of his normal bonus opportunity (as such term is
defined in the severance agreements). A "change in control" is defined
generally to include significant changes in the stock ownership or board of
directors of the Company or Union Camp, or either's dissolution (and has
occurred as to Union Camp upon its merger with and into IP on April 30, 1999).
"Good reason" is defined generally to include certain reductions in duties or
reporting responsibilities, certain unapproved relocations, certain reductions
in compensation or benefits and material breaches of the agreement by the
Company. "Cause" is defined generally to cover certain failures to perform
duties to the Company or willfully engaging in conduct injurious to the
Company. An executive officer would also be entitled to continue to receive
certain benefits for thirty months. The Company will also make an additional
payment to the executive to ensure that the components of its severance
benefit described above that are multiples of salary and bonus will not be
subject to net reduction due to the imposition of excise taxes under section
4999 of the Code. The individual severance agreements provide for the
distribution to the executives of their benefits under the Company's
supplemental retirement plan promptly following both a change in control of
the Company or Union Camp and termination, as noted above.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The discussion set forth below includes summaries of significant terms of
various agreements between the Company and IP.
Transactions with Principal Shareholder
The Company and Union Camp entered into various agreements in 1994 which
initially provided for the transition of the Company from a wholly-owned
subsidiary of Union Camp to a public company and which governed certain
ongoing relationships between the Company and Union Camp. These agreements, to
the extent then outstanding, were assumed by IP upon Union Camp's merger with
and into IP on April 30, 1999.
Services Agreement. Prior to the 1994 initial public offering of the
Company's Common Stock, Union Camp provided to the Company certain
administrative services, including treasury activities, employee benefit
administration, human resource administration, environmental, tax, risk
management, legal, accounting, safety and health administration,
transportation logistics, corporate communication and research and development
activities. The Company entered into a Services Agreement with Union Camp
under which Union Camp agreed to continue to make these services available to
the Company. Any or all of the services covered by the Services Agreement may
be terminated by either party upon ninety days prior written notice. The
obligations of Union Camp, and now IP, under the Services Agreement are
subject to the reasonable demands and requirements of its ongoing operations.
The rates charged to the Company under the agreements approximate the fair
market value of the services to be provided by the Company. None of these
services agreements other than that involving research and development have
been terminated through the end of 1999.
Technology Agreement. Union Camp and the Company each granted (or caused one
or more of their subsidiaries to grant) to each other an irrevocable, non-
exclusive, royalty-free license to use their respective patents, patent
applications, know-how and trademarks that are used or useful in their
respective businesses.
Supply Agreement. The Company and Union Camp entered into a Supply Agreement
relating to the terms and conditions pursuant to which the Company will
purchase turpentine from Union Camp as well as the procurement of turpentine
by Union Camp from other sources for sale to the Company, in each case at
approximately fair market value. This agreement has now been superseded by a
turpentine sales contract, dated August 3, 2000, among IP, the Company and
Arizona Chemical Company.
B-14
<PAGE>
Tax Allocation Agreement. The Company entered into a tax allocation
agreement with Union Camp in 1994. Under terms of this agreement Union Camp
and the Company agreed to mutually indemnify each other against potential
claims, assessments or adjustments made by any taxing authority with respect
to any tax position taken by the Company or Union Camp for periods prior to
the 1994 initial public offering of the Company's common stock.
Cross-Indemnification Agreement. The Company and Union Camp entered into an
agreement whereby each party is required to indemnify the other party against
liabilities relating to the business of the indemnifying party as it has been
conducted prior to the 1994 initial public offering of the Company's Common
Stock, including Union Camp's agreement to indemnify the Company against all
liabilities relating to the operations and business of the Company's
Jacksonville facility at any time up to and including December 31, 1986, after
which date the Jacksonville facility was operated as part of the Company.
Registration Rights Agreement. The Company and Union Camp entered into a
Registration Rights Agreement pursuant to which the Company has granted
certain registration rights to Union Camp and certain of its affiliates with
respect to the shares of Common Stock of the Company owned by Union Camp or
acquired by any such affiliate from Union Camp following the Company's initial
public offering. In the event that the Company proposes to register any of its
shares of Common Stock for sale under the Securities Act of 1933, as amended
(the "Securities Act"), Union Camp is entitled to require the Company to
include all or a portion of the shares of Common Stock of the Company held by
Union Camp or its affiliates, subject to the restrictions set forth in the
Registration Rights Agreement. Union Camp also received the right to require
that the Company register all or a portion of the Common Stock of the Company
held by Union Camp or its affiliates for sale under the Securities Act three
times, subject to the terms of the Registration Rights Agreement. The
Company's obligations are subject to limitations relating to a minimum number
of shares of Common Stock of the Company required for any such registration,
the timing of registration and other similar matters. The Company is obligated
to pay all expenses incidental to any such registration, excluding
underwriters' discounts and certain legal fees and expenses. The Company
agreed to indemnify Union Camp for certain liabilities, including liabilities
under the Securities Act, in connection with any such registration. Under the
Registration Rights Agreement, Union Camp and certain of its affiliates have
the right to transfer their respective rights to a transferee other than
pursuant to a public offering, and such rights were transferred by Union Camp
to IP.
Company Performance
The graph below compares the cumulative total shareholder return of Company
Common Stock, the S&P 500 Composite--500 Stock Index, and an index of a peer
group, for the period of five years beginning December 25, 1994 and ending on
December 25, 1999 assuming that the value of the investment in Company Common
Stock and each index was $100 on December 25, 1994 and that all dividends were
reinvested. The peer group index is comprised of the following companies:
Alberto-Culver Company, Avon Products, Inc., Block Drug Company, Inc., Church
& Dwight Inc., Crompton & Knowles Corp., Ecolab Inc., Ethyl Corporation,
Helene Curtis Industries, Inc. (from December 25, 1994--December 25, 1995,
when it ceased to trade publicly), Hershey Foods Corp., International Flavors
& Fragrances Inc., McCormick & Company, Inc., Morton International, Inc., NCH
Corporation, Nalco Chemical Company, The Quaker Oats Company, Ralston Purina
Company, Tambrands Inc. (from December 25, 1994--December 25, 1996, the last
full year it traded publicly), Wm. Wrigley Jr. Company and W. R. Grace &
Company. The performance of the peer group is weighted based on market
capitalization.
Total Cumulative Shareholder Return for
Period Ending December 25, 1999
<TABLE>
<CAPTION>
December 25 1994 1995 1996 1997 1998 1999
----------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Bush Boake Allen Inc.................. 100.00 108.37 103.94 104.19 133.99 96.55
S&P 500............................... 100.00 136.56 171.37 216.70 289.28 348.44
Peer Group............................ 100.00 124.85 150.11 188.48 205.15 181.48
</TABLE>
B-15
<PAGE>
Policy of the Board of Directors
All ongoing and any future transactions with affiliates of the Company, if
any, will be on terms believed by the Company to be no less favorable than are
available from unaffiliated third parties and will be approved by a majority of
disinterested directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who beneficially
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Based solely on a review
of the copies of reports furnished to the Company and written representations
from the Company's executive officers, directors and persons who beneficially
own more than 10% of the Company's equity securities, the Company believes
that, during fiscal year 1999, all filing requirements applicable to its
officers, directors and ten percent beneficial owners were met.
B-16
